Positive Pay system – Upgraded security of your high amount cheques

Making payments through cheque has been an easy and convenient way to do transactions especially for those who are not very comfortable with digital and online banking. Consequently, a lot of transactions are still made every day through cheques. With this high volume of transactions, banking fraudsters have also found newer ways to find their preys. It has been the experience that forging of signatures on cheques and misappropriation of funds of account holders had been the main cause of concern.

To make the cheque payments more secure, RBI had come forward with an idea of ‘Positive Pay System’ (PPS) in September 2020. The same has already been implemented from January 2021 by all the banks. PPS involves a process of reconfirming key details of large value cheques, typically of value Rs 50,000 and more, where the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc, certain minimum details of that cheque (like date, name of the beneficiary / payee, amount, etc) to the drawee bank, details of which are cross checked with the presented cheque by CTS. Banks will honor the cheques only if the details furnished by customers and cheques presented through cheque truncation system (CTS) tally, thus eliminating the chance of banks making payment against any forged cheques. Banks are now considering making PPS mandatory in case of cheques for amounts of Rs 5 Lakhs and above.

No doubt, it will provide an extra layer of security on cheque related transactions which will help to reduce the number of banking frauds in future. If you also make a payment of high value amount through cheque, never forget to inform your bank to avoid rejection or any fraud.

(Contributed by Kritika Saini, Relationship Manager Arjun1, Team Arjun, Hum Fauji Initiatives)

Should I pay my parents for my living expenses?

“I have started earning and I want to support my parents now. It’s not that they need my support but I consider it my moral responsibility to do so now when I am able to do so.”

We should be proud of our culture that large number of such instances exist in our society. In fact, such moral behaviour also serves to be a good financial planning tool too.

HRA or house rent allowance is the most common allowance received by the salaried. Those who live on rent can maximize on saving tax by claiming a deduction for HRA from the salary.

If you are a salaried employee staying with your parents in a house that they own and you don’t co-own, you can pay them rent and claim the HRA exemption offered by your employer. This will help if parents are in the tax-exempt income limit or a lower tax bracket than you do. Even if you and your parents are in the same tax bracket, your parents can still claim a deduction of 30% of the annual rent for repairs and maintenance under Section 24. For you, the tax exemption on HRA will be least of the following:

  • HRA per month.
  • 50% of the basic salary.
  • Actual rent paid – 10% of basic salary.

Rent agreement and rent receipts or online transfer of rent amount to parent’s bank account would be essential for claiming any tax benefit.

This rental income will not only help the parents financially but also help you to save tax.

Continue with your moral responsibility; your benefits will be much more than mere financial ones.

(Contributed by Rishabh Shukla, Associate Financial Planner, Team Vikrant, Hum Fauji Initiatives)

Personal finance rules in a post covid world

It is very aptly said that everything that happens, happens for the good. Some lessons seem very harsh but ultimately, they teach us some life-lessons. COVID-19 helped us realise the importance of relationships, life, money, values and everything else that had started taking a back seat.

Some personal finance lessons that have been refreshed by COVID are as below:

  1. Create a Contingency Fund – You should have a contingency fund that is 3-6 times your monthly income depending on your income and expenditures. It will help you to meet large unforeseen expenses in unforeseen circumstances.
  2. Health Insurance: Have sufficient health cover. Critical health insurance is also a must-have.
    Term Insurance: Each one of us have responsibilities towards our family members. Sufficient term life insurance to ensure any uncertainty related to your life should not at least financially impact the family members.
  3. Don’t let inflation eat your money: Savings account and Bank FDs are giving very low returns especially in this COVID impacted economy. Explore other investment avenues, lest this inflation eats away your money and eventually your life-time goals.
  4. Invest wisely: Many companies offering attractive returns could not handle the shock of COVID and couldn’t pay back the principal value too. Give preference to financially stable companies rather than returns-tempting small companies. Wealth preservation should prioritise over wealth creation. Points 4 and 5 need a delicate balance – take professional advice if you don’t feel up to it yourself.
  5. Estate Planning: You must have a WILL prepared so that there is peaceful distribution of assets in case of any uncertainty and the family continues to live happily without any conflicts.

(Contributed by Manish Kumar, Associate Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

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