Monday, November 19, 2001, Chandigarh, India






National Capital Region--Delhi

B U S I N E S S

Y O U R  M O N E Y
A GUIDE TO PERSONAL FINANCE


Getting a car financed
W
ITH the Indian market flooded with car models, gone are the days when buyers were forced to buy an Ambassador, a Fiat or a Maruti. Also gone are the days of saving for years for your dream car. It’s a buyers market with an increasing number of financiers offering you the “best deal” in car finance.

  • The myriad schemes
  • The interest rate factor
  • The hidden costs
  • Pre-payment charges
  • Zero interest scheme
  • A tailor-made scheme for you
  • The fine print
  • Get your documents in order
  • Shop around

MARKET SCAN

Market future uncertain
J.C. Anand

T
HE stock market has been doing well during the last fortnight. Last Friday, the sensitive index closed at 3180.23 points, registering a gain of 67 points. Some scrips like Larsen & Toubro, Tata Tea, Glaxo and Novartis sustained their upward movement. Even automobile stock found buyers. Mahindra & Mahindra made gains during the last six weeks.

The Punjab pavilion The Punjab pavilion is attracting large number of visitors on Sunday at an international trade fair being held in the Capital. 
— Tribune Photo Mukesh Aggarwal.




India's first branded hand-crafted diamond jewellery launched by former Miss India in Kolkata.
(28k, 56k)


EARLIER STORIES

THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

CHECKOUT

Complainant is to prove default
Pushpa Girimaji
T
WO months to deliver a telegraphic money order? That’s a record that any postal department in the world could do without. And any service provider worth his salt would try to keep such a dismal performance under wraps lest the adverse publicity affect its image.

HOW I INVEST

Don’t invest heavily in share market
M
R A.I .S. Sandhu has been a very aggressive investor who even today has almost 80 per cent of his savings invested in the equity market. He lost heavily in the share market and a change in the investment strategy is what he is working on these days. After putting in 20 years of service in the Air Force, he practised Income Tax law for several years and these days, is busy trading and studying the market thoroughly.

  • Equity market
  • Mutual Funds
  • Banks and insurance
  • Where to invest

TAX & YOU

LIC premium
Q:
I had taken LIC Policy in F.Y. 1999-2000 and paid my full year instalments of Premium. But due to unavoidable circumstances. I could not paid my LIC Premium in F.Y. 2000-2001, but deposited the same in May 2001 with interest & fine.

  • Shares purchase
  • Tax saving bonds

Nasscom to host Asia-Oceanian meeting
New Delhi, November 18
The Information Technology industry experiencing the blunt of the economic downturn hopes that the industry would bounce back in the coming year. The Asia-Oceanian meet of business leaders in the Capital next month would focus on the theme “Government and Industry: Business in the digital economy.”

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Getting a car financed
Simmi Sareen

WITH the Indian market flooded with car models, gone are the days when buyers were forced to buy an Ambassador, a Fiat or a Maruti. Also gone are the days of saving for years for your dream car. It’s a buyers market with an increasing number of financiers offering you the “best deal” in car finance. But the finance schemes, advertisements and brochures only make you more confused. Don’t know where to find that best deal for you? Here’s a primer.

The myriad schemes

There are mainly four types of schemes — margin money, security deposit, zero percent interest and flat rates. The margin money scheme is one of the easiest to understand. If a car costs Rs. 4 lakh and you pay a margin of 20 per cent you will get a loan for the balance 80 per cent, i.e. Rs. 3.2 lakh. Margins normally range from 10-25 per cent. Most financiers would require a lower margin on say, a Maruti 800 than a premium car.

The average loan tenure ranges from 3-5 years although some financiers are already offering seven-year loans. Even when some schemes give 100 per cent financing, they either take security deposits or advance EMIs. Watch out for these deposit schemes and also the flat interest rates, those can be tricky! Make sure you are aware of factory-to-dealer incentives. Since most manufacturers refund a certain percentage of the car’s price to the dealer, you should look out for rebates and discounts from the dealer.

The interest rate factor

Don’t rush into a loan because the financier offers a 9% loan. For all you know, it could be a flat rate scheme. The best criteria to compare a car loan would be the effective interest rate, which would factor in the method of computation of interest and other costs like processing charges. Right now, most auto financing companies offer effective interest rates in the range of 13-16 per cent. Company owned car financiers could charge you even lower. So a bit of shopping around helps. It would also be worthwhile to bargain for a rate — half a per cent saving could be a decent amount.

If all the financial jugglery confuses you, the easiest way to spot the lowest effective interest rate (all other things being equal) is to compare EMIs. Let’s say you plan to take a Rs 2 lakh loan for a 5-year period, it would be simplest to compare what EMI you would be paying. Several websites now allow you to compare EMIs for similar schemes of various financiers. These include www.apnaloan.com, www.myiris.com, www.walletwatch.com and www.etinvest.com.

The hidden costs

A surprise cost could hit you in the face the moment you commit a loan — typically in the form of service charges, documentation charges, processing fee etc. Given the competition in car financing, it might be worthwhile negotiating with the lender for waiver of the processing fee. Also get the lender to give you a list of all the charges in writing with a statement that there are no other charges as well as the calculation sheet for EMIs. Most lenders will not commit anything in writing because of the money they make through the back door. So don’t just believe whatever that lender or his agent says — any verbal commitment carries no weight.

Be careful about when you pay your first instalment since this has an impact on the lending rate. If you pay your first instalment on the first day, your actual loan should stand reduced by that amount and interest should be charged only on the reduced amount.

Pre-payment charges

Find out about the pre-payment charges that are applicable on payment of loans ahead of schedule. Typically auto financiers would charge a certain percentage of the outstanding principal (2-4 per cent) as pre-payment penalty. Some financiers also put a restriction on the amount of pre-payment. If you would like to prepay some part of the loan as and when you get money, an absence of pre-payment charges could translate into savings. Use this criteria to act as tiebreaker among competing financing schemes.

Zero interest scheme

Zero per cent interest schemes seem hugely attractive for borrowing money virtually at no cost. Here, the dealer may forgo a part of his discount, which accounts for the interest that you might have paid. Or both the dealer and the finance company bear the interest. The loan amount would generally be lower in 0% schemes and usually the repayment period is 1 year to 18 months. Make sure there are no hidden costs by way of processing charges etc.

A tailor-made scheme for you

Several finance companies are now offering innovative scheme tailor-made for the customer. These include step-up or ballooning, a scheme that will allow you to pay a small installment initially and increase it in later years. Essentially for salaried people who expect their monthly cheques to fatten with salary hikes or promotions. Another option is the bullet scheme where installments are staggered at the end of the year to match annual bonus or increments.

The fine print

Read the documents you sign carefully. Remember, if there is a problem later, what is written is what counts. Try to get a copy of the Agreement or Contract before you get into one. Understanding the important clauses within the agreement can help you avoid a lot of trouble in future. Most banks and NBFCs market their car finance schemes through agents. Try and authenticate an agent’s verbal claims directly from the officials of the bank or the finance company.

Get your documents in order

No matter where you get your car financed from, you will need some basic documents ready — proof of income (Form No. 16/Latest salary slip), identity documents and proof of residence (Ration card/passport/telephone bill/electricity bill), bank statements for last 6 months, photographs and signature verification from bank.

Shop around

It pays to check the schemes of various financiers and do a little research before you take a loan. Here’s where to go for auto financing — institutions and companies offering car finance include nationalised banks like State Bank of India, Allahabad Bank, Bank of Baroda, Bank of Maharashtra, Corporation Bank and Punjab National Bank. Among private banks the list includes ICICI, HDFC Bank, Citibank, HSBC, Standard Chartered and Centurion Bank. Corporates offering car finance include Countrywide, Associates, Kotak Mahindra, and Tata Finance.

Lender Max. loan  Interest Tenure Processing fees Prepay-ment charges
HDFC Bank 90% of car value  13.5-14.25%  1-5 years Nil  2%
ICICI 90% of car value 12-16%  1-5 years Nil  2%
State Bank of India 75% of car value 14% 3-7- years 1% Nil 
GE- Countrywide 90% of car value 12.5-13.5%  1-7 years Nil  2%
Bank of Punjab  90% of car value 13.5-16%  1-5 years Nil  2%

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MARKET SCAN

Market future uncertain
J.C. Anand

THE stock market has been doing well during the last fortnight. Last Friday, the sensitive index closed at 3180.23 points, registering a gain of 67 points. Some scrips like Larsen & Toubro, Tata Tea, Glaxo and Novartis sustained their upward movement. Even automobile stock found buyers. Mahindra & Mahindra made gains during the last six weeks.

The market seems to disregard industrial slow-down in India as well as global recession. The disturbing news is that industrial growth rate during the last six months (April to September 2001) is a meagre 2.3 per cent as against last years’ corresponding figure of 5.7 per cent. In fact in September, 2001, the industrial growth rate is mere 1.58 per cent, as against 2.66 per cent in August, 2001, except for consumer durable sector, which has been doing well. All the three major sectors of industry have recorded lower growth rates. The manufacturing sector growth rate has come down to 2.4 per cent, as against 6.2 per cent during the corresponding period last year. The mining growth rate is negative. Electricity segment is recorded a growth rate of 3 per cent, as against 3.5 per cent.

The surprise is that the market does not take a lower growth rate into consideration. It is but clear that the industry will have to report lower operational profits as well as well as sales during the next year i.e. 2001-2002. It is for this reason that in this column, I have been recommending booking profits, wherever possible. Delivery based trading is preferable to long term investment buying at present. For industrial slow-down is bound to eat into the higher market prices. Even 3rd quarter results may reflect the slow-down.

Another factor, which is likely to have a deep impact on industry in the coming years, will be greater competition from imports. Now that China has become a member of the (WTO), it would be difficult to keep out Chinese goods, particularly, if China improves the quality of the exports. Moreover, in view of the recent round of discussions at Doha, the (WTO) has scaled-down the prospect of protecting local industry by imposing high custom duties. It may not be out of place to recommend some short-term investment in shares, which have been showing excellent results. One of them is Akash Optifibre Limited. Originally, its share with the face value of Rs 5 was offered to the public at Rs 65. At present, it is quoting a little above that amount. But is has shown excellent results during the half year ended 30.9.2001. Its net profit for half year is Rs 1439.07 lakh, as against 314.92 lakh. It has an EPS of Rs 6.53 on Rs 5 face value share for the first 6 months. It has also declared an interim dividend 0.75 paise per equity share. This is in addition to the first interim dividend, declared earlier. It has an equity capital of Rs 1101.89 lakh. It has a book value of Rs 34.7.

The other shares which deserves notice is that of Moser Baer. It is also doing very well and has defied the constraints of global recession. Its six months results show a profit of Rs 175.2 crore, which is 90 per cent higher than that in the corresponding period last year. Its six months EPS is Rs 37.4, as against Rs 29.2 for the full year, ending March 31, 2001.

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CHECKOUT

Complainant is to prove default
Pushpa Girimaji

TWO months to deliver a telegraphic money order? That’s a record that any postal department in the world could do without. And any service provider worth his salt would try to keep such a dismal performance under wraps lest the adverse publicity affect its image. But obviously the postal department in India is not bestowed with such sensitivities. So armed with the antiquated Indian Post Office Act of 1898 that gives it immunity from liability even for such inaction, the postal department thought it fit to challenge an order of the Tamil Nadu State Consumer Disputes Commission directing it to pay damages to the consumer who suffered on account of such poor service, only to be chastised for its attitude towards the consumers. And while doing so, the apex consumer court also broke down the immunity shield around the postal department, thereby allowing consumers to haul up the department for its negligent service.

Yes, the recent National Consumer Disputes Redressal Commission’s order in the case of Post Master Ranipet HO vs Mr N.B. Janakiraman finally gives the consumer courts the power to grant relief to consumers who suffer on account of poor postal service. But let me first give the bare facts of the case before explaining the significance of the order. Mr N.B. Janakiraman sent a telegraphic money order from Ranipet Post Office in Arakkonam, Tamil Nadu, to his son in Saharanpur, Uttar Pradesh. For the amount of Rs 400 that he wanted delivered to his son, he paid a commission of Rs 29 to the post office. However, the money was not delivered to his son who needed it urgently for his expenses on boarding and lodging in Saharanpur. Upset, Mr Janakiraman took the post office authorities to the consumer court, demanding damages to the tune of Rs 5 lakh.

The postal department did not dispute the facts of the case, expect to say that eventually it had delivered the telegraphic money order to the addressee, even though it was after a delay of nearly two months. However, it reminded the State Commission that no action can be taken against it under the Consumer Protection Act because of the immunity granted under Section 48 (C) of the Indian Post Office Act. When the State Commission directed it to pay Mr Janakiraman Rs 5000 towards compensation and Rs 1000 as costs, the postal department filed an appeal before the National Commission. (FA no. 129 of 1995).

Now Section 6 of the Indian Post Office Act says that the Central Government or the Postal Department as well as its employees are exempt from any liability for loss,misdelivery, delay or damage to any postal article in course of transmission by post, except where it is caused by a fraudulent or a wilful act or default of an employee. Similarly, Section 48 says that no suit or other legal proceedings shall be instituted against the government or any officer of the post office in respect of deficient service, except when such deficiency is the result of fraud or wilful act or default of such officer.

However, in this particular Order, the National Commission took the view that when default is so extensive as in this case, the complainant need not provide any proof or evidence of default or fraudulent or wilful act on the part of the post office or its employee. This Order restores to a large extent the rights of the consumer vis-a-vis the postal services.

Said the Commission here: “A bare perusal of Section 48 (C) would show that it does not give blank immunity to the appellants. If there is fraud or wilful act or default on the part of any officer of the Post Office, appellants will certainly be liable. It may be that fraud or wilful act has to be proved by the complainant and so also the default. But when the default is so extensive like in the present case, no proof or evidence on the part of the complainant is required to prove the default on the part of the Post Office. As to what is wilful or default, we need not go to any treatise on the interpretation of these terms or to any judgement for the purpose. We have to see from a consumer’s point of view as to what is wilful or default when interpreting a particular 
provision”.
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HOW I INVEST

Don’t invest heavily in share market

MR A.I .S. Sandhu has been a very aggressive investor who even today has almost 80 per cent of his savings invested in the equity market. He lost heavily in the share market and a change in the investment strategy is what he is working on these days. After putting in 20 years of service in the Air Force, he practised Income Tax law for several years and these days, is busy trading and studying the market thoroughly. A rational approach to investment right from the beginning of one’s career is what he advises while talking to the TNS. 

Initial investments

Stating that I began my investments from the equity market might be unlike majority of the people , but that is true. During my initial years of service, I did not save money and it was only when I started practising Income Tax law that I came in contact with people involved in active share trading and I felt the need to plan my investments. Ponds, Colgate and several such companies were my initial buys during 80s and I even gained in these shares.

There was hardly any money that I put in the bank, though for tax saving purposes I did put the maximum I could in Public Provident Fund (PPF).

I also kept buying land , primarily agricultural to save upon taxes.

Equity market

I invested heavily in the equity market and even today more than 80 per cent of my money is invested in shares. Heavy returns, of course were the allurement and I also lost. Today I hold shares like V.K. Fibres, Zee, Videocon International, Wockhardt, Vardhman, Reliance Capital and various others. Many of the companies, especially those I went in for after the Harshad Mehta period have even closed down.

After burning fingers in the share market I would suggest that if one has to go in for shares it should be done only after a thorough study of the market. I would advise one not to invest heavily in the share market. If you invest — a thorough study of the market is a must and the company you put your money into should have sound financial and management background and rational long term plans. The market reputation also counts.

Mutual Funds

Though initially, that is two years ago , when I started investing in Mutual Funds, I went in for IT related and other equity funds. I have Kothari Infotech and Kothari balanced fund today. Given the present market conditions where I believe safety has to be the priority, debt funds are the best option.

Banks and insurance

I have always put a marginal amount only in the banks, though they offer maximum safety and are thus a good option today.

One needs to be properly ensured, that is cover the risk, but insurance is only a risk cover and not investment.

Where to invest

One should spread his investments among different areas rather which helps preventing losses . An even blend of mutual funds, banks and equity market — after proper analysis of the policies etc will fetch reasonable returns and assure safety apart from tax saving.

(As told to Shveta Pathak, TNS) 
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TAX & YOU
R. N. Lokhotia

LIC premium

Q: I had taken LIC Policy in F.Y. 1999-2000 and paid my full year instalments of Premium. But due to unavoidable circumstances. I could not paid my LIC Premium in F.Y. 2000-2001, but deposited the same in May 2001 with interest & fine.

Whether I can claim deduction u/s 88 for such premium in the Assessment year 2001-2002.

— Naresh Kumar, Barnala

Ans: In respect of Insurance premium paid by you in May, 2001 you cannot enjoy tax rebate during the Financial Year 2000-2001.

Shares purchase

Q: I purchased 1000 shares of Jindal Vijaya Nagar in 1994 @ Rs 11 per share and sold them in April, 2001 @ Rs 4 per share. I had also purchased 800 shares of Reliance Petroleum Ltd. @ Rs 10 in 1993 and these were also sold in April, 2001 @ Rs 50 per share. What will be my capital gain/loss calculation after opting inflation index and what tax (if any) shall I have to pay? Kindly clarify.

— Sushma Goel, Bathinda

Ans: For calculating long-term capital gains, the long-term capital loss suffered by you will be adjusted to arrive at the net taxable gain. You should calculate the cost of the shares sold by reference to Cost Inflation Index and then arrive at the net taxable long-term capital gains. From your facts small portion of capital gains will become taxable in your case. For ready reference the Cost Inflation Index during the F.Y. 1993-94 was 244 while the Cost Inflation Index for the F.Y. 2001-2002 is 426.

Tax saving bonds

Q: I had purchased ICICI Tax Saving (Infrastructure) Safety Bonds, February 2000 Option II (Cumulative) with maturity period of 3 years 3 months in the nature of Deep Discount Bonds (DDB). The cumulative interest is payable at redemption after 3 year 3 months, which shall be liable to TDS. Please clarify:

1. For the purpose of Income Tax Return, can the interest payable be split into annual instalments, though interest could be paid only at redemption:

2. Can refund of TDS be claimed u/s 80-L, thereafter;

3. To split the interest annually in I.T. return, is annual interest certificate needed, which the ICICI office refuses to provide.

— Dr Raman Singla, Amritsar

Ans: For the purpose of income-tax return the accrued interest payable will be taken for each year. Thus interest would become taxable based on accrued basis calculation even when it has not actually been received. You can claim the benefit of section 80L in each year. ICICI is duty bound to give you certificate of annual interest accrual. In case of any problem you should write to SEBI. Refund of income-tax can be claimed in the year in which you actually receive the money.

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Nasscom to host Asia-Oceanian meeting
Tribune News Service

New Delhi, November 18
The Information Technology industry experiencing the blunt of the economic downturn hopes that the industry would bounce back in the coming year.

The Asia-Oceanian meet of business leaders in the Capital next month would focus on the theme “Government and Industry: Business in the digital economy.”

The 19th General Assembly and Symposium of Asian Oceanian Computing Industry Organisation would be held in the Capital on December 6 to 8.

The meet is being hosted by Nasscom would be inaugurated by the Prime Minister, Mr Atal Behari Vajpayee.

The president of Nasscom, Mr Kiran Karnik, said “with the recent developments of a slowdown in the US economy and Europe witnessing flat growth, the Assembly provides an excellent platform to network and forge alliances between member companies in the Asia Ocenian region to develop trade.”
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BIZ BRIEFS

Inflation dips
New Delhi, November 18
Inflation rate plunged 0.19 per cent to a new 18-month low of 2.4 per cent during the week ended November 3 due to cheaper primary articles. PTI

Syndicate Bank
Madurai, November 18
Syndicate Bank is launching next month a centralised banking solution to provide its customers “anywhere-to-anywhere-banking” facility, its Chairman and Managing Director D.T. Pai has said. PTI

Kinetic Zoom
Rohtak, November 18
Mr B.K. Garg, Manager, State Bank of India, Maharshi Dayanand University branch today won a Kinetic ZX-Zoom scooter worth Rs 37,000 under a scheme of contest envelope which started nearly a month ago by the company. Mr D.S. Badhwar, MD, Badhwar Automobiles here said the sale of ZX-Zoom model had been highest in Rohtak in the entire state. OC

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