HUFs cannot continue PPF after 15 years!

Source:  The Times of India

Hindu undivided families (HUFs) will now have to mandatorily exit from the public provident fund (PPF) on completion of 15 years. The move is aimed at checking misuse as several people were investing in PPF to earn 8% tax-free return as an individual as well as an HUF, which are set up by family members to avail of tax benefits.
The head of the family is the karta or the main operator of the account, with the others being family members. While daughters can be members of an HUF, on marriage, they cease to be members of the one promoted by their fathers.
After the government stopped fresh investment by HUFs in PPF from May 2005, several of them continued to park funds in the popular savings scheme as it earned them a 8% tax-free interest. Some were older investments though they were yet to complete the 15-year period while others availed of a five-year extension.
But a recent finance ministry notification has said that money should be refunded as soon as the 15-year period ends for PPF accounts opened by HUFs before May 13, 2005. For the accounts where the 15-year period has already ended, the money will be refunded on March 31 next year.
This means accounts opened after the ban was imposed in 2005 will be allowed to continue only till the tenure ends, while the others will be terminated at the end of the current financial year.
There are many accounts which are running on a fiveyear extension. But, with the current rule, they will be terminated by March end, no matter whether theextension period has ended or not, said a source dealing with PPF and other small savings schemes such as the National Savings Certificate ( NSC) and post office deposits.
Fresh investments by HUFs into PPF was stopped as it was observed that the facility was being misused.
Investments were made in the name of HUFs as well as individuals as both are considered as separate entities. This allowed the investors to earn 8% tax-free returns both as an HUF and an individual . This continued even after the ban came into place.
The philosophy of small savings is to provide a savings window to the middle class or those living in remote areas where banking services are not available.

The year that was for the life insurance industry ...

The year 2010 will be well remembered by the life industry & the policy holders alike for the tussle between SEBI & IRDA regarding who will regulate one of the most mis-sold products in the universe - Unit Linked Insurance products. The entire insurance industry (or I would put it as private players) were in for a rude shock as SEBI banned sales of all ULIPs offered by private insurers on April 9th 2010. IRDA asked insurers to ignore SEBI's order, finance ministry came in between to sort out issues, an ordinance was passed & lot of things happened in the next few weeks. In the end it was IRDA who won the battle against SEBI - but this win actually turned out a win for the customer who should always be the only beneficiary. Lot of changes were brought about in ULIPs since then by IRDA - lowering of charges & amortizing the charges across the premium payment period, lowering of surrender charges, extension of the lock-in period for ULIPs from 3 years to 5 years resulted in lesser scope for agents to mis-sell ULIPs. Lot of insurance agents went out of the industry as they cannot operate with lower commission structures & even few of the private insurers shut their branch offices to cut costs. The paradigm of (mis)selling have undergone a sea change since then - though mis-selling could not be strictly eliminated. Since mortality charges were kept out of the maximum charges that an insurance company can levy, couple of private insurers ensured they took charges from customers by charging them extra as mortality charges. God only knows how come the mortality experience of Indian population under-went a sea change in just few months that few of the private insurers had to charge double the rates they were charging couple of months ago! Also agents now say - "sir pay 20,000/- for 5 years & get 3 lakhs @ the end of 5 years!". the only change in the statement was change in number of years from 3 to 5 years. Though no new changes are expected in regulation of ULIPs in 2011 it is a fact that the new business premium of insurers have dropped due to the new regime.

The only way to prevent mis-selling will be ensure stricter norms for entry as a life insurance agent - a mere 12th standard pass & an examination will not be sufficient to prevent such happenings. The objective of such agents is always to make some extra income through commissions & not to establish a business that will develop selling & servicing strategies for long-term. A professional certification from a reputable financial institution should be made mandatory & ongoing renewal of the certifications should also be in place. Part-time agents should be taken out of the system & an option to switch over to other agents in the event of poor service should be put in place. The above things in my opinion will ensure in the long run that only professionals are involved in financial industry & servicing standards will be enhanced by every agent as he has to fight out to retain his clients. But I know I am only too optimistic for these things to become a reality in 2011. Till such things are in place, it is up to the customer to ensure that he takes advice from a full-time professional agent with relevant experience & also lodge complaints with the insurance ombudsman & grievance cell of IRDA against mis-selling (or) poor service standards of the insurance company / agent.

LIC's Annual report ...

L.I.C has made public in its web-site its annual report for 2009-2010. Generally the annual reports take a longer time to be published because the same has to be tabled in both the houses of the parliament before it is published. You can download the same from LIC's web-site - it is 26 MB huge file. The size is relevant considering LIC's huge size :-) http://www.licindia.in/annual_report.htm

IRDA Annual Report ...

The much awaited IRDA annual report for 2009-2010 has been released on 15th December 2010. The following are the key find-outs from the report:

1. The cumulative losses of private insurance companies stood @ 20,143 crores
2. LIC has shown an increase of 10.8% in profits
3. None of the private players have given dividends to their share-holders yet (only if something is there, they can give!)
4. LIC has paid a dividend of a whopping 1,031 crores to Government of INDIA. For your information, Govt has just invested on LIC a 5 crores rupees in 1956 & look @ the dividend it received in just one single year!
5. Private companies have shut their offices owing to cost cutting measures - the number of offices stood @ 8768 from 8785 in 2008-2009.
6. LIC has opened 220 new offices suggesting a strong growth
7. Operating expense ratio of LIC stood @ a mere 6.58%
8. Operating expenses of Private insurers stood @ 20.86%
9. Private insurers have settled just 84.88% of the claims - 7.60% have been rejected & 7.48% are pending still. 
10. LIC has settled 96.54% of claims - 1.21% of the claims were only rejected & 1.41% is still pending.

Over-all, the lapsation of policies are also well contained by LIC when compared to private players reflecting the fact that in long-run, the profitability is only bound to increase! For more news on the IRDA report, visit www.irdaindia.org

AFP - Retirement Planning Certification

LIC Housing continues to retain highest Crisil rating!

Crisil has reaffirmed its highest rating AAA for LIC-HFL despite the arrest of its CEO on bribery charges. The reason for this affirmation comes more from the fact of LIC of INDIA the largest life insurance company being the single most largest share holder in LIC-HFL! LIC of INDIA owns 36.54% of LIC-HFL's shares. Crisil based its decision on LIC's commitment that it will not allow its shareholding in LIC Housing to fall below 33 per cent. Meanwhile the 8 people who were accused in the bribery cases including Mr. RR Nair (Ex. CEO - LIC-HFL)have been given bail now!

Our LOGO: Unveiled

We are very happy to unveil the LOGO for (y)our organization. Our logo is a reflection of what (y)our organization stands for!


FOUR BLOCKS:
Defines our core values upon which we had built our business & will passionately continue to build it in the future too. The 4 block represents:
(I) Trust (II) Professional Service (III) Ethics (IV) Innovation

ARROW: When the above 4 elements are present in any business, it is bound to be successful for both the clients as well to the business - which is what is depicted by the upward arrow. The Arrow has a slightly downward trend in between – it signifies & captures the philosophical aspect of both money as well as life. Even though we do things to the best of our abilities you cannot escape a downward trend now & then. But it will be only for short period & it is bound to have a come-back & surge ahead in the long run.

COLORS: The palette of colors in the name & the styles used reflects the vibrancy & dynamics of the ‘next gen’ financial planning services.

THREE DOTS: @ the end of the name signifies that we will only continue to grow & continue to serve our clients better & better!

FINANCIAL SERVICES: The word signifies that we are fast emerging to provide you with the complete financial planning services that would include advisory models on real estate, stock broking, small savings schemes & other investment avenues apart from the present life insurance, medical insurance, mutual fund investments & home loans.