That Foreign institutional investors (FIIs) are interested in Indian stocks is not something new. The fact that their stakes in large Indian companies have increased over the past few quarters is something that proves this point. On the other hand, the actions taken by domestic institutional investors (DIIs) are quite the opposite. In the year till date, their net outflows stood at over Rs 732 bn. As per the Business Standard, this is probably the highest sold by such institutions in about 9 years; data prior to 2004 is not available. The earlier record was about Rs 570 bn in 2012. On the other hand, the net inflow by FIIs stood at Rs 1 trillion during the year. This is their third highest figure of such inflows reported in a year. 

One may argue that redemption pressures, which may have led to a situation of net outflows by DIIs, must be taken into consideration here. Not to forget the outperformance of other asset classes, coupled with profit booking (with the BSE-Sensex touching its highest levels recently) as reasons for investors pulling their money out of stocks. 

We believe this should ideally be the situation that investors should be taking when the markets seem overheated. Sure, the markets have touched new highs, but does that mean they are expensive? 

Warren Buffett is of the belief that the best single measure for gauging the attractiveness of stocks in an economy is the 'total market capitalisation to GDP ratio'. The lower it is the, more attractive the stocks are in that market. The higher it is, the more expensive they are. 

If one were to view valuations by this parameter, stocks look anything but expensive at the moment. At the end of FY08, the figure stood at about 106%, which indicated an overheated situation. Post the market decline, the figure fell close to 55% levels at the end of FY09. Going by the chart below, valuations picked up quickly thereafter. However, in recent years the ratio has moved lower. As of a couple of days ago, India's market cap to GDP ratio stood at about 64%, which is pretty much close to its thirteen year average. 

Going by this parameter, stocks are not expensive

* As of December 23, 2013; It may be noted that the business daily has estimated the FY14 nominal GDP growth rate to be 12% (5% growth + 7% inflation).

What does this suggest? A short answer would be that one can consider investing in stocks at the moment. 

But when one views valuations of the different indices, it paints a slightly different picture - for the blue chips mainly that is! The BSE-Sensex trades at a multiple of about 17.8 times its trailing twelve month earnings, which is slightly above its long term average. Comparing this to the BSE-500 index, which comprises of the large cap companies in India, valuations are lower at about 15 times. Now, considering that the bluest of blue chip companies form a significant portion of this list of 500 companies - in terms of market capitalisation - it would be fair to assume that the collective valuation for the balance large cap companies would be much lower. 

Also, if one looks at the smaller companies, i.e. stocks forming part of the BSE-Midcap and BSE-Small cap indices, they seem all the more attractive. Given the volatile earnings reported by them in the past few quarters, looking at these companies on a P/E basis may show a distorted picture. But when seen on a price to book value basis, stocks forming part of these indices collectively seem attractive. The price to book values of the BSE-Midcap and BSE-Smallcap indices stand at about 0.67 and 1 times respectively. These are much lower than their long term averages and attractive when gauged in isolation as well. 

Considering the last five year period was one of the most challenging phases for companies, it would be relatively easy to identify the ones that have done well or those that have done much better than their peers. Investors would do well to identify such companies for investment opportunities, especially considering that the markets are not seemingly expensive at the moment. 

The 'Greatness' Conundrum

The 'Greatness' Conundrum

Only 10% or so of the BSE 500 companies are able to stick to the 'greatness' framework over a 5-6 year period...

By Saurabh Mukherjea | Apr 26, 2013

Indian companies find it very hard to generate shareholder returns – over the last 20 years, 80 per cent of Indian companies have not been able to deliver real returns (i.e. returns better than the rate of inflation) to their shareholders. However, given that the country has grown at around 15 per cent per annum (in nominal terms) over this period, this means that the remaining 20 per cent of companies have delivered very significant real returns. So, how does one systematically identify these magical 20 per cent of companies? That was the homework exercise my colleague Gaurav Mehta and I set ourselves two years ago.
Our research lead us to the "greatness" framework i.e., a way of identifying companies which grow their businesses over long periods of time in a consistent and calibrated manner. What these "great" companies do is very easy to describe – they invest systematically in their businesses, turn investment into revenues, revenues into profits, profits into cashflows and cashflows into further investment. The good news is that because the country is growing at roughly 15 per cent per annum, the "great" companies are able to grow their toplines, bottomlines and assets at around 25 per cent per annum. High school maths tells us that if a company grows at 25 per cent per annum, it becomes a 10-bagger in 10 years (even without any P/E re-rating).
The fact that only 10 per cent or so of the BSE 500 companies are able to stick to the "greatness" framework over a 5-6 year period does not surprise us – the negative political, social and economic influences prevalent in the country make consistent and calibrated development difficult for any Indian institution in almost any facet of Indian life.
What does surprise us though is that very few large cap stocks are able to stick to the "greatness" framework – the only Nifty stocks in our 40-stock "greatness" portfolio for CY13 are ITC, Asian Paints and Lupin. So why is this? Why is it that the vast majority of the biggest companies in the country are not able to grow in a consistent and calibrated manner? This is a question which we are currently investigating. Answering this question is important as it could explain one of the other conundrums that had puzzled us – why is it that every 10 years the Nifty "churns" by around 45-50 per cent, a much higher ratio than other major developed and developing markets.
My current thinking is that large and successful Indian companies tend to hit at least one of the following roadblocks which brings them to a juddering halt:
1. Over the last decade India has created a dozen or so autonomous regulators. Whenever a sector becomes very large and very profitable, someone in Delhi decides that it is time to do some rent-seeking by setting up a regulator. Once created, the regulator seeks to lower the profitability of the sector. Classic example, our beleaguered telecom sector.
2. India has become a relatively open and competitive economy. Access to capital for local companies has become more democratic with the creation of a large Private Equity sector and with FDI norms being relentlessly eased, foreign capital is now able to enter relatively easily. So when entrepreneurs, Indian or foreign, see a large and profitable sector with juicy operating margins and RoCEs, they decide to join the party and thus disrupt the profitability of the incumbents. Classic example, our two wheeler sector which is currently being disrupted by Honda.
3. Indian companies, for all their claims to be relying on "professional management", are still overwhelmingly dominated by and run by promoter families. These families are only human and once they decide to grow beyond the core business and the core territory that they know so well, they struggle. Expansion into new countries or new sectors by Indian companies are rarely successful. The finite nature of the promoter's skill set puts a natural cap therefore on how far an Indian company can go. Classic example: plenty – so it would be unfair to single any one company out.
So, how does one beat this trap? Look for Indian companies operating in niches which: (a) are unlikely to invite regulation or foreign competition; (b) have natural barriers to entry based on brand, distribution or technology; and (c) create a natural incentive to invest steadily (the need into expand a new region). Examples: TTK Prestige, Bata, Whirlpool, Jagran Prakashan, Asian Paints, Carborundum, Cummins India and Balkrishna Industries.

TERM PLAN- SELECTION MADE EASY

Below table shows you the comparison of various term plans available in the market from different insurers.

Sr.No.	Company Name	Policy Name	Mode	Entry Age	Minimum Term	Maximum Term	Maximum Maturity Age	Premium
1	Aegon Religare	iTerm	Online	18-65	5	40	75	7,753
2	Aviva	i-Life	Online	18-55	10	35	70	8,058
3	SBI	eShield	Online	18-65	5	30	70	9,135
4	HDFC	Click 2 Protect	Online	18-55	10	30	65	10,112
5	Kotak	e-Term	Online	18-65	5	30	70	10,140
6	Bajaj	iSecure	Online	18-65	10	30	70	10,955
7	ICICI	iCare	Online	18-65	5	30	75	12,360
8	Birla SL	Protector Plus	Offline	18-65	5	30	75	14,045
9	Max Life	Platinum Protect	Offline	18-60	10	30	75	18,090
10	LIC	Amulya Jeevan - 1	Offline	18-60	5	35	70	25,700

Note: Premium mentioned in the above table is for a 30 years Non Smoker individual for a Sum Assured of 1 crores for 20 years.

Above table shows Term plans available in 2 different modes i.e. Online and Offline.

Online Term plans are directly from the life insurance company, wherein an insurance agent is not involved in the process thus resulting in low premium for you. Offline Term plans are bought through an insurance agent, the premiums you pay for indemnifying risk to life is high when compared to online term plans.

From the above table it is clear that any person of the age of 18 years can buy a term plan while maximum entry age is 65 years for most of the companies in a term plan. Minimum tenure for most term insurance plans is 5 years, while the maximum tenure is 30 years. Only in case of Aegon Religare iTerm the maximum tenure is 40 years. Term plans can cover you upto a maximum age of 75 years depending upon the insurance company you choose but most insurers cover you upto a minimum of 70 years of age.

In the above table we have ranked life insurance companies from the lowest to highest premium for a term plan. Aegon Religare provides the cheapest term plan being an Online Term plan, while LIC has the highest premium for an offline term plan. There is a huge difference between the lowest and highest premium term plan of approximately Rs. 17,000. The main reason for such a huge difference is:

• Insurance agent's commission;
• Increasing competition in the life insurance industry;
• Difference in life insurance companies' actuarial assumption rate;
• Past claim settlement experience; and
• Credit worthiness of life insurance companies.

LIC being the most trustworthy and with the highest claim settlement ratio of all the life insurance companies charges higher premium for its term plans.

So, which is the best Term plan in the market?

Well, the best term plan depends upon your requirement i.e. at what age you are opting for it and till what age you require it and the premium you are willing to pay for the term plan. Online Term plan can save your premium amount and also provide you the convenience of buying a life insurance policy but you should always check on claim settlement ratio of the insurance company from which you are buying the term plan, since it is the most important factor in deciding which policy to go for. You should also disclose your true health history while filling up the proposal form so that insurance company cannot reject claim on the ground of past health history.

Source:personal FN

When you get I T notice, Donot scare but reply

With the Income-Tax department on a drive to increase compliance, notices are being sent to individuals for old dues, which will now be adjusted against pending refunds.

Of course, anyone who gets a notice starts panicking. But for all you know, your returns may have been picked for random scrutiny.

Importantly, don't ignore the notice. Non-compliance with the notice could lead to a penalty of Rs 10,000, apart from the tax and interest penalty. Provide all the documents to the assessing officer (AO) and things might get resolved.

Before you meet the AO, check for details like the permanent account number (PAN) in the notice. Sometimes, the name or address might be incorrect but the income-tax department identifies you through the PAN.

"Identify the reason for being served a notice. Typically, under section 143(1D), individuals get demand notices for discrepancy in the returns. At other times, it could be for mismatch in tax deducted at source (TDS) or income amount," says Vaibhav Sankla, director of Pune-based tax consultancy H&R Block.

If there is a refund claim and the case is selected for scrutiny under section 143(2), then the return may not be granted. Section 143(2) enables the AO to make a regular assessment after a detailed enquiry. Otherwise, an intimation under section 143 (1) is the proof of return processed as submitted.

Then, check the validity of the notice. Under section 143(3), a scrutiny notice has to be served in six months from the end of the financial year in which the return was filed. But, a notice under section 148 can also reopen five-six year old cases if the AO has enough reasons for it.

After collating all the information/documents, prepare a cover letter (make two copies) listing all the documents provided.

Ask for an acknowledgement on the copy of the letter. Preserve this as evidence of the documents given. In case of a notice under Section 143(2), where the details required are not specified, collate basic information, like bank statements, major expenses, income and loan details, say chartered accountants.

Such notices have the officer in-charge's details like name, designation, signature, office address and, most importantly, income tax ward/circle number. Now that such notices come electronically, it must have the Document Identification Number, available on each communication by the tax authorities.

Do remember to make copies of the demand notice, in case you lose it. Or, scan and store the document. The envelope that carries the notice is an important evidence and should be preserved. It has the Speed Post number and establishes when the notice was posted and served to you. This helps when you receive the notice late and can't respond within the validity period.

Chartered accountants suggest seeking professional help to better understand the demand in the notice and supporting it with proper documents. In case you have to appear before the AO, a professional can help you better prepare your responses.

Why pension products may not help you plan your retirement well

Many of us engage in an economic activity to make a living. And with competition around we often work hard and try to give the best within our means to our family in times where inflation monster haunts us. But while we do all it takes to keep our family happy, prudent financial planning can bring in solace in our endeavour to give best to our children and even save for the golden years of retirement. Mind you, many misconceive ad-hoc investing with prudent financial planning and often think they are on the right path to meet life goals. But let's apprise you that investing along with planning is rather a serious activity and often boring, as against the excitement depicted by the market intermediaries (i.e. agent / brokers / distributors / relationship managers), glamorous business channels and friends.

Today, while all of us want to have a cosy retirement life ahead the onus of indeed making it cosy ahead (during the golden years) is on us as investors. There are host of investment avenues available to plan for retirement, but it is imperative that your investment portfolio intended to achieve you goal of retirement, to have the right mix of asset classes and investment options therein. Annuity in the form of pension which takes care of our cash flows during retirement is something very much desire; but it imperative to plan for the same wisely and not get lured to inappropriate products, merely getting carried away by the exuberance created by the market.


In a market condition that seems to be uncertain, you need to follow the right investment approach.

Ideally all your investment moves should be demarcated by in-depth knowledge.

We have often seen investors getting hooked on pension plans offered by insurance companies, in their objective of planning for their golden years. It is noteworthy that earlier, until the new guidelines on pension products issued by Insurance Regulatory and Development Authority (IRDA) came into effect, guaranteed returns were not offered to policyholders. But now by the virtue of new guidelines from IRDA, a number of life insurance companies are planning to launch pension products that will now offer capital guarantee - where you as the insured will at least get back the total premium paid.

Life Insurance Corporation, HDFC Life Insurance, Birla Sun Life Insurance and ICICI Prudential Life Insurance have already launched pension products while few others including Bajaj Allianz Life Insurance and Aegon Religare Life Insurance are mulling options.

But should you invest in these pension products?
Well we are of the view that, in the process of planning for your retirement it imperative to undertake a holistic exercise considering your:

• age;
• income:
• expenses;
• risk appetite
• existing assets;
• existing liabilities;
• intermediate goals (which you are catering to viz. children's education and their marriage) and
• nearness to goals

Taking into account the aforementioned along with the inflation factor (which haunts most of us and has eroding effect on our savings) would help you plan for your retirement prudently by having in place the right asset mix in your portfolio and investment avenues therein. But you need to act early, and not procrastinate executing the plan - as that may not help make your retirement life cosy. Moreover you got to refrain from digging into your retirement corpus, unless you absolutely need to (where your contingency funds are drained out).

The pension products from insurance companies, while they provide an annuity they do not help you optimally structure your retirement planning. The aforementioned new product launches are taking place since life insurers offering pension products withdrew them last year following IRDA's guidelines relating to pension plans that said all unit-linked pension plans (in which a part of fund is invested in stocks or bonds) should specify assured benefits on pension plans, applicable on death, surrender or maturity. So, there's no point merely getting swayed by the tall claims and sales pitch of your insurance agent. Instead it is imperative to have structured, intelligent financial plan in place for your retirement which can ensure smooth and cosy retired life ahead. 

Cairn is looking to invest Rs 100 bn and raise India's crude oil output to 500,000 barrels per day (bpd), or 25 million tonnes a year, surpassing the annual production of state-run Oil and Natural Gas Corp (ONGC). (ET)

Investing in FD's is a losing long term proposition

1

Ajit Dayal discusses why investing in Fixed Deposits is not as attractive as investing in stock markets. With the equity markets in the "doldrums", there have been a series of articles in the popular press about how investing in Fixed Deposits and in bank accounts is far superior to investing in stock markets. As for gold, it is seen as some barbaric relic that only fools would throw their money at. These arguments are flawed and distort the facts. Readers of the Honest Truth are familiar with the table that is there at the end of every Honest Truth. Suggested allocation in Quantum Mutual Funds (after keeping safe money aside) Quantum Long Term Equity Fund Quantum Gold Fund (NSE symbol: QGOLDHALF) Quantum Liquid Fund Why you should own it: An investment for the future and an opportunity to profit from the long term economic growth in India A hedge against a global financial crisis and an "insurance" for your portfolio Cash in hand for any emergency uses but should get better returns than a savings account in a bank Suggested allocation 80% 20% Keep aside money to meet your expenses for 6 months to 2 years Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information" Based on Table 1, it is obvious that investors should have exposure to various asset classes. The percentage allocated to each asset class may vary depending on the individual situation of the investors. At the end of the day any investment we make is for: Peace of mind - to know that the asset is there when you may need it; To meet our present consumption in the future years - assuming that inflation will increase the price of whatever we consume today, our savings needs to find a way to earna return to match - or surge faster than - the rate of growth in prices, To meet future good events that you know will occur - getting married, having children, educating the children, arranging finances for their marriage, and buying a place to live, To meet future problems that may occur - illness, a loss of a job, a loss of a key earning member of the family. Each of us will plan for the above in different ways. Some may believe that they will not get married. Some may feel that it is not their responsibility to educate their children through college or help in their marriage. Some may believe in renting a home and never buying a home. Our "goals" should determine how much we save and then how we invest those savings. Shilpa's choice But all of us have a "consumption basket" - we all consume things and, as long as we live, will increasingly consume things. The price we pay for our consumption basket is likely to increase over time - the effects of inflation. Let's take the example of Shilpa, a typical consumer and see how thecost of her consumption basket has changed over time (Table 2). The start year is assumed as 1990. That is just before the Great Indian Reforms of in 1991 when most services or products were provided by either government monopolies or by a few licensed private sector cartels. Table 2: Shilpa' s cost of living per annum CONSUMER BASKET 1990* 2000 2010 2011 Food and personal care (Grocery bill) 10,167 20,000 37,500 42,500 Taxis / Trains / Local air travel 3,696 8,750 11,250 15,000 Clothes, shoes 964 2,500 3,750 4,250 Going out (Recreation and Cultural activities) 402 1,250 4,500 6,250 Rent / Accommodation cost 10,000 40,000 70,000 80,000 Electricity 2,000 5,000 8,000 9,000 Telephone / Mobile phone bills 3,500 6,500 9,000 10,000 Medical expenses 2,000 5,000 6,500 8,000 Education 500 2,000 3,000 3,000 Electronic items 880 2,500 18,750 22,500 Holidays (Hotels and Restaurants) 8,805 25,000 50,000 62,500 TOTAL SPENDING PER ANNUM 42,914 118,500 222,250 263,000 Fully aware the costs of enjoying her consumption basket over time will increase; Shilpa knew she had to invest her savings. For arguments sake let's assume that Shilpa had 3 extreme choices: Invest all her savings in gold, Invest all her savings in the stock market via the BSE-30 Index, Invest all her savings in a Fixed Deposit with a PSU Bank. Table 3: You need less of "BSE-30 Index money' and "gold money" and more of your "FD money" to enjoy your consumption basket. CONSUMER BASKET 1990 2000 2010 2011 TOTAL SPENDING PER ANNUM 42,914 118,500 222,250 263,000 Price of gold, INR/10 grammes 2,145 4,012 17,940 23,544 Units ( Grams) of gold to consume my basket 200 295 124 112 BSE SENSEX 942 4,606 18,207 17,778 Unitsof BSE-30 Index to consume my basket 46 26 12 15 Fixed Deposit Basket Index Value (Value of initial investment Jan 1, 1990 =1000) (SBI 1 Year Deposit Rate)* 1,064 2,220 3,550 3,769 Unitsof FD Basket to consume my basket 40 53 63 70 * Quarterly compounding and Tax rate on Fixed Deposit assumed to be 30% As Table 3 indicates, the annual cost of her consumption basket in 2011 is Rs 263,000 v/s Rs 42,194 in 1990 - that is an increase of 613% in 21 years, an average price increase of 9% per year over the past 21 years. If Shilpa could use gold to pay for her consumption, she would have needed 200 grammes of gold in 1990. To maintain her "consumption basket" in 2011 she would need only 112 grammes of gold. This is so because the price of gold has surged by 1,098% over that same 21 year time period - an average rate of return of 12% per year for the past 21 years. This is higher than the increase of 9% in the prices of the items in Shilpa's consumption basket. If Shilpa could pay for her consumption with units of "BSE 30 Index" then she would have needed 46 baskets of the BSE-30 Index in 1990. To maintain her "consumption basket" in 2011, she would need only 15 baskets of the BSE-30 Index. This is because the BSE-30 Index has surged by 1,888% over that same 21 year time period - an average rate of return of 15% per year for the past 21 years. This is higher than the increase of 9% in the prices of the items in Shilpa's consumption basket. If Shilpa could pay for her consumption with units of Fixed Deposits or "FDs" then she would have needed 40 baskets of the FDs in 1990. To maintain her "consumption basket" in 2011, she would need a larger number of 70 baskets of the FDs. This is because, while the FDs may have given an average return of 6% after tax, they are below the nearly 9% increase in the prices of goods that Shilpa consumes. This is lower than the increase of 9% in the prices of the items in Shilpa's consumption basket. Note the risks But before you go rushing to buy equity shares or gold, note that both these asset classes can be in the dumps for a long period of time. Or, conversely, can also be "at peaks" for a short period of time. Changes in tax laws will also influence where people could save. If investing in FD's was to become tax free, then maybe Indians like Shilpa would see the benefit of investing in them. Similarly, gold may now attract an import tax and a wealth tax. Shilpa's consumption basket could change. But the biggest risk is, in my opinion, is not diversifying the surplus savings we have into a range of instruments that can give you a steady, decent return and an opportunity to live through some tough times. Disclaimer: The Honest Truth is authored by Ajit Dayal.

CONSUMER BASKET	1990	2000	2010	2011
TOTAL SPENDING PER ANNUM	42,914	118,500	222,250	263,000
Price of gold, INR/10 grammes	2,145	4,012	17,940	23,544
Units ( Grams) of gold to consume my basket	200	295	124	112
BSE SENSEX	942	4,606	18,207	17,778
Unitsof BSE-30 Index to consume my basket	46	26	12	15
Fixed Deposit Basket Index Value (Value of initial investment Jan 1, 1990 =1000) (SBI 1 Year Deposit Rate)*	1,064	2,220	3,550	3,769
Unitsof FD Basket to consume my basket	40	53	63	70

* Quarterly compounding and Tax rate on Fixed Deposit assumed to be 30%

"It is not the profit margins of the past but those of the future that are basically important to the investor." - Philip Fisher

However, is this right strategy to have? Certainly not if one is confident that the current growth rate in India is just an aberration and days of higher growth rate of 7%-8% are only a matter of time. In that case, there could be no better to time to invest in Indian stocks than now we believe.

And our belief stems from a study that we have carried out based on historical data. You see, since the year 1992-93, there have been only six financial years (excluding FY13) where the economy has grown below 6%. And investments made during the end of these years have on average yielded returns of 19% over the next 12 months. Even from a three year perspective, returns have averaged in the region of 17%. Thus, as can be seen, a weak economy is not the time to avoid stocks. In fact, investments made at such times are likely to yield the best results over the medium to long term as most stocks are priced poorly given the weak economic environment. Therefore, smart investors who are able to take advantage of this opportunity are the ones that end up creating good deal of wealth for themselves.

Consequently, one's best chance at generating returns does not lie in heeding Mr Feldstein's advice. It instead lies in taking an exposure in Indian equities if one is confident of its long term growth story.

Table 2: Shilpa' s cost of living per annum

CONSUMER BASKET	1990*	2000	2010	2011
Food and personal care (Grocery bill)	10,167	20,000	37,500	42,500
Taxis / Trains / Local air travel	3,696	8,750	11,250	15,000
Clothes, shoes	964	2,500	3,750	4,250
Going out (Recreation and Cultural activities)	402	1,250	4,500	6,250
Rent / Accommodation cost	10,000	40,000	70,000	80,000
Electricity	2,000	5,000	8,000	9,000
Telephone / Mobile phone bills	3,500	6,500	9,000	10,000
Medical expenses	2,000	5,000	6,500	8,000
Education	500	2,000	3,000	3,000
Electronic items	880	2,500	18,750	22,500
Holidays (Hotels and Restaurants)	8,805	25,000	50,000	62,500
TOTAL SPENDING PER ANNUM	42,914	118,500	222,250	263,000

"No one in this room or anywhere else knows where the price of gold is going next year or the year after. All we know is that the risks of owning it are fairly low...while the risks of not owning it are high."

Investments which qualifies for deduction u/s. 80C

Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:

Provident Fund (PF) & Voluntary Provident Fund (VPF: PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF).

Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Current rate of interest is 8.60% tax-free and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,00,000. A point worth noting is that interest rate is assured but not fixed.

Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.

Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C.

Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest.The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of theIncome Tax Act. Please read “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.

Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house.

National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit.  The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.

Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.

Pension Funds – Section 80CCC: This section – Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it maeans that the total deduction available for 80CCC and 80C is Rs. 1 Lakh.This also means that your investment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh.

5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.

Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.

5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit (POTD) qualifies for tax saving under section 80C. The Interest is entirely taxable.

NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.

Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments. They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term.

Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.

National Thermal Power Corporation

 (NTPC's) 1,980 MW super-thermal power plant in Jharkhand, has received the Prime Minister's Cabinet Committee on Investment's (CCI) nod, to resume operations. This power project's proposal has been pending for more than a decade, as in 2003, Coal India had raised the issue that NTPC's power plant would be sitting on an area with nearly six billion tonnes of reserves. But now it has investigated that, this thermal power plant in Jharkhand will not impact mining activity at Coal India's Karanpura mines, located close by. Hence both Coal India and NTPC have agreed to work on their respective projects. The power plant will be operational for 35 years. After that, the land will be available for mining. NTPC has invested Rs 2.5 bn in the project and obtained various clearances. The project, in fact, has received support from the Ministry of Environment & Forests as well.

ITC at Robust pace

Tobacco major, ITC's Agri Business Division - ILTD, which works with the tobacco farmers in Mysore and Hassan districts, has developed affordable farm mechanization solution for small tobacco farmers. In order to develop farm solutions, ILTD imported the technology from a manufacturer in Italy. With the help of this solution, the company can save 50% of the labor requirement in tobacco cultivation. This solution is likely to benefit 60,000 farm families and laborers, as labor shortage always hinders operations timeline, impacts crop quality and the export potential.

While regulatory headwinds have led to a moderation in ITC's cigarette business, the impact has been partially offset by the brisk growth in its FMCG business. Despite a structural rise in taxation, ITC has been able to expand margins in its core cigarette business, thanks to the huge pricing power enjoyed by it. Even cigarettes launched in the new filter segment (cigarette length not exceeding 65 mm) have met with reasonable success and the company is rolling out the products across the country. The company has been consistently reducing losses in the FMCG segment. All these factors have enabled ITC to grow its topline as well as earnings at a robust pace.

How do I get my Form 26AS?

How do I get my Form 26AS?

Form 26AS is available online on the income tax website, and you can view it by quoting your PAN number, once you register yourself on the income tax website. You can even download it in the PDF or Excel format and keep it as a record with you.

Here are the steps to register and view your Form 26AS:

1. Go to income tax filing website: www.incometaxindiaefiling.gov.in
   
2. As a New User, you need to click on 'Register', and register your PAN and password along with other details required in the registration form
   
3. Once you are registered, go to the Login page, or Click on "View Form 26AS (Tax Credit)", which will ask for your login details.
   
4. Post login, in the "My Account" section, you can click on the sub section - "View Tax Credit Statement (Form 26AS)"
   
5. Choose the Assessment Year for which you need to view your tax credit statement, enter your Date of Birth and click SUBMIT
   
6. It will ask for a confirmation and redirect you to NSDL website to view your form 26AS
   
7. Click on "View Form 26AS" to get your Form 26AS
   

While the income tax filing website provides you with Form 26AS post registration; being a customer of technically advanced bank, you can also get direct link to your Form 26AS through your net banking account. Many banks like SBI, IDBI Bank, HDFC Bank, ICICI Bank etc as a feature in their internet banking facility, also provide a direct link to its customers to view their Form 26AS. By clicking on the link, you will be directly routed to TDS Reconciliation Analysis and Correction Enabling System (TRACES) website, where can directly see your tax credit statement (earlier it routed you to NSDL website).

What will you see in your Form 26AS?

Your tax credit statement broadly consists of 5 parts:

• Part A - Details of Tax Deducted at Source: It shows details of all the transactions where the Tax has been deducted at Source for any payments made to you (mapped against your PAN) and has been submitted to the income tax department. It shows the Name and TAN of the deductor along with the section under which deduction was made (e.g. section 192 for salary), date on which payment was credited, amount paid/credited, tax deducted from payments and deposited in the bank are also included in this part.
  
• Part B - Details of Tax Collected at Source: It shows details of the transactions where the tax has been collected from you by the seller of specified goods and submitted to the income tax department. Other details in respect of the seller and the tax collected are similar to as those displayed in Part A.
  
• Part C - Details of Tax Paid (Other than TDS or TCS): It shows details of income tax which has been paid directly by you (like advance tax, self-assessment tax). It also shows the date of tax deposited and details of the challan through which you have deposited this tax in the bank.
  
• Details of Paid Refund: It shows the details of any refund (in the year) paid to you by Income Tax Department along with the assessment year for which refund is paid. It also shows the mode of payment, amount of refund and date of payment.
  
• Details of transaction of Mutual Fund, Shares and Bonds (as reported by AIR filer) -This shows the details of 'high value financial transactions' done by you (as reported in Annual Information Report - AIR filer under section 285BA). Details of the nature of transaction, name of AIR filer, date of transaction, whether single or joint party transaction, no. of joint transacting parties, amount and mode of transactions are also included.
  

When is Form 26AS used the most?

While you can view Form 26AS multiple times in a year, it is usually helpful at the end of the year before filing your tax returns. Before filing your tax returns, you might want to check the amount of total tax already paid by you through different ways in the given year and then you pay the remaining tax. In case you find that you have paid extra tax in a year, then you can submit your tax credit statement to the income tax department while filing and request for a tax refund.

In case you see any entry on account of TDS/TCS credit in your Form 26AS which is not pertaining to you, you may intimate the deductor/collector. In case the erroneous entry is on account of advance tax or self-assessment tax, you may intimate your Assessing Officer. In case if any of the issue has not been resolved by the deductor, then you can contact Aaykar Sampark Kendra (ASK) at 0124-2438000 or Central Processing Center (CPC) of TDS.

Hold L&T Finance for long term,

Hold L&T Finance for long term, says Tulsian

 

SP Tulsian of sptulsian.com advised holding L&T Finance for long term as he feels L&T holds the maximum chances of getting banking license.

Tulsian told CNBC-TV18, “I will advice to remain invested in L&T Finance Holdings . I won’t advice to buy more because the kind of swing and volatility the share is closer to its upper circuit and never it is advisable to buy or to do the trading or averaging more. If you ask me for any reason, if you go by the feedback and the opinion even if Reserve Bank of India (RBI) allots four or five banks, L&T holds the maximum chances of getting that banking license.”

He further added, “L&T is quite aggressive and capable to acquire the existing banks also which have no identified promoter. So, taking all this into consideration from a banking point of view it looks a very good stock but that should not be the only theme. If you go by the present financials with a market cap of Rs 15,000 crore price to book of 2.5 the stock looks expensive. And generally I have been taking a ballpark figure that the banking license can add or increase the market cap by about Rs 1000 crore.”

“I will advice to remain invested into the stock for a longer term horizon. I won’t be hesitative in saying that one should not be hesitant in exiting or making the profit booking in three digit whenever the stock reaches to those levels and look to buy that stock back again at the lower level, but no buying now. Hold your stock till Rs 100 and keep a long-term view. But keep trading beyond Rs 100 in the stock for a gain of about Rs 4-5 on each round of trade.” Tulsian added

GO LONG says Mr Mulraj, an expert in investment advice

When it comes to investing, it is necessary to do your homework. Studying the financials of the company, meet the management; evaluate performance against the peers, etc. These are just some of the points that you cover when judging if a stock can be invested into or not. After doing the groundwork, you study the company's valuations. If it is available at cheap and attractive valuations, you go ahead and invest your money in it. But having purchased the stock, the big question is what next? How long should you hold the stock for it to deliver that fantastic performance that you want and expect?

The answer to this question should ideally be never. But unfortunately not everyone would go for this option. So we decided to discuss the other options available. To understand the options better we collected some statistical evidence. The data we have taken is for the BSE-Sensex to show shows the returns investors would have fetched had they invested in the BSE Sensex 10, 5, 3 and 1 year back respectively. The following chart gives the CAGR returns that you would have earned on the closing price of 22nd February, 2013.

Source: BSE

It must be noted here that the 5 year performance looks depressed because of bull period that Indian markets enjoyed till 2008. Nevertheless, the picture is still quite clear. If stocks were held for one year or a three year period, the compounded annual returns. (CAGR) that one would earn would be a meager 6%. On the other hand, if you had held on to the stock for 10 years, the CAGR would have been an amazing 19%. And this is just the returns in prices. It does not include the returns earned through dividends.

This gives a fair idea on how long the stock should be held. The answer is for a long term horizon. The thing is that there can be periods of time when irrationality and emotion, rather than fundamentals will drive stock prices. And such periods, of excessive greed or fear, could last for months, if not years. But sooner or later rationality is bound to return to the market and then, stock markets have to value companies based on what they are truly worth. Naturally one cannot expect this to happen in short term periods. It can only happen in the long term.

So the recipe to get rich through investing is actually a simple one. Do your homework. Buy the stock at cheap valuations. Then sit back and rest. In the long term, you will reap spectacular gains for sure. But remember what we are advocating is a Buy and Hold approach. Not a buy and forget philosophy. Periodic checkups are necessary to ensure that the fundamentals of the company are intact. And as long as they are, continue to hold it for a long term.

ITC a must-have in every long-term portfolio: Agarwal

Rajesh Agarwal of Eastern Financiers feels ITC is a must have in a long term portfolio due to its strong management and balance sheet.

Rajesh Agarwal

Head of Research

Rajesh Agarwal of Eastern Financiers feels ITC  is a must have in a long term portfolio due to its strong management and balance sheet.

Agarwal told CNBC-TV18, “Talking about the fundamentals, there cannot be a better play if you are looking at Indian consumption story rather than ITC. It is a must have in long-term portfolio be it fast moving consumer goods (FMCG), cigarettes, apparels, hotels everything is under single company. I think it is just a matter of time when the stock starts performing. At this point of time at 30 times earnings it might look expensive to some people. But still with the kind of history it has, the strong management, strong balance sheet and not to forget the cash position this company has in its balance sheet is a must have in a long-term portfolio.”

He further said, “For the investor who is there for a very short-term and is worried about the tax being implemented in the coming Budget, there can be a kneejerk reaction with the kind of noise being there in the entire world about tobacco products. But with FMCG business of this company on a verge of being profitable in the very near future, one should increase time horizon and be in the stock.”

“I do not think there is much to lose even if taxes are imposed. There might be a kneejerk reaction that the stock might go down by Rs 10-20 but it would recover just because of the fact that its other businesses are doing well. A price target of around Rs 325 for a very short-term period is quite possible and for a longer term horizon it is a must have in one’s portfolio,” Agarwal added.

L&T Finance Holdings

Moneycontrol Bureau

Brokerage house JP Morgan has initiated coverage on L&T Finance Holdings with a 'neutral' rating, saying that the stock was fully valued at current levels.

L&T Finance shares were up 4 percent at Rs 85, as the market is betting that the company's impending application for a banking licence will be approved by the Reserve Bank of India.

"A strong brand, access to L&T's vendor/customer network, lending portfolio that spans across multiple facets of retail, corporate and infrastructure  lending and management that has considerable experience in incubating long  gestation projects are some of the key strengths of the business. A unique Holdco (holding company) structure also allows for efficient capital allocation in the underlying operating companies," the JP Morgan note to clients said.

"Further, the company in our view is a front-runner for a new banking licence as and when it gets awarded. The stock is fully valued at the current share price, in our view," the note said. JP Morgan has a price target of Rs 80 on the stock.

UK PM Cameron says, "India's rise is going to be one of the major phenomenon of this century. It is incredibly impressive to see the vibrancy of your democracy and great strength of the diversity of your country and endorse power of your economy. It is going to be one of the top three economies by 2030. That is why I am here. Britain wants to be your partner of choice."

UK PM Cameron says, "India's rise is going to be one of the major phenomenon of this century. It is incredibly impressive to see the vibrancy of your democracy and great strength of the diversity of your country and endorse power of your economy. It is going to be one of the top three economies by 2030. That is why I am here. Britain wants to be your partner of choice."

The sector that has broken down and has significant representation on the index is capital goods. Technically, what do you see for some of those stocks?

A: Luckily, capital goods do not constitute the top five-six stocks on the index because it is quite interesting that in the last 2-2.5 weeks, while the Nifty has corrected about 200 points, the broader market has corrected significantly. The smallcap index has retraced 61 percent of its entire rise of the last four-five months. The midcap index has done about 50 percent. Capital goods has been one of the biggest underperformers and it is really disappointing because till the capital goods index does not show signs of strength, it does not make sense to buy these stocks just on face value.

When one talks about stocks like L&T, Siemens , BHEL one feels that these stocks cannot go lower. However, they have been seriously underperforming. I would not look at them. But I think the top five-six constituents of the index, whether Sensex or the Nifty, they contribute about 30 percent of the market and are looking the steadiest at this point. Stocks like ITC , Reliance ,ONGC , HDFC Bank and ICICI Bank , these five-six popular stocks, unless they correct significantly, the index is unlikely to go down too much.

This is an important takeaway. It is very important that one is invested in these five-six stocks atleast from a portfolio perspective because then one is moving along with the market and one would not suffer the kind of damage that we have seen in the midcaps recently. So, one has to be choosy. However, at the same time our favourites right now would be banking, technology to a certain extent and autos.

Clunky KYC norms keep investors away

KYC registration agencies need to coordinate better; more clarity needed on documents required.

Kayezad E. Adajania |  Joel Rebello

 Feb 11 2013. 09 11 PM IST

Shyamal Banerjee/Mint

How hard can it be to fill up a one-page form that asks for simple things, such as your name, age, address, telephone number and sundry details that you would have at your fingertips? Take the case of the know-your-client (KYC) form that asks for these and a few more details; nothing, of course, that you wouldn’t, or shouldn’t, know. As per capital markets regulator Securities and Exchange Board of India (Sebi)’s guidelines, if you wish to invest in a mutual fund (MF), you must be KYC-compliant. In other words, you need to fill out the KYC form and have it approved by any one of the five KYC registration agencies (KRAs). But looks can be deceptive. This simple and innocuous looking form can raise havoc in your investing life.

Devitoma Kar, 31, a homemaker based in Rupnagar, Punjab, found this the hard way. On the back of rising equity markets in October 2012, Kar tried to open an MF investment account with Fundsindia.com. She was particularly interested in investing in gold MFs. Along with the account opening form, she duly filled out the KYC form (since she was a first-time MF investor) and sent it to the portal along with a copy of her residence and identity proofs. Weeks later, her KYC was rejected.

She later found out that there was another KYC form— in her name—pending at one of the KRAs; unless she filled and completed that form, her new KYC (through Fundsindia.com) would not go through, she was told by an email that Fundsindia.com sent her almost a month later. “I had no idea what the other KYC was; I did not know what to do,” Kar told us over telephone from Rupnagar, where she now lives at the Indian Institute of Technology campus with her husband who teaches there. It took Kar three months to sort out the mess; in January 2013, her Fundsindia.com account was finally ready, allowing her to invest in MFs.

Like Kar, many investors face different problems in getting their KYC done. And it’s not even about filling a wrong detail here or leaving a blank there. Despite filling out details diligently, there is still a chance that your KYC application gets rejected. One of the biggest problems that investors face is because of lack of coordination among various KRAs. Here’s what it means.

In October 2011, Sebi said that if you wished to invest in the stock markets, either through a stock broker, MFs or portfolio management services and so on, you needed to do your KYC, just once. This single KYC would have to be done “in-person” but will be valid through all such stock market intermediaries. Further, Sebi also allowed some firms to set up KRAs so that you—the investor—do not have to do KYCs again and again. These KRAs would store your KYC records and would share your KYC record among them (as multiple KRAs are allowed to be set up). The idea: Do a KYC with any intermediary who will then approach any KRA that it has tied up with and upload your details. Then if you approach another intermediary, it should be able to pull out your earlier KYC and confirm your KYC status.

KRA inter-operability is a distant dream

At present, there are five KRAs—CAMSKRA (set up by Computer Age Management Services (Cams), one of the two largest registrar and transfer agents to service MFs); CDSL Ventures Ltd (CVL, a division of Central Depository Services (India) Ltd); NSDL Database Management Ltd (NDML, a subsidiary of National Securities Depository Ltd); DotEx International Ltd, a unit of the National Stock Exchange; and Karvy Data Management Services Ltd.

Last year, Sebi also mandated the intermediaries to upload your KYC records on the centralized system (through any KRA). Here’s where Kar’s—and apparently many other investors’—KYC got stuck. Kar had opened a demat account with a stock brokerage firm in 2010 and forgot about it, eventually. In 2012, Sebi instructed intermediaries to upload their existing clients’ KYC details in the KRA system in a phased manner. Mainly stock brokers were affected by this as KYC was mandated long back to open demat accounts. Kar’s existing KYC details with her stock broker (done when she had opened her stock broking account) also got uploaded at NDML Ltd (a KRA). “But it turned out that my KYC done at that time was incomplete. When I tried to do a (fresh) KYC with Fundsindia.com last year, my new KYC clashed with my existing KYC (which was already uploaded) and things came to a halt. After a lot of back and forth, I was forced to close my stock broking account, make my earlier KYC redundant and then fill up a new KYC form all over again. Then, my KYC got approved,” she says.

Fundsindia.com typically uploads its clients’ KYC detail on CVL KRA. If inter-operability works in true spirit, CVL KRA should be able to accept the remaining details, irrespective of which intermediary (Kar’s earlier stock broker or Fundsindia.com) submits the KYC documents afresh.

Apart from this, if your KYC is done, you should also be able to check your KYC status at any of the KRAs’ websites and get a confirmation. For instance, if your KYC application gets registered with one KRA, your status should show “KYC Complete” on all KRA websites. “Unfortunately, many times this does not happen. If the KYC process is efficient, the investor should be able to give KYC documentation through any KRA. Isn’t that what a uniform KYC meant to do?” says Rajesh Krishnamoorthy, managing director, iFast Financial India Pvt. Ltd.

“Inter-operability (connectivity) between the five KRAs is still in process; it’s not yet complete. This is a big problem, but we expect it to be resolved soon,” says Srikanth Meenakshi, director, Fundsindia.com.

The problem compounds when you submit your KYC application form at the time of investment, only to be rejected later. One of Shashank Joshi’s (a Mumbai-based MF distributor) client’s KYC got rejected almost 15 days after she had submitted her KYC and investment application forms. Once the KYC got rejected, the fund house refunded her money. “In the meantime, if the market moves sharply, the investor loses out,” says Joshi. Like Kar, Joshi’s client had opened a stock broker’s account in 2008; her stock broker subsequently uploaded her KYC records that turned out to be incomplete.

When any change means trouble

When Kolkata-based Paromita Haldar Roy got married in 2009—she subsequently took up a job at Cognizant Technology Solutions Corp.—she chose to retain both her maiden name (Haldar) as well her husband’s last name (Roy). Her plans hit the roadblock when she tried to open a salary bank account in her new job, at HDFC Bank Ltd which did not allow her to use both her names. That’s not all. When she tried to apply for a ration card, she was told to put one of the two names in brackets. Her voter identity and Aadhaar cards accepted both her names. Finally, she opened her bank account that does not carry her maiden name. “As a result, my full name appears differently in my office, bank account, Aadhaar card and the ration card,” says Haldar Roy.

But can banks insist on only one last name and not two, like in Haldar Roy’s case? “No. the account holder has a choice to use her maiden name, married name or both these names or she can even use neither, provided she submits a relevant document such as a marriage certificate as proof,” says a Reserve Bank of India (RBI) spokesperson, who did not want to be named.

As part of your KYC, you also have to submit proof for your residential address, both current and permanent. But what happens if you don’t own a house and stay in a rented accommodation? Hari Unnikrishnan, 32, a professor, wanted to open a bank account with South Indian Bank in Bangalore when he moved there in 2012. As part of his KYC, he had to submit a residence proof. Unnikrishnan had a problem. Since he lived with his friend in Bangalore, the rent agreement was not in his name. It’s only when he requested his college to write a letter certifying that he teaches there, that his KYC was complete and he was allowed to open a bank account. “Three months later when I took a place on rent, I took my rent agreement and updated my new address on it,” says Unnikrishnan.

That is not all. The slow enrolment of Aadhaar numbers has meant that some banks still do not accept Aadhaar as a valid proof. Those who wish to open a savings account have to either produce a ration card, a rental agreement or a utility bill as proof of address. This, in spite of RBI allowing banks to accept Aadhaar cards issued by the Unique Identification Authority of India (UIDAI) as a valid address proof for opening a new account, in December. Before the December notification Aadhaar was just considered as a proof of identity and not an address proof as bankers were confused after a previous RBI notification said lenders have to “satisfy themselves about the current address of the customer by obtaining required proof of the same…”

What should you do

Says V.N. Kulkarni, chief counsellor, Abhay credit counselling centre: “The recent rise in threats related to terrorism has put KYC in the spotlight and unlike western countries there is no single social security number here, hence the emphasis on documentation.”

Kulkarni specifies that there are six different identity proofs accepted by banks, according to RBI regulations. They are Permanent Account Number, Aadhaar, voter identity card, passport, identity cards issued by central or state governments and driving licence. For address proof, there is electricity bill, telephone bill or rent agreement.

“For young workers and students who may not have a residential proof, banks accept a letter from the company in which case the statements will be sent to the office of the person,” says Kulkarni, who also adds that “ration cards are also not accepted as address proof by banks because of an increase in number of duplicate cards and a government notification debarring the acceptance of ration cards”. However, many banks claim that they accept ration cards.

As we cut through the KYC noise and clutter, hope comes from finance minister P. Chidambaram. “It’s important that the KYC norms within a market regulator should converge and become one set of KYC norms. The next step is to converge the KYC norms of different regulators,” he said at a press conference in Mumbai last week when he mourned why retail investors get scared from investing in financial instruments. And when he blamed this on why it is easier for investors to invest in gold (“there are no KYC norms in buying a gold coin”) instead, little wonder the audience gave him a big round of applause. “Life must be made simple,” said Chidambaram.

Vivina Vishwanathan contributed to this story.