Archive for September, 2012

Mutual Fund – Systematic Investment Plan (SIP)

September 5, 2012

Mutual Fund is an investment scheme in which money is invested in the share market in multiple shares. There are various mutual funds available in the market. Mutual funds which provides tax benefit on the money invested in it, are called tax benefit mutual funds. Such mutual funds generally have a lock-in period of three years. It means you cannot withdraw your money before three years once invested. There is another category of mutual funds which does not provide any kind of tax benefit. You can withdraw your money anytime after investment. You just need to pay an exit load in these mutual funds. Exit load is a charge you need to pay while exiting from such mutual funds before one year.

Each mutual fund has a NAV (Net Asset Value) which varies as per the share prices in which mutual fund’s money is invested. NAV is also known as the per unit price of a mutual fund. NAV per share is calculated once in a day based on the closing market prices of the shares. The money which you invest in a mutual fund is converted into number of units of the mutual fund after dividing it by NAV of the mutual fund.

There are different methods to invest in the mutual funds. The best way of investment is systematic investment plan. Under this plan, a fixed amount of money is deducted automatically on a specific date from your account. This money is converted into number of units of the mutual fund as per the NAV value. It means if you are making an investment of Rs 1000 on a particular day, and NAV value of the mutual fund is Rs 20. Then total number of units purchased are 50. In other words, your money is converted in 50 units of mutual fund.

To make investment in a mutual fund, it becomes necessary to keep track on the NAV of that mutual fund which is a very difficult task. To make this task bit easier, companies has provided us SIP option. Using this option, you need to select a mutual fund, a specific amount that you want to contribute every month, and the time period for investment. At the time of taking SIP option, you can select a specific date for this investment. For example, you can select that on 5th of every month, an amount of Rs. 2000 per month is invested in HDFC Top 200 mutual fund for a period of 12 months. Using SIP option, your money is invested with different NAV in the mutual fund. You can calculate profit or loss on a specific day by dividing the number of units of mutual fund by NAV.

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How to Cancel an Insurance Policy

September 5, 2012

No doubt, if you will ask people around, you will found every third person has taken an insurance policy either life or health insurance. You will be shocked when you came to know that more than 60% of these policyholders are not aware with the process to cancel a policy. This is because they rarely read policy document after taking a policy.

We get relaxed after taking an insurance policy and never read the policy document. We read it only when it comes to claim against a policy. When our claim get rejected due to a specific reason, we come to know that we were misguided at the time of taking the policy. Generally, we think to cancel a policy only when it does not fulfill our requirements or its terms and conditions does not matches the terms mentioned by the broker.

As per IRDA (Insurance Regulatory and Development Authority) guidelines, each insurance company provide a grace period of 15-20 days after issuing the policy document to a policyholder. If you are not satisfied with the policy terms or benefits, you can submit an application to cancel your policy during this time. A nominal charge of Rs 50 -100 is charged for bond/stamp paper and processing fees of the application, remaining amount is credited to your bank account or a account payee cheque is issued to you.

Whenever, you have decided to cancel a policy, you need to write an application to the same branch manager where you have submitted the application form to take that policy. In this application, you need to mention why you are willing to cancel the insurance policy. Mention the reason whether, you are not satisfied with the policy benefits or you were misguided by the agent at the time of taking the policy. Then give a request to cancel the policy.

Within a week of submitting the policy cancellation request, your policy get cancelled. Insurance company will dispatch the cheque against your policy after deducting a nominal charge of stamp paper or processing fees. Remember, once you send the cancellation request for your policy, you will not be able to get any benefit that your policy provides.

House Rent Allowance (HRA) Exemption

September 5, 2012

All the working people must aware with the term House Rent Allowance (HRA). It is part of your salary package which your employer provides. As per income tax rule in India, you can claim for  HRA exemption on the amount that you pay for your accommodation. However, income tax department have set a limit for HRA exemption as per your salary structure.

Many people who are reading this article are not aware of the method to calculate their HRA exempt. There is a general rule many organizations are using in India to calculate the HRA exemption of their employees. This rule basically comprises of three conditions:

  1. Actual House Rent Allowance (HRA) received by the employee.
  2. Excess of rent paid for accommodation over 10% of the salary.
  3. 50% of the salary for the person living in metro cities and 40% of the salary for the person living in non-metro cities.

Least of above three is takes for HRA exemption. Let us understand it with the help of an example;

Ram have a basic salary of Rs 12000 and HRA of Rs. 6000. He pay an amount of Rs 5000 as rent. In this case, HRA exemption can be calculated as:

  1. Rs. 6000
  2. 5000 – 1200 = Rs 3800
  3. Rs. 6000 for metro cities and Rs 4800 for non-metro cities.

Least of above three is Rs 3800. So, Ram will get an exemption of Rs 3800 per month on his rent paid for accommodation.

Cloud Computing – An Overview

September 5, 2012

Cloud computing is a computing model in which IT services and resources (hardware and software) are sold and delivered over the internet. Try to understand it with the help of an example; the email that you are using (Gmail, Yahoo, Hotmail and Rediffmail) helps you to store all the valuable information on the internet. You no need to worry about the software and hardware required to store these mails. You just need a computer and internet connection to access your email account.

Irrespective of the software’s installed on your computer, you can access your email on your computer. Your email is not configured on your local computer; you just access it through internet connection. All the data that you store on your email is actually stored at a server located at a single or multiple locations. It comes under a type of cloud computing known as SAAS (Software as a Service). The cloud helps you to access your information from anywhere at any time. Google doc is also an example of cloud computing where you can create a word, excel or PowerPoint document just using the internet. You no need to install MS office software on your computer. You can create your documents directly on Google docs.

On the other hand, a general computer setup requires you to be at the same location where your data storage device is placed. With cloud computing, you can access your storage device from anywhere. Your cloud service provider can have their own or rent the hardware and software necessary to run your business applications.

Cloud computing helps those small businesses that cannot afford the same amount of hardware and storage space as a larger organization can have. They even cannot buy the application software’s necessary for their business. These smaller organizations store their information in the cloud and reduce the cost of purchasing the software’s and storage devices. Using this service, the chances of wastage of storage space can be overcome as you can reduce the subscription of your storage capacity as per your business requirements.

The basic requirement is to have an internet connection to access the cloud computing. It means, if you want to access a specific document that you have housed in the cloud, you must first establish an internet connection either through a wireless or wired internet or a mobile broadband connection. The benefit is that you can access the same document from wherever you are with any device that can access the internet. These devices can be a desktop, laptop, tablet, or phone. This can also help your business to function more smoothly because anyone who can connect to the internet and your cloud can work on documents, access software, and store data. Imagine picking up your Smartphone and downloading a pdf document to review instead of getting it printed or upload it to your laptop. This is the freedom that the cloud can provide for you or your organization.