Daily Economics

[dailyeconomicsnet]

Why SIP is the best Investment Tool for Retail Investors?

 “SIP of Rs 5000/ - stated on 1st July 2010, has become Rs 18.84 lacs as on 1st July 2021 (Actual Figure)”

  What is SIP?

SIP is a short form for Systematic Investment Plan, As the name suggest, it is a method of regular investments. Like when u invest a Fixed amount every month in a Mutual Fund Scheme, it is called a SIP.

Where to Invest SIP?

It is advised to start the SIP in a diversified Equity Fund, for better long-term growth. SIP works on the principle of SNOW BALL theory - longer you go, bigger it grows. Volatility is the food for SIP.

 How to open SIP Account?

Opening a SIP account is very simple. You just need to check if you are a KYC compliant, and then sign an ACH mandate with your MF Distributors, for monthly deduction of the SIP amount; that's it!

3 TIPS TO GET THE BEST FROM YOUR SIP

SIP is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time. Currently, mutual funds have 3.73 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes.

1st TIP TO GET THE BEST FROM YOUR SIP

SIP is nothing but a piggy bank! You should assign all your SIP to your Financial Goals, like-SIP for home painting, SIP for Foreign Vacation, SIP for Social Gifting, SIP for Kids education etc. This will help you maintain the discipline of investments and inspire you to save.

2nd TIP TO GET THE BEST FROM YOUR SIP

Always check your estimated future Value, before starting a SIP; I have given below the reference table of Rs 1000/- per month at an assumed rate of 12% p.a*, just for your help.

 *Note: Above table is just a ready reference for your help. 12% p.a is just an indicative return, taken for the purpose of calculation. Actual Average ROI of Top 5 Diversified Equity funds is 18.5% p.a, in 20 Years period. 

3rd TIP TO GET THE BEST FROM YOUR SIP

Always allocate your SIP according to your target period and Liquidity requirement. Like, if you want to start a SIP for a shorter period (< 5 years), then prefer a large Cap or Hybrid Fund, and if you are looking to start a SIP for longer period (7-10 years or more), you can select Midcap or Small Cap Funds. I have given below the real historic chart of some of the long-term SIPs in Indian Equity Mutual Funds:

One can see the advantage of SIP over a long term - SIP of Rs 5000 per month has been converted to huge wealth, if you have kept the discipline of investing.

AUTHOR

VR Aiyappan (CFA, FRM)

[dailyeconomicsnet]

My new Blog, please visit it and provide me your feedback.

Link: https://dailyeconomics.net/start-up-msme/5-important-clauses-in-a-saas-agreement/

[dailyeconomicsnet]

See my New blog on Retirement Planning.

https://bit.ly/3sz9Ry1

[dailyeconomicsnet]

Despite there is no changes in Personal Tax Slabs, Budget 2021 brings significant proposals to facilitate ease of compliance for the taxpayers.

Visit: https://bit.ly/3oQQLBI

Watch Now: https://youtu.be/6TgukD-stNI

[dailyeconomicsnet]

Bullying - a menace that's everywhere - offices, schools, homes, neighborhood, malls etc. It can leave scars for lifetime.

Read Now: https://bit.ly/3oCJDJ4

[dailyeconomicsnet]

Bullying – a menace that’s everywhere

Bullying:

Many of us have faced bullying in some form or the other, at some point in our lives. It can happen randomly or regularly to anyone. Bullying – a menace that’s everywhere. It can occur anywhere, even in the best of schools, and leaves a scar on almost everyone involved, from the targets to witnesses—and sometimes even on the bullies themselves. It does not matter if you are a student, a teacher, a parent, or a professional, victims face different intensities of bullying depending on the age and form of the incident. Maximum cases, though, are reported among school students.

Various studies and reports from around the world term it as a staggering statistic; considering how bullying can affect a person’s overall wellbeing in the days and years that follow the episode. The most alarming side of this unhealthy practice is the inflated self-view of students carrying out bullying (termed as bullies) and the effects of this behaviour on people who are the targets (termed as victims). Victims often suffer from sleep issues, loss of self-esteem, anxiety, and depression; elevated emotional distress that can sometimes lead to severe health problems later. Bullies, in many cases, are prone to become antisocial or have adulthood troubles, with violent behaviour patterns and abuse becoming a significant part of their habits. Some of them may take to substance abuse as well. The increased dependence on gadgets and media has increased cyberbullying and cyber-attacks that have become a pervasive problem affecting students across the world and can slowly become a dangerous pandemic.

Schools often struggle to take a stand against bullying. Media coverage, the role of parents, internal politics, and the resolve of the management, all play a part in this dilemma.

It is time we found ways to redefine schools, work spaces, and homes to reduce this unhealthy practice. Unfortunately, teachers, many times fail to catch the first signs of bullying or to address it in time. The usual practice of letting go of a bullying attempt with dialogues such as kids will be kids, boys will be boys and such need to be shunned completely. The biggest message we must pass on to children is that no one can get away after a bullying incident, irrespective of the grade or intensity. Bullying can be of various types– mental, physical, emotional, psychological, cyber, verbal, and more. The most common one we see these days is children mocking people with disabilities or of a chosen gender. As much as we are becoming more inclusive in various spaces, children must first be taught the lesson of acceptance, to embrace and include people of different skin, ability, or gender into one fold, and to consider everyone as equal.

Teaching empathy, kindness and compassion are vital social skill sets. Social-emotional learning should be mandated in every classroom from primary grades to help develop these skill sets. Parallelly, schools should teach about personal boundaries and how to guard and respect them. Introducing children to diversities, conflicting ideas, and diverse cultures early on, help them understand the plethora of emotions. Knowing how to defend themselves without getting offended and without offending others leads to the growth of healthy relationships.

Creating better homes, schools, and work spaces that encourage building connections beyond color, caste, and personal belief systems are encouraged to nip bullying at a very young age. Students and teachers, parents and wards should foster a sense of community in their respective ecosystems. The sense of belonging and mutual respect reduces the urge to bully or see the other person as lesser or different.

Identifying gateway-behaviours is essential for every parent and teacher. Repeated behaviour patterns can signal the beginning of bullying nature in a child. Some of the key behaviour signs one should look out for are eye-rolling, prolonged staring, name-calling, ignoring or excluding intentionally, laughing at cruelly, spying, stalking, causing physical harm, pushing a person to cry to find sadistic pleasure, and such. Some of these may not be direct bullying behaviour, but if we can stop kids and make them understand the consequences at the first instance, we could mitigate the chances of it growing into problematic issues later.

Framing, forming, and implementing anti-bullying laws and practices in schools and strictly adhere to them backed by an anti-bullying legal framework helps immensely. It is vital to emphasize to stop bullying to protect students and teachers alike, as sometimes teachers also become targets of bullying attempts by children. Frequent awareness programs should be run among educators and children at periodic and regular intervals so that children are reminded of the repercussions if they commit one.

Schools must find ways to reduce this problem. This includes educating all teachers, staff, and administrators and making them aware of the different forms of abuse and bullying. The approach and strategy of the school should be such that teachers, staff, and students alike are taught ways to prevent bullying, about the consequences of bullying, and the legal ways to handle bullying. Unless we redesign and recreate spaces for expressions and talents without fear, we seldom will see healthy and competitive ecosystems around us. Nurture your child to hold and hug one another looking beyond differences and diversity.

 Author: Aparna Viswanathan

Aparna Viswanathan is a serial entrepreneur and founder of Zocio, the company that facilitates socio-emotional skill training. She is a visiting faculty in B-schools and Journalism colleges. Her expertise lies in topics of Communication and Diversity & Inclusion. She is also a mentor in the entrepreneurship space. You can reach her at [email protected]

[dailyeconomicsnet]

Bitcoin has seen a dramatic rise in 2020 – a year marked by events unprecedented both in the real economy and in financial markets. Bitcoin has given a staggering return of 340% in 2020 and 570% from the lows of March 20. Financial markets had a roller coaster ride in 2020 and Bitcoin has been a stellar outperformer beating all asset classes by miles.

Read More: https://bit.ly/3ox4MVa

[dailyeconomicsnet]

The rise and rise of bitcoin!

Bitcoin:

The rise and rise of bitcoin! The name Bitcoin evokes a sense of enigma, curiosity, and a possible peep into the future of money.   

Origins of bitcoin can be traced to a blockchain built under an anonymous name – Satoshi Nakamoto. Satoshi was the first to solve the problem of double-spending using peer to peer network. The identity of the brilliant mind who authored the white paper on Bitcoin remains unknown to this day however!

Bitcoin blockchain is a public ledger that records all bitcoin transactions. It is recorded as an addition to the block of transactions without overwriting the earlier blocks. New bitcoins are mined every 10 minutes by generating a code or nonce. Mining of bitcoins refers to solving a computational puzzle and people who solve the puzzle are rewarded with new bitcoins.

Bitcoin has seen a dramatic rise in 2020 – a year marked by events unprecedented both in the real economy and in financial markets. Bitcoin has given a staggering return of 340% in 2020 and 570% from the lows of March 20. Financial markets had a roller coaster ride in 2020 and Bitcoin has been a stellar outperformer beating all asset classes by miles. 

Given the powerful rally and rising investments in the cryptocurrency from traditional investors, there is a growing view that the fair value of one bitcoin will be upwards of 1 mn USD if only 2% of investor wealth in currencies is invested in the cryptocurrency.

Given the advantages of borderless and seamless transactions at nil transaction costs in real-time, a huge influx of liquidity by Federal Reserve in the aftermath of COVID 19, audit trail of all transactions, flawless code with complete transparency of the mining process, added cushion of eventual scarcity in the supply of bitcoins coupled with a rally in the cryptocurrency, the argument that it will gradually replace the hard currencies of today seems a more realistic and likely scenario than it was anytime earlier.

We have attempted to put together our thoughts on whether bitcoin will pass the basic tests for being the next currency of the future or it will fade with the eventual rise of digital currencies backed by sovereign nations –

Popularity of bitcoin is partly because it is not regulated by the Federal Reserve or the Central bank of any country. These are free-flowing transactions that are not subject to review and/or approval of any competent authority. What has however led to the popularity of bitcoin is also an obstacle to its adoption and acceptability by a much wider audience. Submission to a sovereign regulation imparts legitimacy and trust to a currency. Higher the trust in the Central bank of a country, more are the savings and funds deposited in that currency. This explains why US dollar despite its flaws is the preferred currency in which Sovereign funds, pension funds, and individuals park their savings. This is the single biggest reason why bitcoin may never be able to become the alternative currency or replace any major currency.  

One of the basic features of a good currency is low volatility in its exchange rate. This explains why a lot of currencies are pegged to the dollar or a basket of currencies. Central banks of countries like India who have chosen not to peg their currency maintain huge forex reserves and intervene in money markets regularly to manage volatility. Reserve Bank of India has a plethora of instruments in its arsenal such as Repo rate, swap arrangements, and other policy tools to manage currency volatility. There is no Central Authority that exists to manage volatility in Bitcoin which partly explains the highs and lows in its chart. Banks, businesses, and ordinary people are unlikely to park their savings in a currency that runs a risk of 30% overnight fall in its value/purchasing power.     

Existing currencies enable different mediums of payment ranging from online transactions, credit card payments, withdrawal from ATM, and payment of currency notes and coins. Basic feature of a currency is to enable transactions across all these mediums and dimensions. Bitcoin while having certain advantages is not designed for payment via credit card/withdrawal by ATM etc. Though some Bitcoin Credit cards are available, their usage is quite limited due to the limitations cited above.  

Deposits in all currencies earn interest which is largely regulated by the Central bank based on inflation, growth rate, etc. One of the basic functions of currency is to drive economic activity by giving loans to consumers, businesses to invest in capacity expansion, etc. Businesses issue Bonds for different terms and a free debt market determines the interest rate or yield based on the credit worthiness of borrower, risk free rate and rates at which comparable bonds are traded in debt market. Bitcoin resembles a dematerialized asset class that earns no interest and has no underlying cash flows to support the high valuations. There is no regulatory authority which can act as an oversight for issuing loans and / or provide a legal recourse to enforce debt servicing in Bitcoin.

Bitcoin is also referred as Gold 2.0 with the potential to replace and/or complement the traditional yellow metal as a store of value. Until the Bretton wood system was abolished by President Nixon in 1971, US dollar was redeemable in Gold. Gold has been the store of value for centuries across civilizations as it indicates trust, low volatility, and hedge against inflation. It is extremely unlikely that people would change their mindset or behavior shaped by wisdom passed over several generations to abandon gold in any reasonable measure in favor of bitcoin. 

Buoyancy in financial markets, partly driven by the money printing machine of the Federal Reserve in the aftermath of COVID 19 has led to a rally in cryptocurrencies. In a discussion on cryptocurrencies on a business channel a few weeks ago, an “analyst” expressed the fear that economic growth may be impacted as Indians with 20% of the world population own less than 1% of bitcoins. I would not want to debate such comments but cannot resist drawing similarities to the views expressed by analysts in the build up to dot.com boom who suggested companies should be valued based on the number of clicks and that era of valuing companies based on cash flows is passe. 

Buoyancy in financial markets is a more recent phenomenon. So, what explains the success of bitcoin? For one, it is a Technological Leap. Secondly, it can be explained by the psychology of human nature. We are fascinated by the future and want to be early adopters of new technology. If our forecast of future on the adoption of cryptocurrency turns out to be correct, we would be handsomely rewarded financially and would also stand out among our peers as the ones who “out called” the future. We get carried away by our fascination for the future and in the process overlook that most forecasts are inherently off the mark!

Bitcoin also runs the inherent risk of a clampdown by regulatory authorities should a terror attack be financed by underlying transactions in cryptocurrency or if authorities decide to clamp down on the dark web which is a source of illicit transactions. As per a study, 1548 cryptocurrencies are in vogue today with transactions running into billions of dollars. It is similar to euphoria before the meltdown!!

Author:

Nitin Grover ACA

Nitin Grover, a Chartered Accountant with over 20 years of experience in senior roles in ITC & Coca-Cola, with an interest in Financial Markets. He is also active investor/Portfolio Manager. He can be reached at [email protected]

[dailyeconomicsnet]

Leave Travel Allowance (LTA) benefit entitles an employee to avail tax exemption in respect of travel costs incurred by an employee for himself and his family to any destination within India. Before availing the benefits, analyze the newly introduced LTA Cash Voucher Scheme.

Visit: https://bit.ly/3pXsZWk . . #leavetravelallowance #allowance #lta #cashbenefits #cashvoucherscheme #ltacashbenefits #accounting #finance #taxation

[dailyeconomicsnet]

Leave Travel Allowance cash voucher scheme – What you must know as an employee

Leave Travel Allowance (LTA):

You can think of a better tit

Covid – 19 pandemics have resulted in a huge disruption of the transport and hospitality sector. Due to this, employees are not able to avail Leave Travel Allowance (LTA) benefit provided by employers. LTA benefit entitles an employee to avail tax exemption in respect of travel costs incurred by an employee for himself and his family to any destination within India. The exemption is available in respect of two travels made in a prescribed block of four calendar years (currently 2018-21). In order to incentivize employees and also boost consumption, the government has come up with an LTA cash voucher benefit.

As per the same, an employee is entitled to a cash allowance of Rs.36,000 per person. So, in the case of a married person having two kids, the maximum amount of Leave Travel Allowance cash benefit would be Rs.1,44,000 (36000*4) i.e., for himself, spouse, and two kids. Since this is the maximum amount, if the employee is entitled to only Rs.1,20,000 as LTA in his salary package, the benefit would be restricted to such amount. Such LTA benefit would be exempt from taxation if the following conditions are fulfilled –

Leave Travel Allowance (LTA) should be forming part of the salary structure.

An employee should not have availed LTA exemption with respect to both the travels made during the current block period.

An employee spends 3 times the value of LTA cash allowance on goods and services which are subject to GST at the rate of 12% or more

The above spending should be during the period from 12 Oct 20 to 31 Mar 21

The payment for such purchases must happen in digital mode. The purchases made by cash payment will not be eligible for this benefit.

The employee must obtain an invoice indicating the GST number and the amount of GST paid.

The invoice should be in the name of the employee.

Points to note

Employees opting for a simplified tax regime are not eligible to avail of LTA cash benefits.

It is optional for the employee to choose between cash benefit and the normal Leave Travel Allowance.

Though 31st March 2021 has been specified as the last date for spending, tax proof submissions in most of the corporates may happen in Jan/Feb. So, employees would need to plan their spending accordingly.

If an employee spends less than 3 times the LTA cash allowance, the income tax exemption would be proportionately reduced.

Example

Here is an example of tax savings in the case of an employee who is married and having two kids.

Suppose if the employee spends only Rs.1,80,000 his benefit would be proportionately reduced as shown below.

Conclusion:

If you observe the above example closely, the tax saving is coming to just above 10% of the total amount spent. That means, in order to save 10% of taxes, one needs to spend 3 times the benefit provided which may not be practical in many cases, especially during these difficult times. Hence, employees need to be cautious before making this choice and exercise their prudential judgment.

Another benefit provided under the normal Leave Travel Allowance(LTA) rules is that, if an employee is unable to claim the exemption with respect to one or more travels in a block of four years, he may carry forward one such journey to the next block. However, such carry forward LTA exemption needs to be utilized in the first year of the subsequent block.  For example, if an employee has availed LTA exemption only once in the current block of 2018-2021, he can avail exemption with respect to the travel undertaken in the first year of the subsequent block i.e., 2022. He can further claim the exemption in respect of two more journeys between the years 2023 and 2025. Employees whoever is eligible could explore the option of carrying over the Leave Travel Allowance(LTA) benefit instead of spending thrice the amount of cash benefit.

Author:

A S Amarnatha B.com, FCA, LLB

Amar is a practicing Chartered Accountant specializing in the field of NRI and expat taxation. His expertise includes various facets of global mobility like expatriate tax, DTAA, social security, ESOPs, etc. He is also specialized in US individual taxation both from expat and foreign national tax compliances perspectives. He can be contacted at [email protected]

[dailyeconomicsnet]

Top five things to consider while making online/digital payments

Digital Payments:

Digital paymentshave taken over our lives in a manner that could not have been fathomed just two years back. It has eliminated the need for plastic currency and physical currency to such an extent that even the tiniest amounts are now being made online. Though this has helped many of us to make payments effortlessly and seamlessly, it has proven to be a double-edged sword that has brought along with it many risks. Here are the top five ways to ensure that you are not scammed of your hard-earned money in the new digital world.

Beware of Phishing

Phishing is a term that is generally used in the domain of cyber space. A gentlemen X, while browsing a popular social media site, came across an offer that he found interesting. He immediately clicked on the link that directed him to another E-shopping portal (Also Read AI technology driven e-commerce platforms) that was a household name. He browsed through the goods, selected the products and proceeded to the payments section. Satisfied that he had made a good deal, he was now waiting patiently for the order to arrive. Alas, to his utter shock, the very next day that he got up in the morning, he found that his whole bank account had been drained. X had unfortunately fallen victim to the most common cyber fraud; Phishing. He was made to believe that he was on a legitimate site whereas in reality, that site as nothing but a replica of the original one. He had entered all his banking details that led to the perpetrators gain access of his accounts and withdraw all the funds.

Solution: Never click on eternal links to a website. Ensure that the address is typed in manually in the address bar of the browser.

OTP Scams

It is one the most common methods of scamming wherein a significant chunk of the population has fallen victim to. The common modus operandi involves calling the victim up and creating a make-believe story that their cards or accounts have been blocked and in order for them to start using them again, they would need to provide a simple OTP that they would be getting on their mobile phone. The victim innocently gives their OTP and within a matter of seconds, the funds are transferred to the criminal’s account leaving no trace.

Solution:

NEVER EVER give your OTP or bank card details to anyone on the phone or in person.

If you ever happen to receive such calls, make a note of the number and lodge a complaint with the nearest Cyber Cell Police Station

Identity Scams

A novel and unique approach wherein the perpetrator gains access to your identity details including photos and social media handles. Your identity is then set up which is then used to inadvertently cause nuisance in your social circle by spamming their inboxes with obscene material. Not only that, they also might very well have gained access, through social engineering, to all your accounts thereby having control of your bank accounts which is then used to siphon off money.

Solution: Beware of entering your credentials on any app or website that is found suspicious. Do not use an outdated anti-virus software.

SIM cloning scams

Another approach that involves making a duplicate yet functional SIM card. The process is fairly simple. The criminals target a particular segment of people who are highly active on social media flaunting their wealth and assets. They will have special hardware that will enable them to use the phone number provided there on such websites. Once the SIM is cloned, all OTPs shall then be sent to the clone SIM through which all the bank accounts are then drained.

Solution: Always ensure that your banking phone numbers are never ever disclosed on social media. Also, once the SIM is cloned, the original SIM becomes defunct. Keep an eye on your network. If it is down for more than half an hour, then immediately contact the service provider and ensure that your cards are all blocked to avoid further damage. Avoid all digital payments in the due course till the issue is resolved.

Card Skimming Scams

One of the most prevalent scams present both online and offline. A person X went to the ATM to withdraw amount. He was able to make the transaction but to his shock found out the very next day that his whole bank balance was emptied off. This happened because the scamsters used a skimmer that could make a copy of the card and its PIN that then was used to make both online ( using digital payments mode) and offline purchases.

Solution: Ensure that you don’t swipe your cards at suspicious looking ATMs. One of the key ways to identifying this is that the machine will have a protrusion in the card well and will be having a friction that will be much greater than the normal swipe well. Also, the keypads of the ATM shall be slightly bulged and will have paint on them instead of embossed keys.  

Follow the above five rules strictly while making digital payments and stay safe.

[dailyeconomicsnet]

Behavioural Finance – Fusion of Finance and Economics

Behavioural finance is a very interesting stream of economics that studies the irrationalities of human behaviour when it comes to financial decision making. It also explains why most investors lose money in the financial markets and / or under-perform the market.

Behavioural Finance: A few basic tenets of irrationalities

Mental Accounting

If we earn USD100 from gambling or windfall gain, we are more likely to spend it for giving party to our friends. We tend to create different buckets in our mind (Hard earned money / windfall gain / inheritance etc) as to the source of money and it drives our end use. Money however has the same color and carries the same purchasing power irrespective of the source. An electronics store doesn’t question the source of money when the customer approaches to buy goods.

It also has an implication on our investing behaviour in Behavioural Finance. We are likely to be less conservative in our investments if in our mind the source of money is other than hard earned money. We are more likely to invest the money in risky assets and therefore probably lose it.

Loss Aversion

Various psychology tests have concluded that the pain from losing USD100 far outweighs the joy of earning the same sum of money. When we are earning a positive return on an investment, there is also a temptation to book profit lest we lose the money that we have earned. It explains why most of the scrips in the portfolio of an investor are loss making scrips (Read – poor investments) and therefore under-perform the market.

When we are losing money on an investment, we tend to hold on to the scrip as we are averse to book losses. Scrips which are delivering profit are sold off and we are left with a less than an optimum portfolio.

There is an old saying that amateur investors book profits while professional investors book losses.

Herd behaviour

There is a tendency of retail investor to follow the latest trends and / or fancies of investment ideas. A very good example was during IT bubble of year 2000 when dot com companies were losing money / burning cash but were the darlings of the markets. Portfolios which would stick to time tested principles of picking companies with strong cash flow and low valuations were under-performing the market. Recession is invariably preceded by euphoria in financial markets and not surprisingly the world went into a tail spin with the collapse of IT Bubble in 2000. Similar euphoria in stock markets was visible in 2008 when the world was beginning to see signs of financial crisis

Parallels today can be drawn in the valuation of E Commerce companies like Amazon, Flipkart which keep burning cash but carry exorbitant valuations.

Herd behaviour in Behavioural Finance is what Warren Buffet cautions in his famous saying “investors should be greedy when markets are in a state of panic and panicky when markets are greedy”.

Price Anchoring

When we buy a book and find it to be not so interesting, we tend to complete it just because we paid for it. In the process we ignore, the cost of book is a sunk cost and the time could be better utilized in something more productive. When we spend heavily on the maintenance of our vehicle and end up encountering another maintenance issue which requires more expenditure, that we have spent already on the maintenance of our vehicles drives our decision to spend more than replace the vehicle.

Similarly, we get anchored to certain price points which could be the purchase price of our scrip, the high that it made yesterday etc. We end up not buying a scrip as it has moved few rupees where it was trading the day before and lose several times the money.

Investors need to train themselves to ignore the cost of purchase / other price anchors as sunk cost / missed opportunities and be oblivious to them in their investment decisions

High Self rating

A survey concluded that 80% of the drivers rate themselves as above average drivers. Most of the investors rate themselves better than others and their over confidence on their abilities as an investor drives the under-performance of their portfolio.

Our mind tends to process information and give a lot more credibility to data points / news that in sync with our investment philosophy. It strengthens our self-esteem and re-inforces our belief in one self.

We are unwilling to accept and process information that is not in sync with our themes and we discount it as just another view or a stray opinion. It makes us over-look important data points and ignore mistakes which leads to holding of sub-optimal investments. We also end up adding more money to “average cost” in case of price corrections in such scrips to re-inforce our belief in self. It is like putting good money behind bad money.

If we are over-excited about an investment, we are more likely to lose money as we have over-looked risks associated with the scrip.

The most difficult thing is to manage our emotions which influence our decision making, move against the herd and carry conviction in our investments with the humility that we are not infallible and prone to mistakes. These are the hallmarks of a great investor.

Don’t forget to read Real Life Emotional & Cognitive Biases simplified for a Retail Investor

AUTHOR:

Nitin Grover ACA

Nitin Grover, a Chartered Accountant with over 20 years of experience in senior roles in ITC & Coca-Cola, with an interest in Financial Markets. He is also active investor/Portfolio Manager. He can be reached at [email protected]

[dailyeconomicsnet]

Who should file ITR and When? - Daily Economics

Who should file ITR and When? – There are many misconceptions among taxpayers regarding ITR filings. We have tried to clear such misconceptions in this article.

Who should file ITR and When?

Income Tax Return (ITR) is a form that a person needs to submit to the IT Department of India. It contains information about the person's income and the taxes to be paid on it during the year. But many misconceptions are there among taxpayers regarding ITR filing. This article aims to clear such misconceptions.

Read Now...

[dailyeconomicsnet]

Who should file ITR and When?

Income Tax Return

Who should file ITR and When? – These questions have been hitting our inbox for some time. There are many misconceptions among taxpayers regarding ITR filings. We have tried to clear such misconceptions in this article.

But before getting into the topic “Who should file ITR? And When?”, let us try to understand the benefits of filing income tax return. Let us see some of the benefits:

Benefits of filing ITR:

1.   Income Tax Return (ITR) is a well-accepted proof of your income and wealth

2.       Loan/credit card can be approved easily based on your income

3.       Quicker visa approvals

4.       Timely filing of return allows claiming losses incurred if any on account of capital gains, business/profession, and house property

5.       Can claim a refund of excess TDS deducted if any

6.       To comply with the land of the law and avoid interest and penalties.

Who should file ITR:

Every individual based on his/her age and whose total income is more than the specified limit as per the below table must file the income tax return every year with the department.

Individual taxpayers – income thresholds

For calculating the total income threshold during the financial year, one should consider all the sources of income and exclude the deductions relating to capital gains and chapter- VIA deductions such as LIC, tuition fee, PPF contribution, repayment of housing loan and etc. However, section 10 exemptions can be excluded like agricultural income, share of the profit from partnership firm, income from mutual funds, etc.

However, in the following cases it is mandatory for an individual to file tax returns even his/her income is below taxable income;

·         If he/she deposits more than one crore rupees in cash during the financial year in one or more current accounts maintained with a banking company or a co-operative bank.

·         If he/she incurs expenditure which is more than Rs. 2,00,000/- towards foreign travel during the financial year.

·         If he/she incurs expenditure which is more than Rs. 1,00,000/- towards the consumption of electricity during the financial year.

·         Resident individual who is a beneficial owner or otherwise, who holds any asset (including financial interest in any entity) which is located outside India

·         Resident individual who is a signing authority in any account located outside India.

·         Resident individual who is a beneficiary of any asset (including financial interest in any entity) which is located outside India.

·         Non-resident individual is liable to file the return only when he earns income in India which is more than the specified threshold limit as given below;

Let us see this with some illustrations for better understanding:

·         Mr. Ram, a resident individual aged 52 years has earned rental income of Rs. 2,40,000/- during the year and he does not have any other income other than rental income during the financial year. With the accumulated savings, he travelled to US along with family. He spent an amount of Rs. 4,00,000/- towards travel expenditure. Is Mr. Ram liable to file the Income Tax Return?

Ans:  Yes, Mr. Ram is liable to file income tax returns. Though his total income is below Rs. 2,50,000/- he is liable as he spent more than Rs. 2,00,000/- towards foreign travel.

·         Mr. Gopal is a resident individual whose age is 65 years earned agriculture income of Rs. 10,00,000/- during the year and he does not have any other income during the year. Is Mr. Gopal liable to file the Income Tax Return?

Ans:   No, Mr. Gopal is having only agricultural income, which is excluded from the total income threshold, hence he is not liable to file the income tax return.

·         Mr. Varma is a non-resident individual whose age is 45 years & has earned Rs. 2,30,000/- from the house property situated in India and earned salary income of Rs. 35,00,000/- from a US entity during the year. Is Mr. Varma liable to file the income tax return?

Ans:  No, as Mr. Varma is a non-resident and his income earned in India is less than Rs. 2,50,000/-, he is not liable to file the income tax return.

When? ITR – Due Dates

1.   Every individual who is having income from business/profession and subject to tax audit, the due date for filing income tax return is 31st October.

·         In any other case (other than tax audit), the due date for filing of income tax returns is 31st July.

However, due to COVID-19, for all the cases due date for filing of income tax returns has been extended to 30/11/2020 for the financial year 2019-20.

Consequences for non-filing/late filing of IT return:

Late filing of IT return

Belated return can be filed till 31st March of next financial year. However late filing fee will be levied as per the below table.

Along with the late filing fee, if you are having tax liability then, interest under section 234A will be levied at the rate of 1% p.m.

Apart from the above late filing fee and interest, business loss and capital losses cannot be carried forward.

Non-filing of IT return

If you fail to furnish the IT return before 31st March, then the consequences are as follows:

Fee (penalty) anyway will be levied up to Rs. 10,000/- based on total income.

If you are having taxable income and if you fail to file the return, that can be treated as concealment of income and the penalties will be higher and it may go up to 300% of your tax liability along with interest.

You cannot claim the refund of taxes (excess TDS deducted, if any).

You cannot carry forward the losses.

Also read Selection of Correct ITR From & More Pointers in filing IT Returns

[dailyeconomicsnet]

AI technology driven e-commerce platforms – boon or bane for consumers?

AI Technology:

Remember a time when salespeople used to go door to door selling products? From then on, technology has grown leaps and bounds only to make buying products convenient, affordable, and cost-saving for consumers. No doubt, all 3 play a crucial role in making our busy lives more comfortable. While on the one hand, we should thank technology but on the other, are we aware of how this is impacting us? Are consumers exploiting the technology, or is technology influencing the consumers? Is AI technology – a boon or a bane? Read on to see if you can arrive at a decision.

In the first series of the article, we understood what AI technology is and saw a quick glimpse of how retailers leverage AI technology using consumer buying patterns. In this article, let us explore the consumer side of the story. How are the e-commerce platforms impacting consumers like you and me?

Research by the World Retail Congress organization (www.worldretailcongress.com) says 35% of google product searches by consumers turn into a transaction in 5 days. India is expected to see the highest online growth rate between 2018-22.  Out of the top five countries with the highest online shoppers, four are in Asia. The E-commerce industry is a hotbed for building wealth in the upcoming years.

Did our Jeff make fair use of it? What happened to his online store? Did Seema move to the online platform to buy milk? If you don’t follow anything I just said, read the first part of the series Artificial Intelligence powering the golden era for Retailers – Part – 1 real quick!

Trust me. You will enjoy this article much better!

For those who have read part 1 of AI technology, you would remember how Jeff leveraged the AI technology and built his pricing strategy. Let’s see what happened to Jeff, Seema, and Dinesh in 5 simple scenes like the first part!

Part 1 Conclusion: What happened Jeff after he launched his online store?

We ended part 1 with Jeff launching his promotion campaign for his new online store.

Seema grabbed the opportunity and took up a 1-year subscription. Within a month Jeff’s promotion went viral in the neighborhood. Although Jeff sold milk at a lesser price than the price, he sold at his store. His customer base grew to an average of 3,000 active subscriptions. At the end of the year, his sales shot through the roof, and he ended the year earning nearly five times more. At the same time, Dinesh, who was not inclined to move ahead with technology, lost his customer to Jeff, and his sales nosedived to the bottom.

Scene 1:  Sunday – Fast forward three years since Jeff opened his online store for selling milk

On a fine Sunday morning, Seema opened the newspaper while going through the technology news section. She was amazed to see “Amaze Online Platform” valued at 100 million dollars, and there it was Jeff in a crisp suit beaming with pride about his flourishing business. Seema took some time to come to terms with what she had just read. The person who sold milk in a small convenience store is now on a newspaper headline with the title “Upcoming Businessman.”

Seema had moved to a different city a year after Jeff opened his online store. After that, she had not followed Jeff’s story until she saw him on the newspaper cover. After reading the newspaper, she got very curious about how Jeff made this happen. She opened her laptop and searched for “Amaze Store Online.”  She discovered that the Amaze store now not only sells essential commodities, but the categories had expanded to electronics, apparel, daily household, and the list went on.

Scene 2:  Sunday- Seema curious to explore other categories to buy online

Seema remembered the convivence of buying milk online. She was eager to check out what “Amaze Online Store” had to offer now. She quickly browsed through some categories, and some dresses caught her attention. She was impressed with the collection and variety “Amaze Online Store” had. She promptly created her login through Facebook ID and added few to Wishlist, hoping to buy them.

After the initial excitement subsided, she pondered over the quality and fit of the dress. No matter how good they looked in the picture, she was not entirely confident about moving the dresses from Wishlist to the cart. She was tired fighting this thought, and finally, she decided to close the browser and get on with her day.

Scene 3: Monday – Introduction to Nudge theory and Seema typical working day

“A ‘nudge’ is a term used to describe any change in the environment which steers an individual’s behavior predictably while preserving their freedom of choice. It is not a push, nor a shove, but a gentle nudge.”

The following day Seema went back to her work. She had completely forgotten about the dress she wanted to buy.  She opened her g-mail to check her emails, and there she finds an email from the “Amaze Online Store,” asking if she would like to finish her shopping, and in bold, there was a callout saying a 15% discount on the first purchase. There was also an underlying message on her Wishlist products, “Selling Fast.”

Seema was “Nudged” twice if you noticed.

15% Discount to lure her back to the site

“Selling fast” message to create a sense of scarcity (Remember, we always value scarce things).

These nudges were enough for Seema to open the site again and move a product from “Wishlist” to the cart. Just when she was about to check out and pay for the dress, she was surprised to see additional add-on costs such as “shipping,” “tax”. These costs were equivalent to discounts provided. Seema was just not convinced about buying the dress. Despite an additional nudge of “10 People looking at the dress” flashing. Seema just abandoned the cart.

Scene 4: Tuesday – Seema can’t get the dress out of her head

As compared to the casual browsing on Sunday, Seema had invested a lot of time on Monday thinking she would buy the dress. Unable to completely let go of the thought, Seema opened Instagram casually and was scrolling through the updates. Just when she thought she had forgotten about dress; she sees an ad for the same three dresses with the message “flash sale” Buy 2 to get 30% off! This is a classic “Nudge” tactic to create a sense of “Limited Time Offer.”

Finally, 4th nudge did seem to work. Seema again launches the website to purchase the dresses and be done with it! But there was another message called out on the website shop for “Rs 4,999 and get an Rs 899” worth of dress free + avail free shipping!

Seema was now just Rs. 1,779 away from getting another Rs. 899 worth of free products. She had one more dress in her Wishlist that was “Rs. 1,800”. Precisely the difference amount she needed to get an additional Rs. 899 worth of products.

While Seema was processing all this information, there was “Nudge 6”, Amaze store now was showing all “Affordable Fashion Products from Celebrities” that were available to be shopped within Rs. 1,700/-.

Scene 5:  Wednesday – Seema choice validation by peers, influencers, and celebrities

Seema was still feeling overwhelmed by the information and promotion. She decided to put shopping off for a while as she had a birthday party to attend. To Seema’s surprise, her favorite dress that she was thinking of buying, one of the guests was wearing the same dress. She noticed that everyone in the room was talking about her.

The following day, she opens Instagram to see all the photos from the party uploaded to Instagram. Guess what, the girl wearing the dress Seema had liked, received the maximum likes. The comments section was overflowing with compliments.

Seema could not decide if the dress made the girl look beautiful or the complete set of accessories, matching shoes, make up that she was wearing! Social validation is also a kind of “Nudge”. Some other types of these “Nudges” are reviews by influencers, likes, and comments by friends, celebrity endorsements.

Today e-commerce platforms are paying tons of money to Celebrities, to people with the highest numbers of followers, influencers to flaunt their products, and repeatedly keep tagging the brand and posting images of the products on social media.

So, does Seema finally gives in and shops for the whole look, or does she wake up and realize before she spends more money than she has? If a brand or e-commerce platform can pay Rs. 2.18 crore for a single post. You can only imagine how many people on Instagram, seeing the post by celebrities, are ending up buying the product.

In Summary, the e-commerce industry is thoroughly using consumer behavior data coupled with AI technology to ensure every ad, every nudge message, every promotion on the site gets customers one step closer to sale. And it is working, the reason I say that is because today Amazon has valued 1 trillion dollars, Flipkart at 24 billion dollars, and Jio Retail at 55 billion dollars. The list can go on.

But what about us as consumers, is our earnings growing exponentially? Are we spending more than we are earning due to the e-commerce industry? Are we shopping more than we did a decade ago?  The answer to all and more in the final part of the series! Stay tuned to know how AI technology is driving your purchasing patterns.

References:

https://www.financialexpress.com/industry/technology/the-flipkart-story-a-timeline-of-funding-from-2007-to-2017/595740/#:~:text=2010%2D11%3A%20Flipkart%20raised%20%2420,company%20then%20was%20%241%20billion.

https://www.gqindia.com/get-smart/content/how-much-priyanka-chopra-jonas-makes-per-post-on-instagram#:~:text=According%20to%20the%20list%2C%20Priyanka,2.18%20crore%20approximately)%20per%20post

https://blog.edesk.com/resources/ecommerce-marketing/

https://www.convertize.com/how-nudging-boosts-sales/

https://www.worldretailcongress.com/__media/Global_ecommerce_Market_Ranking_2019_001.pdf

https://www.emarketer.com/content/global-ecommerce-2019

https://www.walkersands.com/wp-content/uploads/2018/07/Walker-Sands_2018-Future-of-Retail-Report.pdf

https://www.merkleinc.com/thought-leadership/digital-marketing-report[2]

https://blog.edesk.com/resources/ecommerce-marketing/

https://www.convertize.com/how-nudging-boosts-sales/

https://www.wordstream.com/blog/ws/2016/03/17/shopping-cart-abandonment

[dailyeconomicsnet]

US dollar continues to be the store of value and safe haven for investors in times of risk aversion. US Dollar - is it the biggest Ponzi scheme?

US economy has been the most dominant economy since the end of World war 2. US dollar continues to be the store of value and haven for investors in times of risk aversion. But US Dollar is a part of Biggest Ponzi Scheme for investors. Read to learn more... 

[dailyeconomicsnet]

US dollar continues to be the store of value and safe haven for investors in times of risk aversion. US Dollar - is it the biggest Ponzi scheme?

Do you know what is Ponzi Scheme? Why US Dollar is the biggest Ponzi Scheme?

Read the article and be aware about fraud...