Monthly Archives: May 2019

Thursday Trivia ~ ePAN Card

We live in an age where technology has become our second line of oxygen. It keeps us connected with the rest of the world all the time. It has changed everything around us and disrupted in more ways than we can imagine.

Remember the last time you had to worry about making that international call because charges were too high? Maybe not, because in recent times with almost free video calling service we have forgotten that it’s chargeable. At the same time, there is no need to wait for any global news to reach our ears, they are right on our palms. We are more in touch with people in our lives, we are more aware of what’s happening around us and the latest additions are ordering food and cab services while paying them right from our phones.

Similarly, Government of India has thought about issuing and storing some important documents such as Aadhar card and PAN Card for a person in digital format. This Thursday Trivia will focus on electronic PAN Card (ePAN Card).

For years PAN Card has been considered as the most important document. People go to great lengths to protect the card such as laminating it and keeping it in their lockers to remove when needed. Add to it the multiple xerox copies that our elders have taught us to keep in a file.

And why not! It’s a document that enables an Indian to be known as a taxpayer!

In our previous Thursday Triva DigiLocker – Let’s save more on cloud than paper!!, we have written about Governments initiative towards storing important documents online. Surely, ePAN will be safe when kept in a Digi Locker which can be accessed anytime.

So now let’s look at how to get your cool ePAN!

ePAN can be downloaded free of cost from NSDLand UTIITSLportal by all new applicants or applicants who have applied for a correction / modification in the PAN data within one month of the issuance of PAN.

An additional fee is charged by UTIITSL Rs. 8.26 (including taxes) for every download request. This payment can be done online and to download the ePAN whenever he needs it.

And this is how an ePAN will look like

So now you would be wondering, what about existing PAN Card holders? How do we get an e-copy of our PAN card?

Well, refer to our Digi Locker for the same. Here are the steps you will need to follow.

  1. Go to https://digilocker.gov.in/public…
  2. Sign up using your Aadhaar number / for Non-Aadhar holders, you can sign in using your mobile number.
  3. If you don’t have an account then just Sign Up!
  4. Click on Issued Documents on the left hand side of the page
  5. There is a message which shows a link on ‘Pull documents‘. Click on that
  6. In partner’s name, select ‘income tax department, Govt of India’ from the dropdown and in document type select ‘PAN verification record’
  7. After this enter your Name, Date of Birth, PAN No., Gender.
  8. Now, click on ‘Get Document’.
  9. Your PAN data will be fetched. After this your pan card will be downloaded in the digilocker and will be available under issued documents list. You can view the document by clicking “View the Document” and download a soft copy of it from there.

And this is how your existing PAN Card will look like

– Jinay Savla

Thursday Trivia ~ Senior Citizens Savings Scheme

 

‘Dad has received a few lakhs from his company, must be his Provident Fund, Gratuity, etc. It’s his hard earned money, where should we invest?’ Manish asked Jay while sipping a coffee.

‘No clue. Fixed Deposit (FD) maybe’ Jay said while putting his coffee down.

‘FD is great but doesn’t offer a good rate of interest.’ Manish replied.

‘Yeah. One of my friend was also talking about Senior Citizens Savings Scheme (SCSS)’ Jay said while he picked up the bowl of potato finger chips.

‘SCSS sounds good.’ Manish replied.

‘At this age, he will also look for some regular income coming in his bank from his investments. Do you remember the last time, we offered him to buy new spectacles?’ Jay was relishing his coffee and potato finger chips.

‘Yes, I can never forget that day. He said that he can still take care of himself and our children too. He is a self-made man and we need to respect his freedom.’ Manish said while recalling that incident. He almost had tears of respect for his Dad in his eyes.

‘Maximum of Rs. 15 Lakhs can be deposited in this account. Dad has received Rs. 14.50 lakhs, so we are well within the deposit limit to opt for this scheme.’ Jay was searching about the Senior Citizens Savings Scheme.

‘Great. Shall we open this with a Bank or Post Office?’ Manish enquired.

‘Bank! They have better service and will take good care of Dad when he visits there. Post office usually has long queues which are never ending. And Dad being Dad, he will himself go and do all this work. So for him Bank will be the best option.’ Jay was looking at his bowl of potato finger chips which Manish was about to complete.

‘Okay. So as I can see SCSS can be opened in any bank. Dad will go for a Nationalised Bank because he has a lot of faith in them. The irony! Let me write down what’s required.’ Manish said.

Documents for opening a Senior Citizen Savings Scheme Account

  1. Form A has to be filled.
  2. Identity proof – PAN card /Passport. (Self-Attested)
  3. Address proof – Light Bill / Telephone bill / Aadhar card. (Self-Attested)
  4. Age Proof Document is required – Passport, Senior Citizen Card, Birth certificate, Voter ID.
  5. 2 Passport size photographs.

Rate of Interest– 8.60% p.a. payable on Quarterly basis

Tenure– 5 years with an option to extend it for further 3 years. (Only 1 extension is allowed by filling Form B)

Premature Withdrawal

  1. 1 year lock-in period and no withdrawals allowed.
  2. Withdrawals after 1 year but before 2 years, Penalty of 1.5%
  3. Withdrawals after 2 years, penalty charges are a percent of the amount withdrawn.

‘What about Tax? Dad is more concerned about Income Tax then who will World Cup this year’ Jay said.

‘Yes, although the interest income is taxable but a deduction of Rs. 50,000 is available under Section 80TTB for Senior Citizens. Dad can also avoid TDS by filling Form 15H as his total income will be below taxable limits.’ Manish said.

‘So Dad’s interest income would be Rs. 1,24,700 from which Rs. 50,000 can be deducted under the section. He will be very happy looking at that’ Jay said.

‘Also, investments in SCSS is tax deductible under section 80C. So if Dad doesn’t want to invest at one go, then he will also be able to take advantage’ Manish said.

‘Yes. Let’s leave that decision to him. Right now, regular income would be more of his concern’ Jay smiled as he finished his coffee.

‘So let’s go through the list of Forms now. We should be prepared if he asks us questions on them’ Manish mocked Jay while finishing his last potato finger chip.

Form A – To open a SCSS Account

Form B – Extension of SCSS Account tenure for further 3 years

Form C – Nomination

Form E – Closure of SCSS Account at Maturity

Form F –Premature Closure or Death of Depositor / SCSS Account holder, then Nominee to carry out the process of Closure of Account

‘Okay! Time well spent. Dad will be really happy to see that we did our homework before speaking with him’ Jay said.

‘Yeah, we never used to do our homework anyways and he would get so upset’ Manish replied.

Jay and Manish got up and hugged their Dad. Their smiles were big and eyes were with filled with pride.

– Jinay Savla

Thursday Trivia ~ Investment Biases that blind Legitimate Business vis a vis Shell Company!

 

Apple iPhones have become a rage among youngsters. It’s not just about features anymore, it has become a status symbol. Youngsters hardly use 5% of the features available on iPhone which are more to do with camera, photo editing, social media and personal communication.

Let’s be honest – iPhones are expensive. They have far more uses than the ones listed above. Yet youngsters rush to buy it when Apple announces the launch of its new phone. Some stand for hours before the store opens to get their hands on the very first shipment of phones, trading their old iPhones for a new one by paying a few thousands extra.

But if you ask a youngster – why have you bought this iPhone X? The typical reply would be, ‘because my friend bought it too’ or ‘I want to look cool in my group and impress that particular person’ or the most typical answer will be ‘dude, it’s an iPhone!’

The funny part is that even investors go through such biases.

  1. Herd Mentality

When a lot of people in your circle buy an iPhone, it ticks of herd mentality in your brain. The reasons may never be good enough.

Same is the case with investors. Investment returns are always a projection of the future. Hence, investors are largely attracted to Entrepreneurs who in a very polished manner speak about the growth of the company. Future earnings potential of a business create a herd mentality in investors. They overlook the current scenario for a very rosy future.

Due to this bias, an investor doesn’t do his/her homework before buying a business and ends up disappointed. That’s why Stock Tips is the most dangerous addiction to have.

  1. Fear Of Missing Out (FOMO)

‘Dude, it’s an iPhone!’, is a classic case of FOMO. Youngsters feel that they will be out of trend if they don’t upgrade their phone to an iPhone. Infact, a lot of students even perform well at their exams so that their parents can gift them an iPhone. Nice incentives there!

Investors read about Entrepreneurs mostly through newspapers or magazines. Their celebrity status, large bungalows, fast cars and beautiful yachts dazzle them. The question that comes to their mind is, ‘he must have a very good business because he is living our dreams.’ Seeing this, they simply start to buy the shares such businesses without doing their initial analysis.

Such fairy tales never have a good ending. Investors often lose money in such scenarios without knowing what really happened.

The question now is – how should an investor can avoid such biases in future?

To be very honest, it’s extremely difficult.

  • Investors are often subject to various behavioural biases that come in the way of making a decision.
  • Not just biases, but sometimes a few overnight regulatory changes also make an ongoing business to shut down.
  • Or sometimes the rules of the game is disrupted by a new-comer.

Although what an investor can control is the way he/she perceives an entrepreneur and his business. But there is a very thin line between a fraudster and a legitimate businessperson. In this article, we will look at two billionaires – One is the well-known Elon Musk and second is lesser known Jho Low.

Background

Elon Musk – Legitimate Business

Known for his stylish electric cars and Mars inhabitation plans, he is admired all over the world. He is the perfect rags to riches story of an American dream. Tesla is a name to reckon with in the world of automotive industry. If it’s electric, it has to be Tesla. In a few years, he has disrupted payments industry through PayPal, Auto industry through Tesla and Space industry through SpaceX.

Jho Low – Shell Company

A Chinese-Malaysian financier from the bustling island of Penang, Low Taek Jho – more famously known as Jho Low – is portrayed by Malaysian and US investigators as one of the masterminds of the 1MDB scam. Despite never holding a formal position with the fund, he is alleged to have played a crucial role in its activities. And it was his savvy networking and shrewd business sense that allowed him to thrive.

Similarities

  1. Extremely larger than life business plans

‘Everything that glitters is not Gold’ – we have been listening to this pearl of wisdom right from the time we started understanding the World. Yet often, we are dazzled by that glitter. We love plans that are larger than life, may it be business or personal life.

Elon Musk talking about going to Mars in a few years dazzles us. We worship him for dreaming the impossible. In a similar fashion, Jho Low talked about transforming Malasiya, he attracted offshore investments to develop Iskander to the tune of $ 1 billion from Saudi Arabia. At a time Malasiya was not considered an attractive investment destination, it’s the larger than life business plans of Mr. Low made him a force to reckon with.

  1. Self-Promotion

Today’s start-up business culture demands Rockstar CEOs. They need to look smart, be outspoken and dress perfectly well.

If one carefully assesses the lifestyles of Mr. Musk and Mr. Low, they are closely connected to Hollywood. Infact they date actresses and marry them too. This gives them a celebrity status in public life. They enjoy it.

  1. Doesn’t play by the rule book

Right from our childhood, we are taught to obey the rules. For example, we are taught to stop at the red light on the road. But when a Ferrari or Lamborghini breaks the red light and zooms past us, we are dazzled. We talk about it for months recounting that episode every single day.

After disrupting the payments industry, Elon Musk set his sights on rockets and electric vehicles with no prior experience of the industry. As a result, he skipped many rules, made a lot of mistakes, apologised publicly and yet in the end when he won – he is worshipped by millions.

Jho Low never had a real experience of running an off shore investment fund. In classic financial term it’s ‘Sovereign Wealth Fund’, something every investment manager aspires to when they have experience. At 27, he saw $ 1 billion entering his 1MDB fund for development of Malasiya which never quite happened. $ 700 million was transferred to an offshore Swis account which he spent lavishly attracting Hollywood celebrities and even backed ‘The Wolf of Wall Street’, an iconic movie played by Leonardo DiCaprio.

  1. Loved / Hated by Media

‘Any publicity is good publicity’, a term we get used to while we are reaching in the middle stages of our career. If it’s good publicity then we get the limelight and if its bad we still get the limelight and a chance to explain.

Mr. Musk and Mr. Low are continuously loved and hated by the media. Mr. Low who is absconding from Malasiya will see a lion’s share of hatred by the media. For Mr. Musk, there are two parties and both are fighting each other as to he is a good/bad businessman.

Absolute Difference

Actual Business with Cash Flows

Tesla cars are being used around the world. Rocket of SpaceX carry satellites or payloads for International Space Station. The companies are genuinely earning money. Infact Mr. Musk is known for his 80-100 hour work weeks due to which these businesses have gained immense success in a short time.

On the contrary, 1MDB of Mr. Low never had any real business. Iskander project never really got off and later on the entity was used for mobilising funds for then Malasiayn Prime Minister Najib Razak. It was a shell company. Funds raised by 1 MDB were transferred to various off-shore accounts and the money was used for various purposes which were never listed in the Profit & Loss statement or Balance Sheet of the company.

Conclusion

Now let’s look at some domestic scams that happened right under our noses. Yet it was difficult to detect them.

Curious Case of GainBitcoin and HomeTrade

In 2016-2017, Bitcoins gained significant attention as its value rose several times. Almost everyone was talking about it. If money was to be invested somewhere then crypto-currency was the place and Bitcoin topped it. Even dinner conversations at restaurants were around its superior returns. Classic FOMO one can say!

To take advantage of this behaviour, GainBitcoin offered to pay 10% monthly returns through a scheme of GB21. And guess what, around 8,000 people fell into this trap. Well the losses are in few hundred crores but it was FOMO working. No investor ever asked, 10% a month – how can any business achieve that?

Home Trade gave life a new definition with its slogan – life means more. A star studded advertising campaign with Hritik Roshan, Sachin Tendulkar and Shah Rukh Khan without any product to sell. Duping even banks with Rs. 400 crores and absconding from India, the CEO Sanjay Agarwal spent close to Rs. 20 crores on the launch of the company. Such a larger than life showbiz created a herd mentality amongst its stakeholders. Only leading to a start of an eventual downfall.

Investors are often dazzled by quick returns on their portfolio. Entrepreneurs often feed stories to media about their businesses which are doing well in domestic as well as international circuit. Most investors that don’t know how to read Annual Reports of the companies fall into the trap of news from various media houses. They fail to recognise a legitimate business or a shell company.

It’s also equally important to acknowledge that markets eventually handsomely reward investors of genuine businesses. And if you are an investor that is unable to differentiate between a legitimate business and a shell company, then it’s always safe to invest with a capable fund manager who is an expert at it.

– Jinay Savla