Tax Planning: How to Save Income Tax

Tax Planning: How to Save Income Tax

by | Apr 3, 2022 | Banking & Finance, resources

Tax Planning: How to Save Income Tax

People are always on the lookout for opportunities to save income tax. However, not all are aware of all the ways by which we can save tax through investment in different schemes.

There are two types of taxes to be paid in India – direct tax and indirect tax. There is no way to avoid indirect tax, but direct tax can definitely be reduced. In this article, we will discuss different ways by which you can reduce your direct tax.

Subas Tiwari

Reducing tax requires special planning. The first thing to do is to complete your tax planning as soon as possible based on your financial goals. There are 17 different ways through which you can reduce your tax liability which includes PPF, NSC and life insurance premium, etc.

Unit Linked Insurance Plan (ULIP)

ULIP Life Insurance Plan is one of the most important investment plans in India. It ensures that one’s family is financially balanced in the case of an event of death. By purchasing a life insurance policy, the taxpayer can avail of the benefit under the income tax act.

Under section 80C of the Income Tax Act 1961, the premium paid towards the purchase of a life insurance policy qualifies for deduction up to Rs. 1.5 lakh. Furthermore, as per section 10(10D), income on the maturity of the policy is tax free. The income is tax-free if the premium is not more than 10% of the sum assured. In the case wherein the money goes to the nominees of the person insured, the same remains as a tax exemption in the hands of the nominee.

In terms of the deduction under section 80C 1961, the taxpayer can claim 20% of tax deduction on the premium paid. The following conditions also apply:

  • The taxpayer purchases a life insurance policy on or before 31st March 2012
  • The policy is in his own name or in the name of their spouse or child

If the life insurance policy is purchased after 1st April 2012, then the premium paid is eligible for tax deduction up to 10% of the sum assured.

Equity Linked Savings Schemes (ELSS)

Equity Linked Savings Schemes are mutual fund investment schemes that invest a large percentage of their portfolio in equity. Furthermore, the fund has a mandatory lock-in period of 3 years which is the shortest amongst all the investment products.

Investment in ELSS funds qualifies for deduction under section 80C of the income tax act up to a maximum of Rs. 1.5 lakh. Both lump sum investment and the amount invested through a systematic investment plan (SIP) qualifies for the deduction. Since ELSS funds invest a large amount in equity, there is always some inherent risk.

ELSS funds provide the dual benefit of capital appreciation and tax-savings. This makes it one of the most popular tax saving schemes amongst investors.

 Public Provident Fund (PPF)

The Public Provident Fund has always been a popular tax saving schemes amongst the taxpayer. One of the major reasons for this popularity is the fact that PPF falls under the category of exempt–exempt–exempt tax status. You can open your PPF accounts with a bank or post office.

Taxpayers can claim a deduction under section 80C of the income tax act for the amount invested by them during the financial year. The maximum amount eligible for deduction is Rs. 1.5 lakhs. Since PPF falls under the exempt category, the interest and maturity amount are exempted from tax.

PPF account comes with a lock-in period of 15 years and it allows the investors the below options at the end of the maturity period:

  • Withdrawal of proceeds from the account
  • Continue for another 5 years

Sukanya Samridhi Yojana (SSY)

Sukanya Samriddhi Yojana has become one of the most important tax saving schemes. It was launched in 2015 by the government of India as a part of the Beti Bachao Beti Padhao campaign. It had a major impact on the general public. The scheme allows a fixed income investment through which the taxpayer can invest regular deposits and at the same time earn interest on it. Investing in Sukanya Samriddhi Yojana also qualifies as an eligible deduction under section 80C of the income tax act.

The government of India determines the rate of interest on the scheme on a quarterly basis and is payable on maturity. The scheme comes with a lock-in period of 21 years and will mature after the expiry of 21 years. A minimum deposit of Rs. 250 is required to be made per year for 15 years. Failure to pay the minimum amount in a year will lead to disconnection of the account. To re-activate the account, you need to pay a penalty of Rs. 50 along with the original Rs. 250 deposit.

In order to open a Sukanya Samriddhi account, below is the eligibility criteria for this tax saving option:

  • Only girl children can claim the benefits of this scheme.
  • The girl child cannot be more than 10 years of age. A grace period of one year is provided which allows the parent to invest within 1 year of the girl child being 10 years of age.
  • The investor must submit age proof of the daughter.

National Savings Certificate (NSC)

A government of India initiative, a national savings certificate is a fixed income investment scheme that aims at the small and middle-income investors to invest and earn handsome returns. It is considered a low-risk investment and as secure as the Provident Fund. The investors can invest as per their income profile and investment habits.

Investment in NSC qualifies for deduction under section 80C of the income tax act up to Rs. 1.50 lakh. Apart from providing the benefit of tax exemption, it provides the investor with complete capital protection and guaranteed interest.

Tax-Savings Fixed Deposit (FD)

Fixed deposits are considered one of the safest tax savings schemes. It’s safer than equity investments in terms of risk and returns. The banks decide the interest rates and it depends on several factors. Below are some of the features of a tax-saving fixed deposit:

  • Investment in tax saver fixed deposit eligible for deduction under section 80C while calculating the taxable income.
  • A minimum lock-in period of 5 years.
  • Senior citizens can get a higher interest rate on investment.
  • In the case of a joint account, the primary holder can avail the benefit of tax deduction while calculating the taxable income.
  • Tax saver fixed deposits do not allow any premature withdrawal. However, after the expiry of the 5 year lock-in period, investors get access to premature withdrawal. The terms and conditions for premature withdrawal vary from bank to bank.

Senior Citizen Savings Scheme

A Senior Citizen Savings Scheme is an income tax saving schemes available to senior citizens who are residents in India. The scheme is available for investment through banks and post offices and offers one of the highest rates amongst the various savings schemes.

Depositors can make an investment with a minimum amount of Rs. 1000 and in multiples thereof. The scheme also provides the facility of investment through cash provided the investment amount is less than Rs. 1 lakh. The deposits made into the scheme matures after a period of 5 years. The depositors also have the option to further extend the maturity period by another 3 years.

School Tuition Fees

The income tax act 1961 provides a deduction under section 80C of the income tax act for payment for school fees of children. This tax saving option is available under section 80C in addition to other investments like PPF, NSC, ELSS, etc. Tuition fees paid to any registered university, college, school, or educational institution qualifies for deduction up to Rs. 1.5 lakh.

The income tax act allows both the parents to claim the deduction to the extent of the amount paid by them. So if the total fee paid by the parents is Rs 1 lakh, of which the father has paid Rs 40,000, while the mother has paid Rs 60,000, both can claim the amount individually as per the payment made by them.

National Pension Scheme (NPS)

NPS or National Pension Scheme has become a popular income tax saving investment product. It is a tax saving option that is available to both government and private employees. It enables the depositor to build a corpus for their retirement along with a regular monthly income. The amount invested by the depositor is invested in several schemes including the equity markets.

There are two types of NPS accounts, Tier-1 & Tier-2. A Tier-1 account has a lock-in period until the subscriber reaches the age of 60 years. The contributions made by the subscriber to Tier-1 are tax-deductible under section 80CCD (1) and 80CCD (1B). Tier-2 accounts are voluntary in nature which allows the subscriber to withdraw the money when they like. However, contributions under tier-2 accounts are not eligible for a tax deduction.

As per the provision of section 80CCD, an individual can claim a deduction up to Rs. 1.5 lakh by investing in NPS. Additionally, a new sub-section 1B was also introduced, which offered an additional deduction of up to Rs. 50,000/-for contributions made by individual taxpayers towards the NPS.

Health Insurance Premium under Section 80D

You can claim a tax benefit of up to Rs. 25,000 in respect of the below contributions:

  • Premium paid to keep in force health insurance covering self, spouse, or dependent children.
  • Any contribution to Central Health Government Schemes.
  • Any other scheme may be notified by the central government as eligible for deduction.

In order to take care of one’s medical emergencies, medical insurance is considered as the safest investment option. This allows the taxpayer to avail of the benefits on two fronts. Firstly, being taken care of by the insurance policy in the case of a medical emergency. Secondly, the tax benefit under the income tax act for investing in an investment product.

Apart from the above, an additional deduction for the insurance of the parents is available to the extent of Rs. 25,000 if they are less than 60 years of age or Rs. 50,000 if they are more than 60 years of age. If the individual and the parent are both above 60 years of age, the maximum deduction available under this section will be Rs. 1, 00,000.

Education Loan

The Income Tax Act provides a tax benefit on repayment of the loan as a tax deduction under section 80E of the act. You must remember that this tax saving option is available to the person who is repaying the loan. Once an educational loan is availed, the interest paid on the education loan qualifies for a tax deduction for a maximum of 8 years, or the interest is repaid, whichever is earlier.

Depending on who pays the EMI for the education loan, the parent or the child can claim the deduction. The deduction under section 80C is available only if you take the loan from a financial institution and not family members. You can claim the tax deduction starting from the year in which the repayment starts.

The income tax authorities provide a moratorium period of up to one year to the borrower from the date of completion to start repaying the loan. This allows the taxpayer sufficient time to manage their finances and claim the deduction once they start repaying the loan.

Rent Paid and No HRA Received

Generally, you receive HRA as a part of your salary and treat HRA as a major tax saving schemes while filing income tax returns. However, there can also be a case wherein it does not form part of the salary of the employee. In such a case, standard HRA deduction cannot be claimed and the taxpayer would not be able to claim the benefit even if they are paying the rent. Further, in such cases, a taxpayer must claim a tax benefit under section 80GG.

In order to provide the taxpayer with benefit even in a case where HRA is not received, section 80GG was introduced. As per this section, a taxpayer can claim the deduction of rent paid even in a case wherein they do not receive HRA. This is subject to the below conditions:

  • The individual is self-employed or salaried.
  • HRA has not been received at any time during the year for which deduction is being claimed under section 80GG.
  • You, your spouse, or the HUF in which you are a member does not hold any residential accommodation at a place where you currently reside.

Interest Paid on Home Loan

In order to claim the interest component on a housing loan as a tax deduction, you must satisfy the following conditions:

  • A home loan must be taken for the purchase or construction of a house.
  • Construction of the house must be completed within 5 years from the end of the financial year in which the loan was taken.
  • The interest component paid as a part of the loan can be claimed as a deduction under section 24 up to Rs. 2 lakh. This is applicable in the case of a self-occupied property. In the case of a let-out property, there is no upper limit for claiming interest.
  • In the case of interest being paid towards a home loan taken during a pre-construction period, the pre-construction interest paid can be claimed as a deduction. The deduction is available in five equal installments starting from the year in which the property is acquired or construction is completed. However, the maximum limit is Rs. 2 lakh.

Savings Bank Account Interest

The Income Tax Act 1961 provides deductions with respect to interest earned from savings bank accounts. Individuals and Hindu undivided family can claim the tax deduction under section 80TTA on the interest earned. This deduction is applicable to taxpayers other than those who are senior citizens. In the case of senior citizens, section 80TTB is applicable.

The maximum deduction under section 80TTA is Rs. 10,000. The limit of Rs. 10,000 applies to the total interest earned from the savings bank account that the assesse has. Any interest over and above Rs. 10,000 is taxable under “Income from Other Sources”.

Medical Expenses Towards Disabled Dependent

As per the provisions of section 80DD, a taxpayer can claim a deduction if they are looking after disabled dependents. This tax benefit will help in reducing the tax liability of the person who is taking care of someone disabled in the family who is dependent on them.

It can be claimed by caretakers who are individuals as well as by Hindu Undivided Families (HUF).

Medical expenses against which you can claim tax benefits are as follows:

  • Any expenditure made towards medical treatment, nursing, training, rehabilitation of a dependent person with a disability.
  • Any amount paid as a premium for a specific insurance policy designed for such cases as long as the policy satisfies the conditions mentioned in the law.

 Treatment of Specified Diseases u/s 80DDB

A deduction under section 80DDB is allowed to a taxpayer wherein a case they have contracted diseases such as cancer, neurological diseases such as dementia, motor neuron disease, Parkinson’s disease, AIDS, etc. All such disease entails expensive treatment costs and the expenses done can be claimed as a deduction under section 80DDB.

The deduction under section 80DDB is allowed for the medical treatment of a dependent who is suffering from a specified disease by individuals or HUF. The deduction is up to ₹ 40,000 or the amount actually paid (whichever is lower). This limit goes to ₹ 1 lakh in the case of senior citizen taxpayers or dependents.

Donations Made to Charitable Institutions

Section 80G provides a tax deduction to the taxpayer with respect to the amount paid by them to an approved charitable organization. The donations made to such organizations should be made via cheque or online transfer. Cash transfers, above Rs. 2,000 do not qualify for deduction under this section. It is very important to take the stamped receipt from the organization wherein the donation has been made in order to claim the deduction.

Depending on the type of organization where a donation has been made, the tax deduction under section 80G can be either 50% or 100% of the donation amount. However, the same is restricted to 10% of the adjusted gross total income of the taxpayer.

There are basically four buckets in which donations can be categorized to claim the tax deduction.

  • Donations with 100% deduction without any qualifying limit, such as the National Defence Fund set up by the Central Government.
  • Donations with a 50% deduction without any qualifying limit such as the Jawaharlal Nehru Memorial Fund or the Prime Minister’s Drought Relief Fund
  • Donations with 100% deduction subject to 10% of adjusted gross total income. The donation must be towards a Government or any approved local authority, institution, or association to be utilized for the purpose of promoting family planning
  • Donations with 50% deduction subject to 10% of adjusted gross total income such as any institution which satisfies conditions mentioned in Section 80G(5).
How to Get the Best Health Insurance Policy for Cancer?

How to Get the Best Health Insurance Policy for Cancer?

by | Apr 3, 2022 | Banking & Finance, Insurance, resources

How to Get the Best Health Insurance Policy for Cancer?

With the rapid increase of health facilities in the country, the cost of treatment of various diseases is on the upward surge too. Amongst them, the treatment of cancer is by far the longest and costliest. For a common man, it gets increasingly difficult to cover the cost of the treatment. Even if the patient recovers, he/she loses all of their life savings in medication and chemotherapy. Moreover, all cancer patients have to quit working while undergoing treatment, which creates additional financial burden and uncertainty. Is there a policy to equip ourselves with the financial coverage? Let’s check it out here.

Subas Tiwari

Start: Solutions to this are the cancer health insurance policies available in the market. These policies provide you financial assistance for cancer treatment.

Why is Cancer Protection Policy Important?

Defined as the uncontrolled growth of abnormal cells, cancer is basically a large group of diseases that can start in almost any organ or tissue of the body. The incidence rate of cancer has increased significantly in the last decade and according to WHO reports, it is the second leading cause of death globally.

With the improvement of health services in our country, the detection and quality of treatment has increased tremendously. However, its cure is still very expensive. To mitigate the burden, medical insurance against cancer is the need of the hour.

Salient Features

  • All life insurance companies offer lump sum payout at early stage (also called minor/mild stage), major stage (also called moderate stage) & severe stage (also called critical stage) of cancer.
  • While some of the plans offer waiver of future payouts of premium (also called waiver), some others offer death benefit to the nominee.
  • Most of the companies also offer surrender benefit (after a specific lock-in period) while some of them offer loan on assignment basis to the company.
  • Once a lump sum is made on the policy for treatment for any stage of cancer, the policy gets extinguished.
  • There are life insurance companies which offer a combination of Heart AND Cancer cover with an option to receive monthly income for prolonged treatment to cover both ailments.
  • No claim is entertained within 180 days of the policy date which is the “waiting period”.
  • The maximum entry age under this plan is 65 years.

Exclusions

  • Sexually transmitted diseases (STD), AIDS or  HIV
  • Any pre-existing condition
  • Any congenital conditions
  • Any critical illness or its signs or symptoms having occurred within the waiting period of 180 days of policy commencement date
  • Under the influence of drugs, alcohol, narcotics or psychotropic substance not prescribed by the treating doctor
  • Treatment for injury or illness caused by activities such as hunting, mountaineering, racing, scuba diving, aerial sports, activities such as hand-gliding, ballooning, any other professional sports which may lead to deliberate exposure to exceptional danger
  • Unreasonable failure to seek or follow medical advice, the policyholder has delayed medical treatment in order to circumvent the waiting period or other conditions

Pointers to Keep in Mind

Cancer insurance plans offer financial relief if diagnosed with minor or major stage cancer and helps the patient and his family to better deal with the situation. There are many cancer insurance products in the market, and it is essential to know what you must look out for when you make your decision.

  1. Benefit vs indemnity:There are two kinds of policies available in the market. Benefit policies are those where sum insured is paid upon the discovery of cancer and successfully passing the survival period. In an indemnity policy, the claims are payable after the waiting period is over and are reimbursed in accordance with the amount spent towards cancer treatment charges.
  2. Sufficient coverage amount:It is no secret that cancer treatment is extremely expensive and a long-term ordeal. The cumulative cost incurred on diagnostics, radiation, chemotherapy and surgery would cause a significant dip in your personal savings if they were to be borne out-of-pocket. Going by the age-old adage, “Better to be safe than sorry”, it would be more beneficial if one were to opt for a higher sum insured amount that would take care of high-cost procedures for a slightly higher premium.
  3. Prior history of cancer: People who have been diagnosed with and treated for cancer earlier should be prepared to face rejection at the time of application for health insurance (whether critical illness policies or cancer care plans). Most insurance companies are not likely to cover cancer patients considering the high risks involved.
  4. Other pre-existing diseases:Whether one opts for a critical illness policy that also covers cancer, or a cancer care plan, it is imperative to declare all previous and/or existing medical conditions and ailments at the time of purchasing the policy. One should also truthfully answer any questions pertaining to genetic predisposition or a family history of any forms of cancer. Non-disclosure would not just impact the claims related to any cancer-specific treatment undergone, it would also lead to rejection of any other non-cancer treatment expense claims.
  5. Waiting periods:Every health insurance plan defines a waiting period for certain conditions and treatments including cancer. These specific waiting periods differ across policies and insurers, so it would be wise to ascertain the time period for the chosen critical illness or cancer care special plan during which one will not be qualified to raise medical claims. Preferably opt for a policy that has a low waiting period to expedite the eligibility. The waiting period is only on first time purchase.
  6. Co-payment: Few health insurers impose a co-payment clause (i.e., a percentage of sum insured amount) on cancer treatment expenses which have to be borne by the policyholder. Choosing such a policy would mean that a certain percentage of the costs will always be paid on your own.
  7. Sub-limits:Some insurers stipulate an upper cap or sub-limit on the amount of coverage offered for cancer treatment. For example, the critical illness plan might be for a sum insured of Rs 50 lakh, but cancer treatment would get covered only up to Rs 5 lakh.
  8. Exclusions:All health insurance policies – whether critical illness or cancer specific – outline a list of exclusions which are conditions and procedures that the insurer is not liable to pay for. Those looking for cancer-related health insurance should, of course, ensure that cancer is not excluded from coverage. Additionally, this list of exclusions might mention a specific type/s or stage/s of cancer that would be omitted from coverage.
  9. Experimental treatments:Exponential and continuous advancements in cancer therapy have led to novel treatment methods being discovered. Most health insurance plans cover traditional and new age treatments that are approved by medical councils. Radical therapies and unproven treatments would not be covered.
  10. Survival period:Insurers specify the minimum number of days for which the policyholder must survive post diagnosis or treatment of cancer. The health insurance benefit will be accrued only upon successfully passing the survival period. This is a crucial point to be aware of to avoid any future surprises.
  11. Features that aid in increasing the sum insured amount:Restoration benefit for the same disease would be an ideal policy feature to have, as it would lead to reinstatement of the original coverage amount upon exhaustion due to single or multiple claims submission. Additionally, no-claim bonus for claim-free years would also help in augmenting the sum insured amount, which would eventually prove useful at the time of seeking expensive cancer treatment.

Renewability of the policy after the discovery of cancer: The policy may not be renewed once cancer specific feature is invoked. The benefit is usually payable once in the lifetime of the insured.

Related

What does the new bank locker guidelines mean

What does the new bank locker guidelines mean

by | Sep 18, 2021 | Banking & Finance, resources

What does the new bank locker guidelines mean

bank Locker

The RBI has announced a few changes in the starting and keeping a bank locker. As the news guidelines are going to be affected from January 1, 2022, let us take a quick look of what it necessitates. 

Subas Tiwari

Under the new guidelines, the liability of the bank towards locker in case of fire, theft, building collapse and fraud by bank employees will be limited to 100 times of its annual rent. The revised locker guidelines will come into effect from January 1, 2022. Banks will have to include a provision in the locker agreement under which the person renting the locker will not be able to keep any illegal or dangerous goods in it.

The Reserve Bank said that on the basis of various developments in the banking and technology sectors, nature of consumer complaint and information provided by banks and Indian Banks’ Association (IBA), it has decided to “deposit lockers/safe custody items provided by banks” facility’ is reviewed.

Let us know here about the new rules and how they are going to affect you.

  1. The responsibility of the banks will be fixed

According to the new RBI guidelines, banks will have to implement a board approved policy, in which their responsibility can be fixed for the goods kept in the locker due to negligence. According to the rules, the bank will not be responsible for any loss in case of natural calamity or ‘Act of God’ i.e. earthquake, flood, lightning and storm.

  1. If theft, fraud happens, the bank will give compensation

But this does not mean that the bank is free from its responsibilities. Banks will have to ensure proper arrangements to protect their premises from such calamities. Apart from this, the entire responsibility of the security of the premises where there are safe deposit lockers will be with the bank itself. According to the new rules of the Reserve Bank, in case of fire, theft, building collapse or fraud on the part of bank employees, the liability of banks will be limited to 100 times of their annual rent.

  1. If payment is not made

If the rent for the locker has not been paid by the customer for three consecutive years, then the bank can take action on it and can open any locker following the due process.

  1. Cannot store illegal goods

According to the RBI new rules, banks will have to include a provision in the locker agreement, under which the locker rental customer will not be able to keep any illegal or dangerous goods in the locker.

  1. Waiting list number will be released

According to the new rules, it will be necessary for banks to send SMS and email of locker operations to the customers. Banks will have to provide receipt for all applications for locker allotment. If the locker is not available, the banks will have to give the number of the waiting list to the consumers. The branch wise locker allotment information and waiting list of banks will be linked to Core Banking System (CBS) or any other computerized system compliant with cyber security framework.

  1. These customers will also get the facility

As per the new guidelines, the existing customers of the bank who have applied for locker facility and who are fully compliant with CDD (Customer Due Diligence) norms can be given the facility of Safe Deposit Locker/Safe Custody Article. According to the new rule, the facility of Safe Deposit Locker/Safe Custody Article can be given to the customers who do not have any other banking relation with the bank.

  1. Shifting of lockers

Banks will be able to shift the locker from one place to another only after informing the customer. Term deposit can be used as locker rent. The bank will have to take adequate steps to protect the strong room/vault. It will be necessary to keep the CCTV footage of entry and exit for at least 180 days.

Why a common man needs bank lockers?

In the earlier centuries, people went to the banks demanding a personal locker facility in view of a spate of robberies which were happening in their households. Their take that banks usually are safe havens with high-end security systems in place, security guards, alarms, etc-so banks were the safest places on earth to keep one’s valuables such as gold ornaments. But this high-end security systems in banks have spurred a burning question nowadays!

Everyone is reviewing their decision to continue to hold a locker in a bank in the light of recent incident of stealing of contents of bank lockers in Haryana by burglars. Readers might also remember the 2014 fire which engulfed one of India’s leading banks in Chennai (fortunately, the locker cabinets escaped the fire) which stoked media discussion about the safety of bank lockers under these circumstances.

So, we venture here to try and understand the way to go about hiring a bank locker and the responsibilities which come with being a locker hirer and the limited uses of this service which are offered by banks under public utility services 

Why banks hire out lockers?

During earlier times, banks were letting out lockers as a favor to high-end customers who were even otherwise dealing with the bank in the matters of deposit/loans/remittances. However, during the latter part of 1970s, after nationalisation of private banks, banks were looking to increase their customer base while looking into ways of accruing non-fee- based income to boost profits. This hunger for additional business threw a slew of public utility services such as issuance of letter of credits, guarantees and of course hiring out bank lockers.

How does one hire a locker?

It is as easy as opening a bank account. Request in writing for a bank locker of the size you need; request for a free personal look-in to the locker cabinets to know the depth of the locker you wish to hire; sign an agreement for locker-hiring; open a bank savings account to deposit locker rent and locker deposit; obtain the key to your allotted locker and come some other day or same day to keep the contents in the hired locker. You would also have to sign the locker visit register to mark your presence.

Locker operation conditions

  • Banks recognise you only by your signature; so, make sure you sign as normally as you always do
  • Locker deputy’s signature would also have to be affixed in the allotted page of the locker register (in case you appoint one)
  • Locker agreement provides for repaying the contents of the locker to you or your nominee (in case of the deceased of the locker-hirer) or either-or survivor clause in case the locker is hired jointly (with a blood relative) or against all the locker-hirers jointly
  • Some banks insist on a declaration from one other person accompanying you (non-locker-hirer) to request for bank’s permission to enter the locker room along with the locker-hirer
  • Quite a few banks are also obtaining a declaration to the effect from the locker-hirer that he/she has personally verified that the locker allotted to him/her has been safely secured with the locker key, after completing the operation of the locker

Benefits of a bank locker

  • In spite of the hullabaloo created in the media questioning/debating on the safety of bank lockers, it is still the safest place to keep your valuables, till some other alternatives come to replace them
  • Banks still provide a secured environment by providing bank lockers which are made of high-quality steel plates with MS screws fitted on them and difficult to penetrate
  • Bank lockers come cheap for the space you hire, which is incomparable with any other alternative system
  • Bank lockers are secured by insurance cover against fire and other hazards and nowadays are backed by internal circuit TV (CCTV)
  • Locker-hirer(s) can nominate/appoint a locker deputy to operate the locker in his/her absence (which acts as a Mandate as in a deposit account as POA holder)
  • Bank officials do not see as to what is being kept in the bank locker; they at best take a declaration that the locker contents are not opposed to public policy. So the secrecy of the customer is maintained

 Disadvantages/drawbacks of a bank locker

  • One can operate the bank locker only during the time the business hours

of a bank which severely restricts the freedom to get the locker contents in case of an emergent situation; incidentally, bank holidays in an area often coincides with a religious public holiday, thereby denying access to bank lockers (to enable the locker-hirer to take out the ornaments for wearing on such important occasions)

  • Normally, banks charge locker rent in advance for a specific period (eg., say for 1 year) and in case the locker-hirer vacates the locker in the middle of the year, banks mostly do not refund the locker rent for the unexpired (broken) period to the detriment of the customer
  • Banks usually insist, albeit orally, on depositing a sizeable sum as fixed deposits to be held with them for a longer period for letting out a locker
  • Lockers are not available at small/medium-sized branches in urban/semi-urban and rural centres where the fear of theft is the maximum due to the of the remoteness of the place
  • The RBI has recently come out with a response to an RTI filed wherein it has clarified that bank locker hirer in India  is that of  a lessee (tenant for that space he hired) while the bank acts in the position of  a lessor (landlord-the owner of the bank locker which is let out for hiring). So in case of a locker theft where the contents were removed without the connivance of the bank officials, the bank is under NO LIABILITY FOR LOSS OF VALUABLES IN LOCKERS.

Do insurance companies give locker insurance?

Insurance companies dealing with non-life (general) insurance products do not cover bank lockers for the purposes of extending insurance cover under a household package policy. However, in case one wishes to have insurance cover on the jewellery items (such as ornaments in gold, silver, platinum; precious stones, diamonds, etc)  and/or currency notes kept in bank locker(s), insurance cover under Jewellery Block Insurance Policy (as a part of the Household Package Policy) is being made available by most of the insurance companies in India.

However, this insurance cover is only for ornaments and other pieces of jewellery as well as cash. Also, one may have to show supporting receipts for having purchased them with their purchase value (other than what was acquired from marriage gifts).

A handy guide to start a term insurance plan

A handy guide to start a term insurance plan

by | Sep 18, 2021 | Insurance, resources

A handy guide to start a term insurance plan

Health Insurance

Term insurance plans work as recourse to face different uncertainties. If you are planning to take term insurance plan, make sure to gather information about the cover amount, policy term, premium etc. The following article gives you an in -depth coverage of all things essential to start a term insurance plan. 

Subas Tiwari

Term insurance brings additional benefits such as posthumous family financial protection, tax savings, critical illness, accidental death etc. If we talk about the types of term plans, then there are pure term plans, return on premium term plans and term plans with income benefits. But first, let us understand what is a term insurance policy. 

What is term insurance?

One of the most misunderstood financial products in India is “Term Insurance”. In fact, “Insurance” in itself is not understood or appreciated enough. Most people consider insurance as just another form of savings or tax savings instrument, which can earn them safe, stable returns over the long run. Some products in the insurance space do provide this regular saving facility, but that is not the purest form of insurance.

The true and simplest meaning of insurance is – protection against risk. Now this risk may be to life or property or many other things. But in this article, let’s focus on life insurance, and specifically term insurance. It’s a policy where you pay premiums in return for a benefit to your family in case you die, and you get nothing if you survive the insurance period.

Tell this to people and most will ask, “Why should I pay annually for a product if I am not going to get anything back?” Very few understand that you pay premiums because there is a guarantee that if something happens to you, your family will be paid the pre-decided amount. Therefore, you have the peace of mind that even if you are not there; your loved ones will not have to bear a financial loss as well.

Just consider this – in the unfortunate event of one’s death, the immediate family will receive sufficient amount to maintain their standard of living. This payout can also fund their child’s education, help pay off dues and even provide capital in case the spouse wants to start a business to support the family. This is the reason term insurance is also known as a “pure risk” plan – simply because it mitigates the risk of you not being there to provide financial support to your family.

Term insurance is the oldest form of insurance and is the least expensive plan to cover the risk of death. Term plan is a no-return plan just like your medi-claim or car insurance cover. If claim is made within the insured period, the nominee will get the full sum assured as otherwise there is no maturity value or cash value for this plan. It provides coverage for a specific period or term say 10 to 30 years. Term insurance plan is a must for a person who has dependents or a family of which he is the sole bread-earner. If you have family members dependent on your income, you need term insurance.

It’s a hedge for the protection

One should not make the mistake of taking term insurance premium as an expense but treat this as a hedge for the protection and security of your loved ones. You need to compare the premiums before selecting the right company and also have to go through the exclusions in the plan. This will help you in selecting the right term plan. Looking at all the facts available, term insurance is the obvious choice for insurance for life.

Term insurance is the simplest or the purest form of life insurance. In this case, there is a provision that in the event of the demise of the insured person, the family of the deceased is paid a pre-determined amount as part of the coverage.
For example, a person bought a term insurance plan for a sum of Rs 30 lacs. The tenure or the term of the policy is 20 years. So, if the insured person passes away in the duration when the policy is valid, the family (the nominee or the legal heirs as the case may be) will be paid a sum of Rs 30 lacs.
 
Another important aspect of term life insurance is to ascertain the safety net which the family of the insured will require in the event of the demise of the insured. The calculation is done by keeping a view on the existing standard of living of the family and the funds that would be required in order to continue to live with the same standard of living. Also, to be considered are the various important events like marriages, higher education etc; and the debt that the deceased must have left behind to the legal heir(s). 

After the calculation of the aforementioned future expenses, the person can come to a definite number or the coverage which he/she may require in order to provide for the family or dependents so they can continue their existing standard of living. 
But one thing is very clear. The earlier the insured takes this policy to benefit his family after the unexpected death, the lesser is the cost of premium he/she has to pay to keep the policy alive.   

One should look at the best term insurance plan in India depending on age, income and life insurance need. The online premiums are cheaper than off-line term plans and are quite easy to avail also. In the recent past, online term plans have gained immense popularity due to their easy access. 
Some of the insurance companies are offering discounts on online purchase of term plan policies, because it saves the companies a lot of labour and man-hours trying to sift through hordes of paper/documents, which can be easily viewed online and preserve it for future use without much difficulty.
We have brought out the salient features and workings of term plan insurance online in this article (SEE BOX) for the information of our readers.

Advantages/benefits of term plan insurance

  • Term insurance is the cheapest form of insurance.
  • It’s simple to understand.
  • Select the length of the term for which you would like coverage, say up to 35 years. So, payments are fixed and do not increase during your term period.
  • During the early years of a term policy, the premium will usually be significantly lower than for cash value life insurance.
  • In case of an untimely death, dependents will receive the benefit amount specified in the insurance agreement directly on filing the claim with supporting documents.
  • You can customise term life insurance with the addition of riders, such as Child Benefit or Accidental death.
  • Another popular feature of term insurance is the return of the premium. They may give the benefit of returning 100 per cent of whatever you have paid.  

Disadvantages/limitations

  • There is a downside in that, if the insured person happens to outlive the tenure of the policy, all the amount paid in the form of premiums will be forfeited by the insurance company without any benefits to the insured or to his/her family. Essentially all the premium will go down the drain, except for tax benefits he/she would have availed on the amount paid as term insurance premium.
    • There is one major hurdle that prevents people from purchasing a term insurance plan; it tends to create a mental block as it deals with the death of the person taking a policy. But it is morbid, as the rationale behind buying car insurance is exactly the same as buying a term insurance plan. 
      If a person meets with an unfortunate car accident while driving, he/she has to pay damage charges to the other party or the insurance provider will compensate him/her. On the other hand, if the person is a relatively safe driver and avoids any accident, the premium acts more like a hedge (cover) against any event which might/might not occur.
  • Consumers resort to consulting their agent as they either do not have the time to go through the brochure of this product or they believe that the agent is in the trade and hence should know more of the product- so it is easy to ask him questions and get answers from him without counter-verifying with the insurer. Unless one is aware of the features of the insurance plan himself/herself, do not expect the agent to explain the plan in detail (some of the agents do not give proper advice to their clients and run behind commissions).
    • Term insurance provides coverage only for a limited period of time.
    • Premium rates are guaranteed only until the end of the term. Depending on the policy, premiums may be level for a period of 1, 5, 10, 15, 20, 25, or 30 years and then cease without any renewal option, or offer a fresh cover at the end of the plan period at a higher premium rate.
  • Deteriorating health can trap you in a policy with rapidly increasing premiums.
  • No insurance company offers term plan insurance over 75 years of age, which means it is not very beneficial to the insured after attaining 75 years. 

Tips to get on a term insurance plan

First decide the cover amount

Choosing the cover amount is the most important thing to do before buying a term insurance policy. It depends on the individual, how much minimum cover he needs. Going by the thumb rule, salaried people should take a cover of 10 times of their annual income and at the same time keep increasing it with increasing income. You can also calculate the cover amount online. There are many online tools available in which you can calculate the cover amount as per your income and profession.

Deciding policy term is very important

Selecting the term of the policy is the second most important task in the selection of a term plan. If you are taking the policy at a young age, then choose the longest-term policy. This will also give you an opportunity to buy the policy at a lower premium.

Online or offline?

You can buy the term policy through an agent or online. You may also have to pay a lower premium if you do it directly through the company’s website or aggregator website. At the same time, if you take it from the agent, you will have to pay a higher premium.

Choosing the company

Choosing a good company is very important before buying a term insurance policy. Before taking a policy from any company, check its claim record ratio. Along with this, also know the financial position of that company and keep in mind the company’s service, method of payment, etc.

Choice of rider

Even after a term plan, there is also a possibility that the policyholder may become a victim of disability due to an accident or he may lose his hearing. In such a case, a rider should also be taken for financial security. However, for this you have to pay an additional premium.

Some more important aspects of term insurance

The public, consisting of the common man, the office-goer, the professional are mostly aware of life insurance products in the insurance sector. But many don’t know or aware, is the topic of discussion in this article. May be, the professionals and the babus in the corridors of power, will have the benefit of knowing this product, which is term plan insurance.

Most of us know that there are 24 life insurance companies operating in India out of which Life Insurance Corporation of India corners almost 70 per cent of the total life insurance business. There is no best investment product anywhere; the answer is a relatively better product based on offering benefits with reasonable costs. 

Types of term insurance plans

There are basically three types of insurance plans available in the market. They are:

(1) Traditional or conventional plans

Traditional plans are mostly saving products and give guarantee of sum assured and also give bonus every year depending on the profitability of the company. The investment options are with the insurer and they take a call where to invest on the plans available in the market.

(2) Unit linked insurance plans  

ULIP plans are market-related and the risk of investment is borne by the policyholders. Policyholders have the right to choose the investment option available in the plan i.e. from 100 per cent in debt to 100 per cent in equity.  ULIP products are more complex than traditional plans.

(3) Term insurance plans

First, think about why you want to buy a term insurance plan? Of course, like everyone else, you also believe that nothing will happen to you. We, too, would wish the same for you. But the harsh truth is that this life is highly uncertain. There is always an element of concern or risk which leads you to ask the “What if?” question. You must buy term insurance to answer this very question as the entire financial trauma arising out of that question will remain unanswered.

Have you ever realized the value of a term insurance plan? Don’t just take a term plan just because everyone is going for that or that you might be considered as a prudent wise man! But do a cross- check whether your family can be benefited easily if required so in future. So, feel the necessity and then proceed further to choose the best product.

What is claim settlement ratio?

This gives us an idea about the claim solving ability of the insurance company. If claims are intimated and the insurance company settles those, claim settlement ratio would be good. In simple words, claim settlement ratio is the number of claims settled by the insurance company out of every 100 claims it has received. Higher claim settlement ratio implies that majority of claims are getting settled. Higher the claim settlement ratio for the company, the better rated the company is in the eyes of the public.

Claim settlement ratio 

One should go with the company who has a better claim settlement ratio and a good reputation. So that after the death of the insured, his family does not have to face much trouble to get the money. In simple words, with better claim settlement ratio, you can understand the ability of the company to pay the amount to insurer’s family. How many policies were settled successfully and if company denied paying the amount showing some reason, then you will ask in how many policies and claim amount was done? So, it’s better to stay with the company who generally or mostly paid out all insurance claims.

Care to be taken while taking a term plan policy

Generally, 99 per cent of insurance business are canvassed by agents only- mostly by our uncle, aunty and relatives, etc. Don’t believe any one while filling the form. Most of the time people just sign the policy document and then leaves the rest of the details to be filled in by the insurance agent. You are the best person to fill up your personal details. Any wrong information which you might think as a negligible factor can be pointed out later by the insurer to your family to find a reason for rejection of claim in favour of the nominee/legal heirs.

How online term insurance plan works?

The latest buzz in term plan industry is the online term plans. You can simply provide the data online and subscribe to your term plan instantly with a lower premium. The insurance companies extend cheaper premiums on on-line term policies as it saves them a lot of paperwork and physical labour of verifying the documents. But the problem here is, most of the term plans do not involve a proper procedure to check individual’s health condition and other factors. Due to that, it is very risky to subscribe to a term plan although the premium is lowest. Your family might be in trouble in future. So, it’s better to pay the premiums and subscribe the same term plan through agent/sales officers by following every procedure clearly. Companies can have a better and clear record about your insurance to track in future.

One can go online and calculate the premium, then can start the process of buying the policy and submit details such as name, age, tenure, sum assured and medical information which can affect the premium. After all this, one gets a premium quote and then it is paid online. 

After the premium is paid, there are few things which are yet to be completed. The proposer will get a mail from company or get a call from company that some representative of the insurance company will come to the residence and collect the important documents; the documents are also required for Know Your Customer (KYC). Based on the age and given information, the insurer can decide if one will have to appear for medical test or not. If there is anything wrong in medical examination which can affect the premium (and consequently can increase company’s risk of insuring), then they can increase the premium (loading) or choose not to offer the policy. One can then decide to continue with them by paying the additional premium or cancel the policy.

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Supreme Court asks for impact study of Consumer Protection Act, 2019

Supreme Court asks for impact study of Consumer Protection Act, 2019

by | Sep 18, 2021 | Legal, Real Estate, resources

Supreme Court asks for impact study of Consumer Protection Act, 2019

Health Insurance

Inaction of the governments in appointing president and members/staff of districts and state consumer disputes redressal commission and inadequate infrastructure across India has led Supreme Court to direct centre to conduct legislative impact study of Consumer Protection Act 2019.

Ankur Saha

The legislative intent behind the Consumer Protection Act, 2019 is empowerment of the consumers. However, the ground reality is quite different as there is little endeavor to translate this legislative intent into an administrative infrastructure with requisite facilities, members and staff to facilitate the decision on the consumer complaints.  “Statistics can be deceptive but sometimes statistics reveal the truth. The position prevalent in the State Consumer Forums and the District Consumer Forums is best reflected by the statistics of existing vacancies, insofar as the chairman and the members are concerned.”

The Bench was addressing the inaction of the governments in appointing president and members/staff of districts and the State Consumer Disputes Redressal Commission and inadequate infrastructure across India. 

On failure of State Governments/UTs to notify rules

Observing the lackadaisical attitude of governments with regard to notifying rules under the Section 44 of the Consumer Protection Act, 2019, the Bench issued directions to all the states and union territories qua the issue of appointment of chairman and members of the state and district commissions and notify the rules within two weeks. The Bench made it clear that where the states still dilly dally on the issue of notifying the rules, the model rules framed by the Government of India will automatically kick off and apply to the concerned states and union territories i.e. Consumer Protection and (salary, allowances and conditions of service of president and members of the state commission and district commission) Model Rules, 2020.

Non-constitution of selection committees

Regarding the large number of existing vacancies, the Bench directed that all the existing and potential vacancies should be advertised, if not already advertised, within a period of two weeks. Noticing that some of the States and UTs had not constituted the selection committees in terms of Rule 6(1) of the Consumer Protection (Qualification for appointment, method of recruitment, procedure of appointment, term of office, resignation and removal of the President and members of the State Commission and District Commission) Rules, 2020 (“2020 Rules”), a direction was issued to the states/UTs concerned to constitute the selection committees within four weeks.

On vacant posts of president/members in consumer forums

Considering the excuse given by some states that the of selection was being held up because the number of posts had not been prescribed/sanctioned in consultation with the Central Government as mandated under Section 42(3)(b) of the said Act, the Bench stated that the mandate is of each State Commission to consist of a President and not less than four members i.e. insofar as the president and four members are concerned; it is only if the number of members have to be more than four, that such number of members may be prescribed in consultation with the Central Government. Therefore, the Bench stated that if the states feels that the numbers of members have to be more than four, that process of discussion cannot derail the process of appointment of president and four members in any case.

Accordingly, the Bench directed that all the vacancies whether for the post of president or members should be finally filled up by the 30 states and union territories within a maximum period of eight weeks.

On last minute filing of affidavits

Noticing that usually, most of the affidavits had been filed at the last minute resulting in the inability of the Amicus Curiae in presenting the appropriate picture before the Court, the Bench expressed that such last-minute rush of affidavits which derails the effective hearing before the Court could not be countenanced. The Bench came down heavily on the administration stating that the Court was spending time on aspects which administration should be doing. The Bench directed, “The States should give their inputs in time so that a picture up to date is presented before us by the Amicus Curiae and last-minute filing of the affidavits by the states is not acceptable.” Accordingly, the states and UTs were directed that updated position should be furnished to the Amicus within two weeks.

Lack of infrastructure and man power

So far as the aspect of infrastructure and man power was concerned, the Bench directed that wherever the Amicus Curiae requires the response in a particular format, the states are bound to respond in that format. Regarding the vacancies in NCDRC, the Bench was of the view that there was no reason why the Central Government should take more time to fill up the vacancies and thus, the schedule laid down for the State Governments to fill the vacancies was held to be applicable of Central Government as well. The information was also sought with regard to infrastructure as to whether the premises were rented or owned by the Government. If rented, the location of the rented premises.

Legislative impact study

On the issue of a Legislative Impact Study and whether the same was undertaken before the new Act of 2019 came into place, the Bench observed that through the new Act expanded the jurisdiction of the consumer forums which would result in the litigation shifting to the Consumer Tribunals apart from the aspect of the variation in the pecuniary jurisdiction by increasing the jurisdiction of the District and State forums, no legislative impact study had been done to ascertain how many more cases would arise in these foras to make necessary arrangements for infrastructure and man power.

The Central Government was stated to be assisting the States by a Scheme titled as, “Computerization and Computer Networking of Consumer Commissions” (CONFONET) which provided the ICT infrastructure to Consumer Commissions and replaced old infrastructure, provided HR support by deployment of technical man power to enable/monitor computer based system in each and every Consumer Commission in India; provided an online module of case monitoring system, facilitated reporting and monitoring at all levels, strengthened transparency and accountability in judicial system etc. The scheme was stated to be fully funded by the Central Government and was being implemented through the NIC. The Court asked the states whether they had utilized the opportunity and the funding provided by the Central Government and in what manner.

The states were directed to furnish the information to the National Commission within two weeks about position of vacancies so the same could be uploaded on the website of the National Commission failing to which they will be treated as in breach of the Court’s directions. In order to ensure that all the aforesaid directions are complied with, the Bench directed that the concerned Chief Secretaries of the States in case of non-compliance within the time frame stipulated will attend the virtual Court proceedings and so would be the position for Union of India where the concerned secretary would be the Secretary, Consumer Affairs.

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Things you should know about Application Supported by Blocked Amount (ASBA)

Things you should know about Application Supported by Blocked Amount (ASBA)

by | Aug 15, 2021 | Best Buy, mutual-funds, resources

Things you should know about Application Supported by Blocked Amount (ASBA)

ASBA

With the Zomato IPO in the headlines, you might want to know how to subscribe an issue in the Initial Public Offering or IPO. If you’re so, we suggest you to understand what is an Application Supported by Blocked Amount (ASBA). It is a process developed by India’s Stock Market Regulator SEBI for applying to IPOs, Rights issue, FPS etc. In ASBA, an IPO applicant’s bank account doesn’t get debited until shares are allotted to them. Let us understand what it entails here and what a consumer needs to go though. 

Subas Tiwari

ASBA facility is adopted for application of Initial Public Issue IPO and Follow-on Public Offer (FPO). It is a SEBI based facility on your bank account which was launched in May 2010. It is a process by which retail investors block the relevant amount in their savings account till the shares are allotted, to apply for investment in an IPO or FPO. If shares are allotted to you then this amount is deducted from your bank account otherwise it is unblocked after the allotment process is completed. It can also be understood that if the investor has subscribed for the IPO, then under the process money will not be deducted from the investor’s account until he gets the IPO issue.

ASBA or Application Supported by Blocked Amount is an application containing an authorization to block the application money in the bank account, for subscribing to an issue.

If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn/failed.  

Detailed procedure of applying in IPO through ASBA

Under ASBA facility, investors can apply in any public/rights issues by using their bank account. Investor submits the ASBA form (available at the designated branches of the banks acting as Self-Certified Syndicate Banks) after filling the details like name of the applicant, PAN number, de-mat account number, bid quantity, bid price and other relevant details, to their banking branch by giving an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. Investors shall ensure that the details that are filled in the ASBA form are correct otherwise the form is liable to be rejected.

Who can apply through ASBA facility?

SEBI has been specifying the investors who can apply through ASBA. In public issues with effect from May 1, 2010, all the investors can apply through ASBA.  

In rights issues, all shareholders of the company as on record date are permitted to use ASBA for making applications provided he/she/it:

  • is holding shares in dematerialised form and has applied for entitlements or additional shares in the issue in de-materialised form;
  • has not renounced its entitlements in full or in part;
  • is not a renounce;
  • who is applying through blocking of funds in a bank account with the Self Certified Syndicate Bank (SCSB).  

Applying through ASBA vis‐à‐vis applying with a cheque

Applying through ASBA facility has the following advantages:

  1. The investor need not pay the application money by cheque; rather the investor submits ASBA which accompanies an authorisation to block the bank account to the extent of the application money.
  2. The investor does not have to bother about refunds, as in ASBA only that much money to the extent required for allotment of securities, is taken from the bank account only when his application is selected for allotment after the basis of allotment is finalised.
  3. The investor continues to earn interest on the application money as the same remains in the bank account, which is not the case in other modes of payment.
  4. The application form is simpler.
  5. The investor deals with the known intermediary i.e. its own bank.

Is it mandatory for investors eligible for ASBA, to apply through ASBA only?

No, it is not mandatory. An investor, who is eligible for ASBA, has the option of making the application through ASBA or through the existing facility of applying with cheque.  

Can I make application through ASBA facility in all issues?

Yes, you can make application through ASBA facility in all the issues (i.e. public and rights. List of Self Certified Syndicate Banks (SCSBs) and their designed branches i.e. branches where ASBA application form can be submitted, is available on the websites of BSE (www.bseindia.com) and NSE (www.nseindia.com) and on the website of SEBI (www.sebi.gov.in). The list of SCSBs would also be printed in the ASBA application form. 

Self-certified Syndicate Bank (SCSB)

SCSB is a bank which is recognised as a bank capable of providing ASBA services to its customers. Names of such banks would appear in the list available on the website of SEBI. No, ASBA can be submitted to the SCSB with which the investor is holding the bank account.  Five (5) applications can be made from a bank account per issue.  

You can either fill up the physical ASBA form available with SCSB and submit the same to the SCSB or apply electronically/online through the internet banking facility (if provided by your SCSB).  

Can I use the existing application form for public issues?

Investor is requested to check the form carefully. In case of public issue, the application form for ASBA will be different from the existing application form for public issues. The application forms will be available with designated branches of

SCSB. In case of rights issue, there will not be a separate form for ASBA. The investor has to apply by selecting ASBA option in Part A of the Composite Application Form. 

How to withdraw my ASBA bids

During the bidding period you can approach the same bank to which you had submitted the ASBA and request for withdrawal through a duly signed letter citing your application number, TRS number, if any. After the bid closure period, you may send your withdrawal request to the Registrars before the finalisation of basis of allotment, who will cancel your bid and instruct SCSB to unblock the application money in the bank account after the finalisation of basis of allotment.  

What to do when application gets rejected

You have to approach the concerned SCSB for any complaints regarding your ASBA applications. SCSB is required to give reply within 15 days. In case, you are not satisfied, you may write to SEBI thereafter.

It is to keep in mind that in ASBA, the entire bank account does not get blocked. Only the amount to the extent of application money authorised in the ASBA will be blocked in the bank account. The balance money, if any, in the account can still be used for other purposes.

If the withdrawal is made during the bidding period, the SCSB deletes the bid and unblocks the application money in the bank account. If the withdrawal is made after the bid closure date, the SCSB will unblock the application money only after getting appropriate instruction from the registrar, which is after the finalisation of basis of allotment in the issue.     

And investors need not necessarily have their DP account with the SCSB, where they are submitting the ASBA form. One is required to submit ASBA to the SCSBs only.  

An investor can apply either through ASBA or through existing system of payment through cheque. If an applicant applies through both, ASBA as well as non‐ASBA then both the applications having the same PAN, will be treated as multiple application and hence will be rejected.

The bids received through ASBA mode gets reflected in the demand graphs displayed in the website of stock exchanges. In case there is an error by SCSB in entering the data in the electronic bidding system of the stock exchanges, the SCSB shall be responsible.

The SCSB shall give a counterfoil as an acknowledgement at the time of submission of ASBA and also the order number, generated at the time of uploading the application details, if sought by the investors in case of need.

ASBA forms need to be treated similar to the non‐ASBA forms while finalising the basis of allotment. In case the issue fails/withdrawn the SCSB shall unblock the application money from the bank accounts upon receiving instructions from the registrar.

In case of any complaints, the investor shall approach the bank, where the application form was submitted or the registrars to the issue.

This can be done provided that your bank have core banking facility and the ASBA form is submitted at a branch which is identified as designated branch by the bank.

The chance of getting allotment is same for all the applicants whether application is made through ASBA or non‐ASBA. ASBA is a simple, easy and smart way of applying in public issues. There are many advantages of applying through ASBA like money does not go out of investors’ account, no hassle of refund, investor keep earning interest on the blocked amount as banks have started paying interest on daily basis w.e.f April 1, 2010 and it gives better opportunity for utilisation of money.

ASBA forms can be submitted only at the SCSBs. In case investor does not have an account with any of the SCSBs, then he cannot make use of the ASBA.

                                                                         (Source: SEBI)

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