Learn about these tax benefits when buying a car

 If you planning to purchase a new vehicle, one of the most exciting things to uncover is if you can get a tax deduction. There’s always a welcome way of saving a few extra rupees to help offset the high price paid for a new vehicle. Not many know that we can avail tax benefits on buying a car. 

Many of us don’t even know that car loans come with tax advantages and miss out on this benefit. However, all car loans do not come with tax benefit. A car loan is a good tool for the self-employed to claim some tax deduction as well as depreciating assert in the balance sheet.

Tax benefits that can be availed by self-employed while buying a Car.
Tax benefits when buying a carHow do you benefit?

Deductions from payable tax through a car loan can be availed only if you are a business man and declare the profit or capital gains earned from your business. Another condition attached to this is that the vehicle has to be purchased in the name of your business. In that case, you get exemption on the interest as well as depreciation of the vehicle.

Under these conditions, you can include the interest paid for your car loan for tax exemption.

Besides this, businessmen can avail deductions on personal loans too under certain conditions, like the loan being taken as a business loan or for capital investment in business.

Loans taken wisely and within our limits would save us from a never ending debt spiral, which many fear. While loans affect your monthly as well as annual finances for other expenditures, the beneficial side of it in the form of tax saving, reduces their overall impact considerably.

Tax benefits that can be availed by employees while buying a Car.

I am not self-employed, I am working for a company, how can I avail the tax benefits? 

Don’t worry. Most of the employers in India design a company policy for car leasing that would give a tax benefit employees. Check with your employer if you can avail car  lease.

Car leasing is becoming popular among employees who are planning to buy their car through bank loan. Company provides option to employees to buy car- any make any model as per employee eligibility accordingly to company car lease policy depending upon employee’s grade. Best thing is that employee needs not to pay any down payment. Employee simply starts paying lease amount on monthly basis. It is becoming a prominent option in compensation structure of high paid employees. This is offered to employee as an option and it is employee wish to choose or not to choose.

Now question is “Car leasing is a good option for employees? Lets understand first, what is this car leasing plan all about?

Employer ties up with a car leasing company which provides cars on lease and design a company policy for car leasing. If an employee who is eligible for car leasing option can express his willingness and mention model and make of car to buy. Leasing company will buy the car for employee and give it to employee for use – both official and personal. Car will be in name of leasing company. Employee will pay monthly lease amount to leasing company which is normally lower than EMI, if employee goes with bank loan option. Car lease period normally range from 3 to 5 years. After lease period is over employee can either choose to buy the car by paying agreed residual price (20% to 45% of car purchase value) depending upon company policy or let the leasing company keep it. Employee can go for another lease or buy a new one.

What are the benefits to employee?

No down payment is required

Employee need not to make any down payment to lease the car. This is a clear cut saving and employee can use this amount anywhere else. Employee can also make a fixed deposit of this down payment amount and can get good interest rate. Employee enjoys his new car from day one without being worrying arrangement for down payment.

Lower monthly lease amount as compared to Bank EMI

Lease amount paid to lease company is always lower than Bank EMI. Lease amount is calculated after reducing projected sale value of car after lease period wherein Bank EMI is on full value of Car.

Employee need not to worry about car maintenance, service and insurance etc

Employee need not to worry about any paper work, car maintenance, regular service, insurance etc. Leasing company take cares of the same and it is including in monthly lease amount payable by employee. There are options available to not to take maintenance option where monthly lease amount will further reduce but employee need to take care of maintenance of vehicle. Lease companies do also provide break down assistance, replacement car in case car service take more than 24 hours, Chauffeurs etc.

It saves a lot of time of employee.

Tax saving on lease amount paid by employee

In case an employee pay Rs 20,000/- per month as car lease and employee falls in 30% tax bracket then employee clearly saves Rs 6,000/- per month on tax (30% of Rs 20,000). Hence it is clear that car leasing is more beneficial to employees who fall under higher tax bracket. Employee who falls in lower tax bracket like 10% will not be that much beneficial.

Wherein if an employee takes bank loan and pay EMI of Rs 20,000/-, then employee will not get any tax benefits as employer will deduct tax on Rs 20,000.

Further, employee can also take fuel expenses and driver salary from company if an employee use the car for official purpose and this will be non taxable money. Hence further tax saving. Commuting from Office to home and vice versa will not be considered as an official travel and fuel expense can not be claimed against the same.

Benefits are more if employee stays with company for longer period

Return on Car lease option is higher if employee stays with company for longer period and do not change the job again and again.

What are the cons for employee in car leasing?

Car is not owned by employee even after lease tenure is over

Even after your car lease tenure is over car do not belongs to you. It is still company’s property. After lease period is over employee can either choose to buy the car by paying agreed residual price (20% to 45% of car sales value) depending upon company policy or let the leasing company keep it. Employee can go for another lease and buy a new one where in case of Bank Loan, Car is owned by person after loan period is over.

Interest rate is higher in leasing as compared to Bank Loan

Interest rate is higher in leasing as compared to Bank Loan. Monthly Leasing amount is lower because it is calculated on car value after reducing projected sale value of car after lease tenure wherein Bank Loan EMI is calculated on 100% car sale value from day one. That’s the reason lease amount is lower wherein lease interest rate is higher.

Example : If Car sale value is Rs 10,00,000 and lease tenure is 5 years and projected sale value of car @ 20% i.e. Rs 2,00,000 at end of 5 years then lease amount will be calculated on Rs 8,00,000 ( Rs 10,00,000- Rs 2,00,000).

Employee still needs to pay some tax

As per tax laws, when you use a company car, the employee has to pay a perquisite tax. For a car which is less than 1.6cc, the perquisite value is .Rs 1,800 per month; while for cars more than 1.6cc, the perquisite value is .Rs 2,400 per month. This means for a car greater than 1.6cc the employee will pay a tax of Rs 741.6 per month.

Employee cannot take tax benefit on conveyance allowance

If an employee chooses for car lease option then conveyance allowance paid to employee automatically becomes taxable. Rs 800 per month conveyance allowance paid to employee to travel between office to work and vice versa is non taxable but becomes taxable if an employee choose car lease option.

Car leasing is costlier deal if you leave the company in between or want to terminate the lease before lease tenure completion

Although, there is option available to employee to terminate the lease in between but It is always costlier affair. If an employee leaves the company then employee is left with following options:

  • Employee need to pay amount asked by leasing company if employee want to buy the car
  • Employee can transfer the lease to some other employee provided some other employee is willing to take that car.
  • Employee leave the car for leasing company

Some companies do also keep penalty charges in case of mid termination of car leasing.

You become second owner if you choose to purchase your leased car

As mentioned earlier that car you choose to lease is in name of the leasing company however you have purchase option after lease period is over but in that case car will be registered in your name again and you will become second owner. For many people, this does not matter but for some it does.

Car leasing can be a good option depending upon in which tax bracket you fall into, what are your plans to be with same company for longer period or do you have money for down payment etc. It can be good deal or bad deal depending upon your case. Hope above information will help you to take your decision. Please write back to me in case you have any query.

26 questions one needs to know about Electronic clearing service!

Updated on 28/Sep/2015


As the name suggests, it’s an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs, investments in mutual funds, payment of insurance premium etc. 


There are two types of ECS, like most other banking transactions, ECS credit and ECS debit. 

Electronic clearing serviceAn ECS credit is used by a bank account holder, usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.


ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. 

For example if you are investing in a mutual fund scheme through systematic investment plan (SIP), and every month a fixed amount of money goes out of your bank account, it must be through the ECS debit process.This could be used for payment of utility bills like electricity, telephone etc.



Q.1. What is Electronic Clearing Service (ECS)?

Ans : ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan instalment repayments, periodic investments in mutual funds, insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa. ECS includes transactions processed under National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI).

Q.2. What are the variants of ECS? In what way are they different from each other?

Ans : Primarily, there are two variants of ECS – ECS Credit and ECS Debit.

ECS Credit is used by an institution for affording credit to a large number of beneficiaries (for instance, employees, investors etc.) having accounts with bank branches at various locations within the jurisdiction of a ECS Centre by raising a single debit to the bank account of the user institution. ECS Credit enables payment of amounts towards distribution of dividend, interest, salary, pension, etc., of the user institution.

ECS Debit is used by an institution for raising debits to a large number of accounts (for instance, consumers of utility services, borrowers, investors in mutual funds etc.) maintained with bank branches at various locations within the jurisdiction of a ECS Centre for single credit to the bank account of the user institution. ECS Debit is useful for payment of telephone / electricity / water bills, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc., that are periodic or repetitive in nature and payable to the user institution by large number of customers etc.

Q.3. At how many places in the country is ECS Scheme available?

Ans : Based on the geographical location of branches covered, there are three broad categories of ECS Schemes – Local ECS, Regional ECS and National ECS.These schemes are either operated by RBI or by the designated commercial banks. NACH is also one of the form of ECS system operated by NPCI and further details about NACH is available at NPCI web site under the linkhttp://www.npci.org.in/clearing_faq.aspx.

Local ECS – this is operating at 81 centres / locations across the country. At each of these ECS centres, the branch coverage is restricted to the geographical coverage of the clearing house, generally covering one city and/or satellite towns and suburbs adjoining the city.

Regional ECS – this is operating at 9 centres / locations at various parts of the country. RECS facilitates the coverage all core-banking-enabled branches in a State or group of States and can be used by institutions desirous of reaching beneficiaries within the State / group of States. The system takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location in the State, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the State / group of States.

National ECS – this is the centralized version of ECS Credit which was launched in October 2008. The Scheme is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the country. This system too takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location at Mumbai, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the country. Banks are free to add any of their core-banking-enabled branches in NECS irrespective of their location. Details of NECS Scheme are available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2345

The list of centres where the ECS facility is available has been placed on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=26. Similarly, the centre-wise list of bank branches participating at each location is available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/ECSUserView.aspx?Id=27

ECS (CREDIT)

Q.4. Who can initiate an ECS Credit transaction?

Ans : ECS Credit payments can be initiated by any institution (called ECS Credit User) which needs to make bulk or repetitive payments to a number of beneficiaries. The institutional User has to first register with an ECS Centre. The User has to also obtain the consent of beneficiaries (i.e., the recipients of salary, pension, dividend, interest etc.) and get their bank account particulars prior to participation in the ECS Credit scheme.

ECS Credit payments can be put through by the ECS User only through his / her bank (known as the Sponsor bank). ECS Credits are afforded to the beneficiary account holders (known as destination account holders) through the beneficiary account holders’ bank (known as the destination bank). The beneficiary account holders are required to give mandates to the user institutions to enable them to afford credit to their bank accounts through the ECS Credit mechanism.

Q.5. How does the ECS Credit Scheme work?

Ans : The User intending to effect payments through ECS Credit has to submit details of the beneficiaries (like name, bank / branch / account number of the beneficiary, MICR code of the destination bank branch, etc.), date on which credit is to be afforded to the beneficiaries, etc., in a specified format (called the input file) through its sponsor bank to one of the ECS Centres where it is registered as a User.

The bank managing the ECS Centre then debits the account of the sponsor bank on the scheduled settlement day and credits the accounts of the destination banks, for onward credit to the accounts of the ultimate beneficiaries with the destination bank branches.

Further details about the ECS Credit scheme are contained in the Procedural Guidelines and available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=1

Q.6. What is a MICR Code?

Ans : MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is a numeric code that uniquely identifies a bank-branch participating in the ECS Credit scheme. This is a 9 digit code to identify the location of the bank branch; the first 3 characters represent the city, the next 3 the bank and the last 3 the branch. The MICR Code allotted to a bank branch is printed on the MICR band of cheques issued by bank branches.

Q.7. How does a beneficiary participate in ECS Credit Scheme?

Ans : The beneficiary has to furnish a mandate to the user institution giving consent to avail the ECS Credit facility. The mandate contains details of his / her bank branch, account particulars and authorises the user institution to afford credit to his / her account with the destination bank branch.

Q.8. Is it necessary for user institutions to collect the mandates from beneficiaries?

Ans : Yes, in addition to the consent of the beneficiaries, the mandate also provides important information related to bank account details etc. which are useful for the user institution to transfer funds to the right accounts . A model mandate form has been prescribed for the purpose and is available in the ECS Credit Procedural Guidelines.

Q.9. Is there scope for the beneficiary to alter the mandate under the ECS Credit Scheme?

Ans : Yes. In case the information / account particulars contained in the mandate undergo any change, the beneficiary has to notify the changes to the User Institution so that the correct information can be incorporated in its records. This will ensure that transactions do not get rejected at the beneficiary’s bank branch due to inconsistencies/ mismatch in the data sent by the user institution.

Q.10. Can ECS be used to transfer funds to Non Resident External (NRE) and Non Resident Ordinary (NRO) accounts?

Ans: Yes. ECS can be used to transfer funds to NRE and NRO accounts in the country. This, however, is subject to the adherence to the provisions of the Foreign Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines.

Q.11. Will beneficiaries be intimated of credits afforded to their account under the ECS Credit Scheme?

Ans : It is the responsibility of the user institution to communicate to the beneficiary the details of credit that is being afforded to his / her account, indicating the proposed date of credit, amount and related particulars of the payment. Destination banks have been advised to ensure that the pass books / statements given to the beneficiary account holders reflect particulars of the transaction / credit provided by the ECS user institutions. The beneficiaries can match the entries in the passbook / account statement with the advice received by them from the User Institutions. Many banks also give mobile alerts / messages to customers after credit of such funds to accounts.

Q.12. What will happen if credit is not afforded to the account of the beneficiary?

Ans: If a Destination Bank is not in a position to credit the beneficiary account due to any reason, the same would be returned to the ECS Centre to enable the ECS Centre to pass on the uncredited items to the User Institution through the Sponsor Bank. The User Institution can then initiate payment through alternate modes to the beneficiary.

In case of delayed credit by the destination bank, the destination bank would be liable to pay penal interest (at the prevailing RBI LAF Repo rate plus two percent) from the due date of credit till the date of actual credit. Such penal interest should be credited to the Destination Account Holder’s account even if no claim is lodged to the effect by the Destination Account Holder.

Q.13. What are the advantages of the ECS Credit Scheme to the beneficiary?

Ans : ECS Credit offers many advantages to the beneficiary–

  • The beneficiary need not visit his / her bank for depositing the paper instruments which he would have otherwise received had he not opted for ECS Credit.

  • The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof.

  • Cost effective.

  • The beneficiary receives the funds right on the due date.

Q.14. How does the ECS Credit Scheme benefit User Institutions?

Ans : User institutions enjoy many advantages as well. For instance,

  • Savings on administrative machinery and costs of printing, dispatch and reconciliation of paper instruments that would have been used had beneficiaries not opted for ECS Credit.

  • Avoid chances of loss / theft of instruments in transit, likelihood of fraudulent encashment of paper instruments, etc. and subsequent correspondence / litigation.

  • Efficient payment mode ensuring that the beneficiaries get credit on a designated date.

  • Cost effective.

Q.15. Are there any advantages of the ECS Credit Scheme to the banking system?

Ans : Yes, the banking system too benefits from ECS Credit Scheme such as –

  • Freedom from paper handling and the resultant disadvantages of handling, presenting and monitoring paper instruments presented in clearing. Ease of processing and return for the destination bank branches.

  • Smooth process of reconciliation for the sponsor banks.

  • Cost effective.

Q.16. Is there any limit on the value of individual transactions in ECS Credit?

Ans : No. There is no value limit on the amount of individual transactions.

Q.17. What are the processing / service charges levied under ECS Credit?

Ans : The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions. The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise per transaction to the Clearing house and destination bank respectively. Destination bank branches have been directed to afford ECS Credit free of charge to the beneficiary account holders.

ECS (DEBIT)

Q.18. Who can initiate a ECS Debit transaction?

Ans : ECS Debit transaction can be initiated by any institution (called ECS Debit User) which has to receive / collect amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. It is a Scheme under which an account holder with a bank branch can authorise an ECS User to recover an amount at a prescribed frequency by raising a debit to his / her bank account.

The User institution has to first register with an ECS Centre. The User institution has to also obtain the authorization (mandate) from its customers for debiting their account along with their bank account particulars prior to participation in the ECS Debit scheme. The mandate has to be duly verified by the beneficiary’s bank. A copy of the mandate should be available on record with the destination bank where the customer has a bank account.

Q.19. How does the ECS Debit Scheme work?

Ans : The ECS Debit User intending to collect receivables through ECS Debit has to submit details of the customers (like name, bank / branch / account number of the customer, MICR code of the destination bank branch, etc.), date on which the customer’s account is to be debited, etc., in a specified format (called the input file) through its sponsor bank to the ECS Centre.

The bank managing the ECS Centre then passes on the debits to the destination banks for onward debit to the customer’s account with the destination bank branch and credits the sponsor bank’s account for onward credit to the User institution. Destination bank branches will treat the electronic instructions received from the ECS Centre on par with the physical cheques and accordingly debit the customer accounts maintained with them. All the unsuccessful debits are returned to the sponsor bank through the ECS Centre (for onward return to the User Institution) within the specified time frame.

For further details about the ECS Debit scheme, the ECS Debit Procedural Guidelines – available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=25 may be referred to.

Q.20. What are the advantages of ECS Debit Scheme to the customers?

Ans : The advantages of ECS Debit to customers are many and include,

  • ECS Debit mandates will take care of automatic debit to customer accounts on the due dates without customers having to visit bank branches / collection centres of utility service providers etc.

  • Customers need not keep track of due date for payments.

  • The debits to customer accounts would be monitored by the ECS Users, and the customers alerted accordingly.

  • Cost effective.

Q.21. How does the ECS Debit Scheme benefit user institutions?

Ans : User institutions enjoy many benefits from the ECS Debit Scheme like,

  • Savings on administrative machinery and costs of collecting the cheques from customers, presenting in clearing, monitoring their realisation and reconciliation.

  • Better cash management because of realisation / recovery of dues on due dates promptly and efficiently.

  • Avoids chances of loss / theft of instruments in transit, likelihood of fraudulent access to the paper instruments and encashment thereof.

  • Realisation of payments on a uniform date instead of fragmented receipts spread over many days.

  • Cost effective.

Q.22. What are the advantages of ECS Debit Scheme to the banking system?

Ans : The banking system has many benefits from ECS Debit such as –

  • Freedom from paper handling and the resultant disadvantages of handling, receiving and monitoring paper instruments presented in clearing.

  • Ease of processing and return for the destination bank branches. Destination bank branches can debit the customers’ accounts after matching the account number of the customer in their database and due verification of existence of valid mandate and its particulars. With core banking systems in place and straight-through-processing, this process can be completed with minimal manual intervention.

  • Smooth process of reconciliation for the sponsor banks.

  • Cost effective.

Q.23. Can the mandate once given by a customer be withdrawn or stopped?

Ans : Yes. Any mandate in ECS Debit is on par with a cheque issued by a customer. The customer has to maintain adequate funds in his / her account with the destination bank branch to ensure the ECS Debit instructions are honoured when presented. In case of any need to withdraw or stop a mandate, the customer has to give prior notice to the ECS user institution well in time, so as to ensure that the input files submitted by the user do not continue to include the ECS Debit details in respect of the mandates withdrawn or stopped by customers. The process flow to be followed for withdrawing / stopping mandates is detailed in ECS Debit Procedural Guidelines.

Q.24. Can a customer stipulate any ceiling on the amount of debit, purpose or validity period of the mandate under the ECS Debit Scheme?

Ans : Yes. It is left to the choice of the individual customer and the ECS user to decide these aspects. The mandate can contain a ceiling on the maximum amount of debit, specify the purpose of debit and validity period of the mandate.

Q.25. Is there any limit on the value of Individual transactions in ECS Debit?

Ans : No. There is no value limit on the amount of individual transactions that can be collected by ECS Debit.

Q.26. What are the processing / service charges levied under ECS Debit?

25Ans : The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions. The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise and 50 paise per transaction to the Clearing house and destination bank respectively. Bank branches do not generally levy processing / service charges for debiting the accounts of customers maintained with them.

Home insurance: A shield against loss/damage of property and valuables.

Home Insurance: A Shield Against Loss/Damage

A house is made of walls and beams; a home is made with love and dreams.”

There is no such place like home in the entire Universe. After all, it is a place where you and your loved ones can rejoice, weave thousands of memories that last for a lifetime. While we put our life’s savings into buying or constructing a home but we rarely realize that our home needs a protection in the form of insurance too. By investing in a good home insurance policy, also referred as homeowners insurance, you can protect your home from threats. Situations like burglary, fire, earthquake or destruction of house due to riots are quite common in India.

Don’t wait for a calamity to remind you the need of buying a home insurance, opt for it beforehand!

Top 5 Benefits of Home Insurance

There is no denying of the fact that house insurance is a must, however, there are other benefits and riders to buying such a policy that will add convince you totally. Have a look below: 

  • Get comprehensive coverage to both content and structure of your home.
  • Secure your assets from any mis-happening.
  • Buy home insurance policy at comparatively lower premium rates than other insurance policies. 
  • Reduce stress and tension level for you’ll have a home insurance to fall back to, in case of unforeseen circumstances.
  • Timely insurance payouts allow families to go through rebuilding process quickly, helping them to move on and get back to their normal daily lives.

Handy Tips for Choosing a Home Insurance in India

There are various home insurance providers in India that offer different plans as per individual needs. To ease your selection, we have listed down important points which should be compared while choosing one home insurance company over other:

  • Check premium and coverage= Firstly, evaluate risks which your home is facing or might face in a future. For example, if you live in a flood prone area then you should ensure that your home insurance policy is covering these risks also. Also, while checking coverage, it is prudent to check if the premium fits within your budget or not. You can solicit premium quotes of individual insurers or use comparison chart to compare premium quotes.
  • Check claim settlement ratio=A good company is judged by the turnaround time of settling claims. The very purpose of insurance will be defeated if you do not get a claim when it is required. So, it is worthwhile to check the claim settlement record of companies before zeroing in on one insurer.
  • Look at company’s reputation=The first and foremost characteristics of a good company is that it has customer friendly staff. Does your insurance company have competent customer service representatives who are capable enough to resolve your queries quickly? It is always important to choose a company who is well equipped to assist you at any point of time.

Inclusions 

Home insurance covers losses to the structure and content of your home due to natural and man-made calamities.

Fire and perils cover-

  • Aircraft damage
  • Fire
  • Lightning
  • Riot, strike
  • Storm, cyclone, flood
  • Missile testing operations

Earthquake Cover

The policy offers coverage against loss or damage to any of the insured property. However, many policies do not cover flood or overflow of the sea, rivers and lakes due to earthquake.

Burglary and Theft Cover

The contents of home are also covered against burglary or theft. The coverage will also be extended to silver articles, jewellery, precious stones and other valuable items, provided these are kept in a locked safe within your home premises.

Exclusions

  • Loss or damage caused by wear & tear and depreciation
  • Loss of cash
  • Loss or damage caused by war, invasion, act of foreign country
  • Loss or damage caused by nuclear war
  • Loss, destruction or damage caused to any electronic equipment due to over-running or excessive pressure

Who Should Buy a Home Insurance?

Home insurance is meant for anyone who has a home whether own or rented. There is myth that only home-owners should buy a home insurance plan. Let us tell you case of Mr Vijay Rao and how having a home insurance policy saved him during a crisis.

Two months after Mr Rao moved to a rented apartment in Mumbai, a catastrophic fire engulfed furniture and other appliances worth Rs 8 lakh. Thankfully, he had a home insurance policy and he could manage to settle back to normal life again easily and without any financial stress.

It’s a misconception that only house owners should buy a home insurance. Although, house may belong to a landlord but it has contents which belong to you. Irrespective of the fact that whether you are a tenant or owner, buying home insurance should be your top priority.

Even, there are various insurance companies which provide exciting discounts to people who have bought over 3 home insurance covers. However, don’t let discounts make you buying those covers also which you don’t need. For instance, if you are a landlord then avoid buying a policy to cover contents of the house. Leave that to the tenant. Companies also offer discounts if you buy it for a long duration. You can insure the house for up to 10 years, which not only gives peace of mind but you also get a chance to earn lucrative discounts.

How to File for a Home Insurance Claim? 

Almost every insurance company is having its own deadline within which you have to inform about your loss. These can vary between 7-15 days so make sure you do it as soon as possible. Some companies even let you do with an email or SMS. Before you file for a claim, you will have to lodge an FIR and the copy of which you need to submit with insurance company. Apart from FIR report, the other documents which you need to submit are-

  • Fire brigade report
  • Medical Officer’s Certificate for death or disability
  • Investigation report by police
  • Suppliers original invoice for replacement
  • Invoice of owned articles, if any
  • Repair estimates
  • Court summons

Note: This is an indicative list and you may be asked to submit other documents at the time of claim settlement.

How to Lower Your Home insurance Premium? 

Strategies that can help in bringing your home insurance premiums down are-

  • Reduce your liability by agreeing to share the burden of repairing. It will help in reducing your premium.
  • There are many such things in our house which are precious to us but there is no point in insuring them if they are too old. For instance, your 10 years old black & white TV might be working well, but there is no point in insuring it at a depreciated value. Be wary while making an inventory of products to be insured.
  • Take two or more insurance covers to become eligible to get discounts.
  • Like any other insurance plans, if insurers are convinced that you have installed all safety equipments at your home then you will become eligible to get discounted premium. If you have security guards posted 24×7 in the building and fire safety alarms installed at home, then you will get discounts in premium.

e-KYC – Electronic Know Your Customer

Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering, terrorist financing.


Electronic know your customerKnow your customer (KYC) is the process of a business verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents’, consultants’ or distributors’ anti-bribery compliance. Banks, insurers and export credit insurers agencies are increasingly demanding that customers provide detailed anti-corruption due-diligence information, to verify their probity and integrity.


Banks are often criticized for using know-your-customer (KYC) norms as an excuse to complicate the process of opening accounts. Many have registered complaints on Grahak Seva, the government’s customer-grievances portal, alleging banks repeatedly seek KYC documents, even after these are provided.

Yet, time to time, banks are penalised by the regulator for violating KYC instructions. On December 17, the Reserve Bank of India (RBI) imposed monetary penalties on ICICI Bankand Bank of Baroda for non-adherence to certain aspects of KYC norms, which allowed fraudsters to open fictitious accounts in the name of a reputed statutory organisation and use those for illegal transactions. The regulator also cautioned three other banks — Axis Bank, State Bankof India (SBI) and State Bank of Patiala — for failing to adhere to its KYC directives. We know it is difficult because there are constraints such as a large population and an inadequate database.


Recently RBI simplified KYC norms, saying a single document will suffice as proof of identity and address. It added no separate KYC documentation would be needed while transferring accounts from one branch to another branch of the same bank. Those who don’t have any “officially valid document” are allowed to open “small accounts” with banks. Intervals between periodic updating of KYC documents have also been increased.

But challenges remain. Bankers say if an account is used for conducting a large transaction, they sometimes seek additional documents, fearing misuse. This, however, happens on a case-to-case basis. “The entire KYC process becomes difficult to negotiate when a customer has multiple accounts with different banks. If the accounts are split with different holders, it becomes even more difficult to carry out proper background checks. Banks need stronger technology platforms to weed out these discrepancies,” said a senior official of a private bank. Also, in India, the lack of a unique national identifier is a key issue in implementing KYC rules. 


e-KYC explained : 


HDFC bank has created buzz in the recent times as it introduced the e-KYC (electronic Know Your Customer) norm in collaboration with National Payments Corporation in all of the branches. HDFC also claimed that the bank is all set to install biometric readers for scanning fingerprints to make the process even easier.

What exactly is e-KYC? It could be defined as a procedure that would enable a customer to walk in to the bank with an Aadhaar number and open an account by only by getting his fingerprint scanned. With the help of Unique Identification Authority of India (UIDAI), bank’s system will pull out all data of the customer that is stored online which includes name, address, age and other relevant data necessary and it will also save a copy of the KYC document that remain stored in UIDAI’ servers. The bank will only print out the account opening form with all the details of the customers already in it.

Electronic know your customer

Before HDFC, Axis bank had launched e-KYC using Visa’s connectivity along with the UIDAI. With the e-KYC facilities, it will become easy for the customers to open accounts without any data entry. Moreover, the entire matter will become paperless as a soft copy of all the necessary documents will be saved in the bank’s systems. Banks are also coming up with the insta-account facilities which help the customers get their account opened within no time and also get them the whole account kit- cheque book, debit card and PIN number across the counter.

However, it is not just opening bank accounts, it has become easy to buy insurance policies with e-KYC. The Insurance Regulatory and Development Authority (IRDA) confirmed it recently that the e-KYC services that are stored in the Unique Identification Authority of India (UIDAI) would be considered acceptable by the insurance process. Aadhaar card has become the sole document fir customer identification as that contains all the necessary details for the identification of an individual along with biometric identification. Almost all the insurance giants across the nation are in the process of updating their systems to e-KYC.

Be it opening banking accounts or buying insurance policies, as the e-KYC becomes mandatory, the complete documentation procedure becomes faster, which eventually helps the banks, insurers , customers and the policy holders. Apart from that, the procedure is entirely paperless and it also takes the least turn around time for the insurance companies and the banks, which eventually makes the service better. With time, as e-KYC becomes compulsory everywhere in the banking and the insurance scenario all forms will be in the electronic form and their will be absolutely no physical documents.