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From the Rat Race to Financial Freedom... A common man's journey
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Happiness Unlimited...How to be happy..always !!
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Dream On...Every setback is a little nudge from HIM to Dream On
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The Autobiography Of A Stock
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A Father's Diary
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Friday, November 30, 2012

Are you blindly following everyone around you?

"Go with the crowd" mentality is so typical in any corporate work environment. It is also not uncommon to notice this in our personal lives. You will see people just following what people around them have been doing for many years, sometimes, not even knowing the rationale behind what they are doing and why.

There was a real experiment (scientific study) done involving 5 monkeys (10 altogether, including replacements), a cage, a banana, a ladder and an ice cold water hose. Some of you may have heard about this experiment before, but the fact that this was a real experiment amazes me every time i read this story and relate the same to the real world.

Experiment - Part 1
5 monkeys are locked in a cage, a banana was hung from the ceiling and a ladder was placed right underneath it. As predicted, immediately, one of the monkeys would race towards the ladder, to grab the banana. However, as soon as he would start to climb, the researcher would spray the monkey with ice-cold water. The trick was that in addition to the monkey who raced towards the ladder, the researcher would also spray the other four monkeys who are silently sitting on the side.

When a second monkey tried to climb the ladder, the researcher would, again, spray the monkey with ice-cold water. As done in the previous step, he would spray the other four watching monkeys also.

These steps were repeated multiple times until a point when the monkeys learned their lesson.

Monkey's lesson from Part 1
"Climbing" equals "Scary cold water for EVERYONE". So no one should climb the ladder.

Experiment- Part 2  
Once the 5 monkeys knew the drill, the researcher replaced one of the monkeys with a new inexperienced one. As predicted, the new monkey spots the banana, and goes for the ladder. BUT, the other four monkeys, knowing the drill, jumped on the new monkey and beat him up. 

Monkey's lesson from Part 2: 
The beaten up new monkey thus learns : "No going for the ladder and No banana at all" without even knowing why! and also without ever being sprayed with water!

These actions get repeated 3 more times, with a new monkey each time and ASTONISHINGLY each new monkey- who had never received the cold water spray itself (and didn't even know anything about it), would join the beating up of the new guy.

This is a classic example of mob mentality where in the bystanders and outsiders uninvolved with the fight- join in 'just because' every one else is doing the same.

When the researcher replaced a third monkey, the same thing happened; likewise for the fourth until, eventually, all the monkeys had been replaced and none of the original ones are left in the cage (that had been sprayed by water). 

Experiment- Part 3 
Again, a new monkey was introduced into the cage. It ran toward the ladder only to get beaten up by the others. 
The monkey turns with a curious face asking "Why do you beat me up when I try to get the banana?"
The other four monkeys stopped and looked at each other, puzzled on their action.

None of these monkeys had been sprayed ever with water and so they really had no clue why the new guy can't get the banana. But it didn't matter since it was too late and the rules had been set. 

So, although they didn't know WHY, they beat up the monkey just because "that's the way we do things around here".

Does this experiment sound familiar to you? Think all around your personal and professional life, scan through a typical day at your office or at home and you would realize that you are a part of this "monkey business" everyday in one way or the other. Are you not copying what others in your neighborhood or society are doing, without knowing why? Go for a house on loan, go for a good car, both husband and wife working, go for the latest mobile etc etc. No one knows why we are doing all this, but we all are doing because everyone else is doing that way, and if everyone is doing, then it must be the "correct" way. 

Is your professional life not following a similar career path as almost everyone around you? Can it not be different? Of course, it can be. Can money only be earned by being in a job and leaving yourself with no choice but doing something which makes you hate those beautiful Monday mornings? No, there are many alternatives. But being different means being uncomfortable. It means coming out of your comfort zone, It also means thinking out of the box, and sometimes being looked upon by your so called "mature and senior" colleagues as if you have been left behind the "rat race". 

Think about it. Question yourself. It takes guts to question yourself after you have lead most part of your life as a "monkey life". Let me help you. Why are you here on this planet? What is the mission of your life? What are your dreams and goals? What makes you happy? and if what you are doing on an everyday basis does not add to your mission, goals and strategy of your life, then stop and think. Are you not the same monkey who is just trying to follow what everyone around you is doing? Or have you got the guts to question what everyone else is doing and then change your path accordingly?

Unless you go inside yourself and start searching for these answers, the easiest thing is to continue to be a monkey and keep beating anyone who starts going towards the banana.

Don't be a monkey. Start questioning every action of yours. Have guts to tread a different path if your heart says so. Your future destiny depends on what actions you take today, on an everyday basis.

Wish you luck !!


Manoj Arora

Tuesday, November 27, 2012

Top-Up Premiums for a Life Insurance Policy

Did you know that paying a top up premium for your existing life insurance policy does not attract much of the regular charges deducted by the life insurance company?

Saturday, November 24, 2012

Can i change the world?

Can i make any difference to the world? Can i make any difference to my country? At least, can i make a difference to the people and society around me? On numerous occasions, we get ideas and plans to bring about a change around us.... for the better. But in most such occasions, what stops us are some questions like these or some very simple but logical doubts in our mind.

What if no one else is ready to change? 
What difference does it make if only i change?

Well, i grew up with similar doubts in my mind that stopped me from making so many attempts at doing great things in life till i read the below story, which changed my entire thought process.

We talk about corruption, cleanliness around us, traffic rules or for that matter anything else that we wish should be immediately corrected. But what stops us from going and bringing that change in the society are some of the questions and doubts as stated above.

I have a completely different belief system now. If you ask me now, actually it does not matter whether any one else is ready to change or not, or anyone else will actually ever change or not or whether you would be able to bring a difference to your society, country or the world or not. Yes, it does not matter at all. What matters is what you do !!

Let me try and explain this concept through a short story which triggered the change in me some time back.

There was a house in a village which unfortunately caught fire. The fire became very intense very fast, because of the high winds and the combustible material that the house was made of. By the time villagers could gather around and plan to take some steps to extinguish the fire, almost half of the house was already gutted. There was no scope of calling a fire brigade in such a remote village. The only hope was if some of the villagers could make a dedicated effort to get some water and start pouring on to the house. But it all seemed too little too late. There were a few who were still trying to get some buckets full of water from the nearby well, but it was just not good enough to have any significant impact on the deadly fire that had engulfed almost the entire house by now. The situation was hopeless. Most of the villagers were now "onlookers" who had given up any hope to save the house.

Suddenly, someone detected a small bird flying at the top of the house and pouring a few drops of water on the house. The bird was flying back, getting its beak filled with water from the nearby pond, and coming back and throwing it at the top of the house. It was doing it repeatedly and was trying to do it as fast as it could. The people who had gathered around the house and were seeing the bird do this strange thing, asked an obvious question to the bird : "Do you think by doing what you are doing, you will have any kind of impact on the fire?". The bird ignored the question and kept trying. After 30 min, when the situation of the house under fire was hopeless, and the bird was still trying hard, the people again asked the seemingly "stupid" bird: "See, your efforts are not going to yield any result. You may very well stop trying. You are wasting your time and energy."

The bird halted for a minute and responded to all of them : "It does not matter whether my efforts would yield the results I want, It does not matter whether i would be able to extinguish the fire or not. I do not even know whether i can save anything in this house. It does not matter what will be the end result. I am not even thinking about that." When people heard this response from the bird, they were puzzled. I mean, if the end result does not matter, then what is the point making such an effort. They once again asked the bird: "If it does not matter whether the fire will get extinguished or not with your efforts, then why are you trying so hard?"

The bird stopped once again and replied calmly to all the onlookers: "When the history would be written and someone would read this incident ever in future, there would be 3 categories of beings that would be talked about - "First, those who lit the fire, Second, those who watched the fire, and third  those who made an attempt to extinguish the fire. I do not wish to be counted in the first two categories." Villagers were stunned by the response.

This story is not about the end result. It is about the intent, the effort and the thought process. I was amazed by the thought process of the bird. It is so important that you hold you own self in high esteem and for that to happen, you need to make an effort towards doing the right thing, without worrying about the end result or whether that would make any difference in the end or not.

Mahatma Gandhi once said : "Satisfaction lies in the effort, not in the attainment, full effort is full victory."

So go on, chase your dreams and goals. Live them while you have energy in your body and before your time runs out.  Do not keep procrastinating them. In the end, it will not matter whether you are able to achieve them or not. What will matter is that you made a serious attempt. At the end of life, this effort of making an attempt will give you immense satisfaction.


Manoj Arora

Related Posts:
One person can make ALL the difference

Thursday, November 22, 2012

The Power of Simplicity

"Simple" has immense power.

Doesn't the above quote look too simple? Yes, it is. But why do we need to complicate it if it conveys the message that we want to convey. Most of us, in life, either ignore or undermine the power that simple things can bring. We either believe that such simple things cannot bring success, else everyone would have achieved it or we get satisfaction out of complicating things for ourselves.
We discussed this to an extent in one of our earlier posts : "Big things will happen by doing Little things right"

Leonardo da Vinci once said : “Simplicity is the ultimate sophistication." . Let me share with you a few examples that i have seen in my life that are governed by the principles of simplicity.

Both my daughters are fond of playing video games on any iPhone or any touch screen enabled phones that they can get hold of. Whenever any of my friend pays a visit to our home, they look forward to the opportunity of grabbing their phones and look for some new and adventurous games. Not that they do not have a laptop of their own at home but it is just the fun and excitement of playing high quality games over a touch screen enabled device that excites them. Could you have imagined all this 10 years back? Steve Jobs had a penchant to break the digital divide between the devices and humans. He wanted to make things so simple to use so that any "kid" could operate it without any formal guidance or training. He believed that simplicity has lot of power. Today, we can easily see the way the world has accepted such devices which simplify our lives.

Mc Donald's, the burger maker, sells 3 times more Aloo Tikki burgers in India than its world wide no. 1 best seller - Mc Chicken Burger. It is not that Indians do not like chicken, but Aloo Tikki burger can reach masses and is so much more simpler to associate with.

Warren Buffet, arguably the greatest investor of all times, has an advise for all his investors. He says that any investor who wishes to make long term profits should not complicate his or her strategy of stock selection beyond the simple mathematics that it deserves. No financial degrees, no complex charts are necessary to make such decisions. You do not need more than high school maths to arrive at a stock that will pay you handsome long term returns. Of course, there are other subtle attributes in your personality that contributes to your success in stock market, but keeping things simple has made him one of the best known investors in history.

Look at all the above examples and start thinking about those things that you feel are complicated for you in your life. If you cannot find a means to simplify something, it is very likely that it will never lead you to success. Success is always linked to simplicity, whether it is success in your professional life, your family life, your passion or anything else. It is we, the humans, who are masters at complicating simple things and then getting ourselves entangled in the same.

Financial Freedom, Stocks, Equity, ....nothing is complicated as long as you keep it simple. The book "From the Rat Race to Financial Freedom" talks about an extremely simple methodology and plan to get financially free. Sometimes, it looks so simple that many of us might not even believe it, to the extent that we may ignore it. For example, if we all understand the simplicity and yet the power of compounding, sound planning and great execution, reaching financial freedom is well within everyone's grasp.

Go for it folks, keep things simple, and realize the immense power that simplicity brings with it. Do not underestimate the huge potential of simple things just because they are simple.

As Albert Einstein once said: “If you can't explain it to a six year old, you don't understand it yourself.”


Manoj Arora

Monday, November 19, 2012

Your TIME is your most valuable ASSET

Rohit and Sapna have been happily married for the last 10 years. They have an adorable 5 year old daughter who has just started going to school. Both of them work for top notch multinational companies. Money is not a real problem for them. They earn well, and spend well. 

Weekdays are typically packed from early morning conference calls till late night customer meetings. They hardly get time to talk to each other except for the customary, mundane and routine activities from getting their kid ready for school, getting themselves ready for office, checking emails before they launch for a long drive for office. After going through the office churn and by the time they are back home, they are too tired and exhausted to think of anything other than planning for the next day.

However, they look forward to the "weekend" time. Weekends are typically a new movie in a theater followed by a dinner at a good restaurant and a great drive back home. Other than that, usually, the modern technology forces them to stay connected to office through SMS, phone calls or emails over phone. 

Because of the high profile jobs and the money that both Rohit and Sapna earn, they have been able to procure an elegant apartment (of course on a 20 year home loan). They also have a good latest model SUV and other latest electronic gadgets. Do not ask me about the loan part. It is very obvious. Loan, now a days, seems to be our birth right. They also realize that they got to continue to work for the next 20 years to make sure that they pay off all their loans. Not that they seem to have any issue with working and continuing to earn better salaries as they grow up in their career paths.

Everything is going fine and life seems to be picture perfect, or so it seems from the outside.Something is not 100% right. They are not truly happy.

Does this story sound familiar to you? Are you a part of a similar story line? While money and luxury have not been a problem in Rohit and Sapna's lives, they had one big assumption throughout their "successful" career journey, which seems to be going fundamentally wrong. They always had a feeling that having enough money will solve most of their problems. Well, hold your thought. I am not against money at all. I love money to a large extent. Money is surely important. There are no two considerations about that. But is money the MOST important ingredient of life? Is there anything that is even more important than money? Is there anything that is available to you only in defined and limited quantity and you cannot do without that? There is ... and that's TIME.

"TIME is money" is an age old saying. We read it, appreciate it and ignore it. Simple. 

Rohit and Sapna got everything correct in their lives except for understanding the fact that TIME always stays over MONEY in terms of its asset value. 
Let me try and explain you how.

While you can work hard and earn more money, you cannot do the same with time. You can never earn more time in your life. Time is limited. Worse, unlike money, you cannot control time's expenditure. Time of your life is getting spent at the rate of 24 hours per day and you cannot get more than that, you cannot take it on loan and you cannot produce it. And if you look at it closely enough, Time happens to be the biggest ingredient that enables your capacity to earn even money. 

Because of all these constraints on time, TIME scores as your most important asset in life, much more important than money is.

Let me ask you a very simple question to emphasize how this theory on time translates to practical life. When do you see your child more happy? When you give him more gifts OR when you gift him with more of your time? In most cases, i have seen the response as latter. That was true for Rohit and Sapna and that's true for me and my family as well. Your child needs more time. He can play with an ordinary or even a broken toy as long as you are physically and mentally involved with him or her with all your time. But you give him the best and the costliest of the toy and you would see that he would get bored in a few days, if not earlier. 

Your child wants your TIME. Your spouse needs your time, your parents need your time, YOU need your own time for yourself.

I want to reiterate that i am no way saying that money is not important. But what i am only suggesting is that "do not try to trade off ALL your available time for money". It is not a wise deal by any means. Save some of it to have the right balance in your life. 

There are only 2 ways to balance time and money in life. 

1. Do not trade off all your time with money
You have got to create a balance in your life. Do not keep running in a rat race not knowing where you are headed. After you have enough money for a decent living, you got to hold on to trade more of your time with money. Progression, beyond a certain point, in your job may not always be for good, especially if it consumes more of your time and introduces more stress in your life. Stay happy in the position you are in - keep earning enough but have enough time in your life to give it to your family and loved ones.

2. Accumulate enough money so that you don't have to spend any more time to earn money.
You can trade back your time if you accumulate enough nest egg which is self sustaining in nature. We call this state as "Financial Freedom" and this freedom allows you to spend your TIME the way you want it. The money part is taken care off by the nest egg, which ensures flow of enough money to meet your regular money needs.Yes, it takes some time and patience to reach this state, but that is one way to come out of the rat race and spare enough TIME for our family.

Whatever path you take, make sure you understand and acknowledge the fact that time is limited and you cannot produce more of it. Spend it wisely. Even if you have not spent enough time with your family till now, you can start doing it now. 

Mother Teresa once said:
“Yesterday is gone. Tomorrow has not yet come. We have only today. Let us begin.”  


Manoj Arora

Saturday, November 17, 2012

5 Year Tax Saving Fixed Deposit (FD) under Section 80C

Can we do a risk free investment that not only saves your tax under Section 80C but is also more liquid than PPF or EPF? If yes, then you must have a look at 5 Year Tax Saving Fixed Deposit (FD).

Thursday, November 15, 2012

Be careful of what you feed your mind

Nutritious filling breakfast, elegant lunch and a light but fruit and salad filled dinner..We do take care of what we feed our body. But are your physical problems only a result of what you feed your body? Or it has do something with what you feed your mind?..Read on...

Monday, November 12, 2012

What is Reverse Mortgage Loan

What is Mortgage?
We understood the fundamentals on mortgage in one of earlier posts titled : "Understanding Mortgage" . I would suggest you to go through the details of Mortgage before getting in to understand about Reverse Mortgage.
In layman's definition, a mortgage is a loan to finance the purchase of one's home. This is clearly the biggest debt that you would ever get into in your life.
Literally, The word mortgage is a French Law term meaning "death contract", meaning that the pledge ends (dies) when either the obligation is fulfilled or the property is taken through foreclosure.

What is Reverse Mortgage Loan (RML) ?
Reverse mortgage is a loan that enables home owners above 60 years of age to convert a part of their self-owned home equity into income without having to sell it.
Under the scheme, the bank determines the value of the property and fixes a percentage of its current value as loan amount. This is based on various parameters e.g. likely lifespan of the senior citizen and his spouse.
Typically, the loan amount is 60-70% of the market value of the property. The applicants have the option of taking the loan as a lump sum or a fixed monthly amount. After the death of the senior citizen, the surviving spouse can continue to occupy the property till his/her demise. The value of the property is periodically re-evaluated by both the parties, the owner and the bank. If the valuation has increased, the applicants are given the option of increasing the quantum of the loan.
However, one should be prepared to shell out money for charges like processing, valuation, as well as legal fees for availing of the loan. The maximum limit for processing charges is Rs 10,000. The valuation and legal charges may add up to between Rs 5,000 and Rs 10,000 depending on the loan amount.

How is the Reverse mortgage loan paid back?
With a reverse home mortgage, no payments are made during the life of the borrower(s), unless you want to pre-pay and cancel the reverse mortgage contract. 

The loan has to be paid only after both the borrower and spouse die.  Since no payments are made during the term of the reverse home mortgage loan, the loan balance rises over time. In most areas, where the appreciation is good, the value of the home grows at a much faster rate than the loan balance. Therefore, the remaining equity continues to grow.

When both, the borrower and spouse pass away, the ownership of the home is then passed to the estate or directed by a living will or will to the beneficiaries. The beneficiaries now own the home and have to sell the home or pay off the loan. If the home is sold, the reverse home mortgage lender is paid off and the beneficiaries keep the remains.

Renting out a Reverse Mortgaged property
One of the clauses in a reverse mortgage agreement is that the property in question should be a house that is being used by the borrowers as their principle residence. This implies that renting or leasing the property is not legally possible.

Selling a Reverse Mortgaged Property
Selling a reverse mortgaged property is legally permitted. But one must consider the following before going ahead:

1) Compare the total debt incurred (because of the monthly principle and interest that the bank is accruing as per the reverse mortgage agreement) with that of the house's market value. If the amount owed to the bank is more or less the same as the current market value of the property, or if the positive difference is minimal, it may not make too much sense to sell the property.

2) In fact, you may not be able to sell the property if you owe an amount to the bank that is close to the value of the property and do not have the financial resources to cover the costs associated with selling the home.

What happens if property prices go down?
If the current value of the property is less than accrued principal and interest amount, the bank suffers a loss. This is a risk that the bank is taking while signing a reverse mortgage agreement with you. This could happen if the real estate market has not moved up in the manner that the bank had initially estimated. 

In that case, you are either required to pay back the principle + interest to the bank and take possession of your property or you may decide not to do so, in which case bank owns the property. Since the property price is less than principle+interest, bank might suffer a loss.

Tax Implication of selling a reverse mortgaged property
1) The borrower will have to pay capital gains tax on the profit generated from the sale of the property.
2) However, banks don't need to pay anything as the property is held as a security or a collateral for the loan that it has provided.
3) Another crucial consideration is that the loan borrower should have an alternative accommodation before he plans to sell his house. A rule of thumb is to opt for a sale only if the proceeds are large enough to facilitate another accommodation after repaying the loan to the bank. Besides, the transaction should yield enough amount so that it can be invested to fetch reasonable monthly returns.

How to foreclose a RML?
1) A senior citizen who has reverse mortgaged his property can easily claim ownership by paying the outstanding sum to the bank. 
2) The pay structure of a reverse mortgage is such that you owe only what you have received of the loan amount till date, along with the interest payable and any fees that the lender may charge. According to bank officials, the institution calculates the interest till the day the principal amount is to be paid. So the interest is calculated on the money taken till date. Many public-sector banks don't even have a foreclosure charge while some may have.

When to consider taking Reverse Mortgage ?
Even though Reverse Mortgage seems like a nice idea, it should not be the primary tool to fund one’s retirement expenses. It should not be used to fund the shortfall in the retirement income. 
It should be used in exceptional cases like if one does not have any legal heirs or leaving money to/for them after death, is not a high priority. There are many old people who have assets of high worth, but they do not have a proper, steady stream of income. One can use reverse mortgage in that case.

Quick Recap on Reverse Mortgage Loan
1. Reverse Mortgage is available to Senior Citizens only. Any house owner over 60 years of age is eligible for a reverse mortgage. If wife is a co-applicant, she  should be above 58.
2. The maximum loan is up to 60 per cent of the value of the residential property subject to maximum of Rs 50 Lacs.
3. The maximum period of property mortgage is 15 years. Minimum tenure will be 10 years. Some banks like PNB offer a Reverse Mortgage Loan for 20 years also.
4. The borrower can opt for monthly, quarterly, annual or lump sum payments at any point, as per his or her discretion.
5. The revaluation of the property has to be undertaken by the bank every 5 years. 
6. The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any tax liability. 
7. Reverse mortgage rates will vary according to market conditions depending on the wheather borrower has chosen Fixed or Floating interest rate. 
8. One can prepay the loan along with the interest any time during the loan tenure. Typically, there is no pre-payment penalty.


Manoj Arora

Friday, November 09, 2012

6 Inspiring Lessons from Sir Edmund Hillary's Life

GOD made you and me with the same dedication, commitment, focus and HOPE as HE did for someone like Sir Edmund Hillary. This is also true for each and everyone around us. When HE created us, he did not create any difference, in terms of giving us the "freedom" to mould our own lives, live the life that we want to live, define our own path and to go and achieve our own goals and dreams.

Tuesday, November 06, 2012

What is in a Gift - Know about Gift Tax in India

Most of us consider giving and taking gifts as a normal tradition in India and may not have ever bothered to even look at the fact that this could also have some serious tax implications. The last thing that you want to think of while receiving a gift from your loved one is about its tax implications.

The Gift Tax has had a bit of a roller-coaster ride in India; There was a brief period when it was abolished and then it got renewed later. Let us look at a little bit of history

Gift tax in India is governed under the Gift Tax Act constituted on April 1, 1958. As per the Gift Act 1958, all gifts in excess of Rs. 25,000, in the form of cash (including draft / cheque), received from one who does not have blood relations with the recipient, were taxable.

However, with effect from October 1, 1998, gift tax got demolished and all the gifts made on or after the date were free from tax.

But in 2004, Gift Tax was again revived partially and a new provision was introduced in the Income Tax Act 1961 under section 56 (2). According to this,"any gifts" received by any individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 in a year would be taxable (there are exceptions to this which we will deal with subsequently). Note that the individual who has recd the gift is going to be taxed and not the person giving the gift.

The 'any gift' clause means that not only cash but all gifts of any value. So if someone receives a gift of a house worth Rs 30 lakh (Rs 3 million), then he/she is automatically in the highest income bracket and has to pay 30% + surcharge on value of the house as tax (close to Rs 10 lakh (Rs 1 million) in this case).
The rule thus effectively prevents money laundering in the guise of high value gifts. 

Exemption from Gift Tax:
In the following case, the receiver of the gifts will be exempt from applicable gift tax:
1) The gift being given by a blood relative, irrespective of the gift value. So, was this a sigh of relief? :)
2) Immovable properties located outside the country
3) Gifts received from relatives (including non blood relatives) on the occasion of marriage.(including gifts received by daughter-in-law from parents-in-law; but excluding gifts received by son-in-law from parents-in-law)
4) All gifts received by way of a will and inheritance
5) NRIs gifting parents in India from their NRE account

It is important to understand who falls under the "relative" terminology as defined in the tax laws

Defining Relatives
The section goes on to define the term "relative" to ensure that there are no loop holes which could in turn lead to some sort of money laundering. The relations who would come under the ambit include
  • Spouse of the individual
  • Brother or sister of the individual
  • Brother or sister of the spouse of the individual
  • Brother or sister of either of the parents of the individual
  • Any lineal ascendant or descendant of the individuals ie children and grandparents.
  • Any lineal ascendant or descendant of spouse of the individuals
  • Spouse of the Brother / sister of individual or brother/ sister of spouse of individual

Gifts received by children
The gifts received in the names of one's minor children will be clubbed with the parents' income for taxation purpose.
Also the taxman is very alert in saying that, in case of both parents having income, clubbing will be done with that parent who is earning more.
So one cannot hide under the cover of their minor child(ren) receiving the gifts.

Real estate Gifts
Real estate deals done for values lower than the rates fixed by state governments / local bodies will also be taxed, because the difference in the value is essentially a gift. Here, the tax will be levied on the difference of amount between state government's rate and purchase price. The tax needs to be paid by the buyer of the property.

An effective curb against money laundering
It was found that many individuals used the loopholes in this act, to launder money.  The key reason for bringing back Gift Tax in its latest avatar is to plug loopholes and make norms more stringent. It is clear that exchanging assets amongst relatives to evade taxes have come under control and this has also ensured that the Income tax authorities can keep tab on the movement of assets (movable / immovable).


Manoj Arora

Saturday, November 03, 2012

Get your Life Vitals right - Mission, Goals and Strategy

We have been talking about the need and importance of a mission, goal and strategy to achieve anything meaningful in many of our earlier posts. I call these 3 elements as vitals of our life. Having understood the purpose of these vitals, let us now focus on how to go about creating these vitals for our own life.

I belong to IT industry and have also worked for Electrical industry during the initial 5 years of my professional life as an engineer. I have also been fortunate enough to be associated with other friends, colleagues and relatives who are involved in their own business or work in different industries and locations across the globe. With all our accrued experience, here is what i can tell you with 100% surety. You will never see a successful project in any industry without clear cut vitals defined and followed for that project. Some projects did succeed in the short term, even without a clear cut mission. However, long term success is impossible to achieve and sustain unless "all 3 vitals" are clearly defined and followed. 

The same principle that applies to projects also applies equally to our lives.
So, let me help you with defining these vitals for your life.

Wikipedia defines Mission as "The purpose of a company, organization or person, its reason for existing. The mission statement should guide the actions, spell out its overall goal, provide a path, and guide decision-making. It provides the framework or context within which the strategies are formulated."

To simplify, you must define "why" do you exist on this planet? What is the purpose of GOD sending you on earth? What would be that one reason you would die for or you would feel happy about at the end of your life? The mission guides your goals in life.

It may take you a few weeks or even months to create a mission for your life's innings, but we already know that a life without a purpose is as meaningless as playing a 2nd innings of a cricket match, not knowing the target score. You may have the best of skills,  the best of team, the best of temperament, you may be ready to do all the hard work, but you are never sure throughout your innings whether you are on track or not. What a miserable feeling !!

One of the simpler ways to kick start your thinking process towards finalizing your life's mission is asking yourself to fill in the following blanks

My purpose in life is to ..... people
The blanks can take in any of the following verbs or anything else you deem fit.
e.g. inspire, elevate, help, enroll, guide, liberate, acknowledge, discover, promote, .....

Goals / Dreams
Life goal(s) can be one or many. Life goals are created within the framework of your life's mission. It answers the "what" do you want to achieve in your life? Goals may change through the journey of your life but your purpose / mission (once established) is highly unlikely to change. 
Goals are more specific and with specific dates. You may want to read more about creating SMART goals on the internet or read any of the widely available books on this topic.
Achieving goals give you happiness while achieving your purpose is an ongoing process and showers you with bliss. Achievement of mission may go beyond one generation as well. Your next generation may continue and take forward your mission. Remember that setting up life goals without establishing a realistic purpose is as meaningless as it can get.

This vital is surely more technical and specific, unlike Mission, which is more abstract in nature. This defines "how" are you going to achieve your defined goals. These forms your plan and steps needed on a yearly / monthly and then on a day to day basis to achieve those steps.

Once your 3 vitals are set, you are good to go and execute your plan as per the strategy. Decision making in life is so simple when these 3 vitals are set. When some of my colleagues come to me and ask whether they should be pushing for the next promotion or seeking more time for their families, i try and take their focus back to the mission of their lives. Missions and Goals would enable decision making and everything comes out so naturally.

My Example
In the end, before i sign off this post, i thought it would be prudent to share an example with you, and why not my own.

So, here are the 3 Vitals of my life. Each step that i take in life is ultimately connected to these 3 vitals.
My mission
My mission in life is to help people and enable overall upliftment of the society.

My goals (dreams)
My goals are:
(1) To generate enough time to serve the society through achievement of financial freedom 
(2) To plant 1 million trees 
(3) To educate 1 million under privileged children.

Note that all the goals are aligned to my life's mission. Any goals that does not support your mission must be scrapped right away. Also, consider the fact that these goals may change as i go on and achieve some of them. Some will get achieved, and some more might get added in the years to come, but each one of them, supports the overall objective or mission of my life.

My Strategy
Strategy is a linked to achievement of goals. I have a detailed plan with specific dates and targets for each month to achieve each of these goals. You will read quite in detail about the strategy to Goal No. 1 (Financial Freedom) in my upcoming book - From Rat Race to Financial Freedom.

So, here we are.
To achieve something worthwhile, we must not only act but also dream. To set those dreams, make sure that you tie them up to the right mission of your life. Spend the maximum time in finalizing the mission of your life. Rest all will follow pretty fast.

Signing of with one of my favorite quotes by Tina Turner
I had to go out in the world and become strong, to discover my mission in life.


Manoj Arora

Thursday, November 01, 2012

Life is a journey towards a destination

Nothing can be more true than the age old saying: "Life is a journey and not a destination". This saying is so relevant because if you have not enjoyed your journey of life, you are in for a hollow sense of achievement after you reach your destination. You will spend a major part of your life in the journey towards some of your goals and a minute fractional little in savoring the destination. Hence, it makes so much more sense to lay emphasis on the journey rather than the destination.....But destination has often been undermined for its importance...Read on..