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Why Should You Know The Lock-in Period of Your Investments?

Sun, 28 May 2023 05:36:50 +0000

The Buyt Desk

Before you start an investment you must know the lock-in period of that investment tool. But why is it so important to check the lock-in period of the investment product? Let us understand.

What is the Lock-in Period?

The lock-in period is a length of time for which investors lock the investment fund for investees. Any withdrawal from the account during this period remains restricted. E.g., if any investment product has a lock-in period of three years, the investor cannot withdraw the fund before it completes 3 years. After that, he can choose to continue or surrender the investment. If an investor chooses to discontinue his investment before the lock-in period and stops paying the due, he may not receive the full refund and in many cases end up paying a penalty too.

Every investment comes with a lock-in period with diverse tenures. E.g., the lock-in period of PPF is different from FD or ELSS. Therefore, when you invest it is important that you check its lock-in period in advance. If you don’t want to block your money for a long time, invest in financial products with a short lock-in period.

Lock-in Period of Different Investment Policies

Public Provident Fund – PPF is a favourite investment product for no-risk taker investors. It is a risk-free investment that also provides tax benefits. However, it comes with a set of rules for the fund withdrawal.

The lock-in duration of PPF is 15 years.
Partial withdrawal of up to 50% is allowed in PPF after seven years of account opening.
One partial withdrawal is allowed in a year.
Early closure of a PPF account is possible in certain exceptional conditions and comes with a penalty.

National Pension System – The National Pension System (NPS) matures only when the subscriber retires i.e after the age of 60 years.But there is a provision for part withdrawal after a minimum lock-in period of three years.It can be availed only for special circumstances.

The account holder can withdraw up to 25% of his contribution from the NPS account for reasons like illness, disability, to purchase property, child education or marriage and to start a new venture.
Partial withdrawal is allowed for a maximum of 3 times in the entire tenure of NPS.
After five years, a subscriber can withdraw a maximum of 20% of accumulated corpus as lump sum and 80% of the fund he should use to purchase an annuity plan to receive the pension.
Normal withdrawal is allowed at the age of 60 years, the account holder can withdraw a maximum of 60 % from the accumulated fund and 40% of the fund he should use to purchase an annuity plan to receive the pension.

Tax Saving FD – The lock-in period for tax saving FD is five years. It does not let the account holder do any transaction on the amount before the lock-in period.

ELSS Fund – This fund has a lock-in period of three years. After the end of a three-year period for a specific investment, ELSS becomes an open-ended equity-oriented investment scheme.

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How LIC’s Jeevan Tarun Policy provides Financial Security to Children?

Tue, 16 May 2023 17:21:52 +0000

The Buyt Desk

LIC’s Jeevan Tarun Policy is a participating non-linked limited premium payment plan that provides a combination of saving features and complete protection for your children. This plan is primarily designed to provide financial support. It can easily satisfy the educational, sports coaching, and many other needs of your growing child with yearly survival benefit payments and maturity benefits till the child completes 25 years of his/her age. As per this plan, you can also get a loan facility on accrued surrender value.

Eligibility Criteria for LIC’s Jeevan Tarun Policy

The minimum entry age for this plan is 90 days (last birthday), while the maximum age is 19 years (last birthday). To gain the maturity benefits, a candidate needs to be 25 years (last birthday) old. The value of the minimum sum assured is INR 75,000, while there is no limit for the maximum sum assured. The premium paying term or PPT is 20 years at entry.

Salient Features of LIC’s Jeevan Tarun Plan

As mentioned above, this is a participating non-linked limited premium pay policy that combines children’s protection with savings to secure their future. The plan is designed to help parents save funds for a child’s growth by meeting the needs of sports coaching fees, higher education, and others. A specific percentage of the sum assured will be given on maturity. You need to pay the premiums until your child turns 20 years. However, the plan remains active until your child gets 25 years old.

There are 4 survival benefit options to be selected in the policy –

No Survival Benefit
5% of the Sum Assured is paid yearly for the last five policy years.
10% of the Sum Assured is paid yearly for the last five policy years.
15% of the Sum Assured is paid yearly for the last five policy years.

A parent or grandparent of a child (0-12 years) can purchase this policy. 2 years is the date of risk commencement for a child (less than 8 years of age). The risk will start immediately for children who are 8 years old. The premium payment can be done monthly, annually, quarterly, or half-yearly. The remaining sum assured plus the vested bonus will be given to your child in the form of a maturity benefit.

How LIC’s Jeevan Tarun Plan Benefits?

Some benefits of LIC’s Jeevan Tarun Plan are highlighted below –

A policyholder receives Simple Reversionary Bonuses as well as Final Additional Bonus.
When the insured person dies suddenly during the tenure, the return of premium paid except for rider premium, taxes, and extra rider, if any, with no interest is paid to the nominee. It is not based on the amount paid in the form of survival benefits.
There is a loan facility for a policyholder through this plan once they obtain the surrender value.
A policyholder can choose between 4 options, each offering a different maturity and survival benefit.
If you opt for a high sum assured, you’ll be eligible for rebates on your premium.
Survival benefits (a certain percentage of the Sum Assured) are provided in the last 5 years when the insured individual survives till the maturity age.
When a policyholder survives the stipulated maturity date, a pre-defined percentage of the Sum Assured will be given as maturity benefit at maturity and the plan gets terminated.
You can choose to customize your policy based on how you want to get the survival and maturity benefits.
Policyholders can get the eligibility to participate in the profits gained by LIC. These profits will be paid as bonuses.

How does LIC’s Jeevan Tarun Policy Work?

While purchasing the LIC’s Jeevan Tarun Policy, a candidate has agreed on various terms including –

Sum assured

The amount that insured will receive in the last of the policy tenure. The minimum amount is INR 75,000, while you’ve no upper limit.

Premium payment term

The premiums need to be paid by an insured till their child becomes 20 years old.

Policy term

It refers to the duration for which you would like to have the cover. The policy term will end when the child becomes 25 years old.

You need to choose one of the four options (as given above) to determine how you would like to receive the benefits. The annual premium will be based on the cover amount, the age of the child, and how an insured wish to get benefits. Based on these things, the insurance company will calculate the premium.

Riders Available

LIC provides an Optional Rider to provide huge benefits to policyholders. Under Premium Waiver Benefit Rider, future premium payouts are waived off in case of the death of subscriber (a person who pays premium).

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Understand the Indexation Benefit

Tue, 09 May 2023 16:30:45 +0000

The Buyt Desk

Indexation refers to the process of adjusting the cost of acquisition of an asset over a specific duration to bring it to the present-day prices after considering inflation. Indexation enables investors to predict the total gain or losses incurred on the investments.This eventually alleviates the complete tax liability by adjusting the purchase price of the underlying investment or asset with the inflation level. Moreover, it also provides the ability to understand the higher gains after adjusting the inflation rate of the purchase and sale year.

In this post, understand how you can benefit from using this concept for your long-term investments, and how to calculate it.

What is indexation?

In layman’s terms, indexation is the process that enables an investor to adjust the purchase price of an asset based on the inflation rate in the economy. Increasing the purchasing price becomes easier by considering the inflation between the purchase and sell time (year). Eventually, it will help you in avoiding decreasing ROI (return on investments) and pay tax after the inflation adjustment. Since the purchase price is indexed, it will provide lower gain which finally results in lower tax liability. Under the indexation concept, the term price index is used for purchase price indexing.

Benefits of indexation

Investors can avail of numerous benefits through indexations –

Indexation helps in increasing or decreasing the value of an investment according to the current inflation level in the market or economy.
Increasing the purchase price or acquisition cost of an asset or an investment through indexation considering inflation means lesser profits or lower long-term capital gains (LTCG), thereby reducing the tax burden of an investor.
By providing indexation benefits to investors, indexation promotes long-term investment.

How does indexation reduce the tax burden of investors?

Inflation and capital gains both are different concepts. As now you understand the meaning of indexation, let’s learn about capital gains. It refers to a rise in the price or value of an investment over a certain period. In simpler terms, the profit you gain from selling your assets like jewelry, real estate etc. is taxed as capital gains. The purchase price adjustment for inflation is referred to as indexation. This helps in decreasing the tax burden.

Let us assume that you buy apples at the cost of INR 100 per Kg (kilogram). You buy 1 kg and then store them. After one month, the cost of the same apples increases up to INR 110 per Kg. Now, you sell those stored apples at the rate of INR 120 per Kg. So, you get a profit of INR 20 from the transaction.

Profit from sale = SP (selling price) – CP (cost price),

Profit from sale = 120-100 = 20.

Since the purchase price in the market is INR 110 now, the government enables you to purchase price adjustments to show the increase in the cost due to inflation. Thus, taxation gain from the sale will be 120 (selling price) -110 (cost of apples in the current market) = 10. The reduction in taxable gains reduces your tax liability.

Remember one thing indexation will help in reducing the tax burden only when the assets are sold after holding them for a particular number of years. This may depend on the type of asset or investment you hold. The benefit of indexation can be availed after 2 years for selling the immovable property.

How to calculate indexation?

You can calculate the indexation using the following formula –

Indexation = original cost of purchase x CII (cost inflation index) of the specific year/CII of the base year.

Here, the CII of the specific year is the CII of the sale year and the CII of the base year is the CII of the purchase year.

The first step to calculating an inflation-adjusted purchase price is to find the purchase price including the transaction charges. Then, find the CII of the year of purchase and sale year. Use the above formula to get the correct indexed cost of purchase. You can get the CII number from the website of the income tax department. Here, you can get the cost inflation index from the year 1981 onwards.

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What are Sovereign Green Bonds?

Wed, 08 Feb 2023 17:47:17 +0000

The Buyt Desk

SGrBs (Sovereign Green Bonds) framework was declared on November 9, 2022. It has been put into action when the Central government announced the launch of the bonds in 2 tranches worth Rs 16,000 crores within a month. In this post, you’ll learn what green bonds are, how it works, and how they assist in the financing of clean projects.

What are Green Bonds and their Benefits?

Debt instruments where the capital raised is used to fund new or current green projects are known as green bonds. The green projects may include clean transportation systems, renewable energy ventures, and others. These bonds are structured like other traditional bonds but have some major differences. According to the Climate Bonds Initiative (CBI), eligible projects can be classified under Waste Management, Energy, Land Use, Energy Efficiency, Transport, Water, or Adaptation Infrastructure.

Green bonds help in raising funds for environmental infrastructure expenses that may be inefficient using highly expensive capital. Considering large investments essential for green projects, the current traditional financing sources like domestic bank loans may not prove to be enough.

How Sovereign Green Bonds Work?

These bonds are allotted for mobilizing resources for green infrastructure, which is mainly related to organizing the mobilized funds in the projects of the public sector to lessen the carbon economy intensity.
Green bonds will be launched in two auctions. This would provide institutional investors ample opportunity to be a part of the government’s environmentally sustainable initiatives.
The government gives sops such as allotting them via uniform price auction to make them eligible for Repo as like SLR purposes. It all happens to make them useful for institutional investors.
The fact Green bonds are different from other ordinary government-issued bonds is that funds raised from investors are just used for supporting initiatives that create a good impact on the environment. For example, renewable energy and green construction.
Considering the returns on these bonds, Green bonds are issued worldwide at a higher premium which results in lower returns. It is because they are issued with a sovereign guarantee.
The success would be based on the creation of a conducive ecosystem for those securities. For example, foreign investments, where green investing is a fury. The present currency surroundings may work like a dampener with foreign investors thinking about the risks of the exchange rate.
According to the framework declared earlier, the risk is reduced in these bonds. Earlier, principal payments and interest on these bonds are not uncertain of the eligible projects’ performance. The investors don’t have any risk related to the project.
Even though these bonds have tax incentives related to them, no details associated with these bonds have emerged out on these bonds.

Green Bond Scenario in India

In India, the market for green bonds is comparatively small. The CEEW (Council on Energy, Environment and Water) evaluates that about 1.62 billion US dollars of green bonds were issued in the nation in 2016. It is a small fraction of the total issue of USD 81 billion issued worldwide.

India plans to install approximately 175 GW of renewable energy by the end of 2022, which needs about USD 264 billion in investments. Probably, Green bonds may support renewable energy projects deployment by offering huge access to domestic and foreign capital and better financing terms like lower interest rates with higher lending terms.

Support of Policy Action for Green Bonds

Policymakers can support green bond issuance by providing various kinds of tax incentives which could either be provided to the issuer or the investor. Some of them are as follows –

Direct subsidy bonds: In this bond, issuers get cash rebates from the government to subsidize net interest payments.
Tax credit bonds: In this bond, investors get tax credits rather than interest payments. Hence, issuers don’t need to pay interest on their bond issuances.
Tax-exempt bonds: In this bond, investors are relieved from paying income tax on the interest they earn from green bonds.

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What is the Loan to Value Ratio?

Fri, 30 Dec 2022 13:57:03 +0000

The Buyt Desk

Home loan customers come across various criteria that are set by lenders. It includes a minimum down payment that needs to be raised by a client, annual income essential for home loan eligibility, good credit score, and others. One of the most important home loan criteria is the maximum LTV (loan-to-value) ratio of a lender. Don’t know what this term means? Keep reading this post to know the basics of the LTV ratio.

What Do You Mean By The Loan to Value Ratio?

This is the part of the property value that a lender can finance via a loan. Financial institutions such as non-banking finance companies, banks, and housing finance companies use this ratio to evaluate the risk of giving a home loan to a borrower.

Loan to value ratio for a lender is used to determine that they don’t give a higher amount than the property’s actual price. For a lender, if this ratio rises the supposed risk of borrower default increases.

How Is Loan to Value Ratio Calculated?

Financial institutions calculate a borrower’s LTV using this method.

(Amount borrowed / Property value) x 100 = LTV ratio in percentage

For example, you are purchasing a home of Rs.1 crore and the LTV ratio of your bank is 70%. In this case, your bank can give the maximum loan of Rs.70 lakh.

RBI Regulations for LTV Ratio

RBI or Reserve Bank of India guidelines are fixed for financial institutions. According to these guidelines, the LTV ratio for home loans of up to Rs.30 lakh can go up to 90% of the property value. Here, 90% LTV means that a loan borrower needs to pay a minimum of 10% of the property value from his own pocket. The rest amount can be financed via loans.

LTV ratio can reach up to 80% for loans ranging from Rs.30-75 lakh. However, for loans more than Rs.75 lakh, the LTV ratio will be 75%. Thus, to determine the minimum down payment, consider the LTV ratio.

The limit for home loan eligibility is set to 75-90% by lenders under RBI guidelines. This limit allows a lender to protect itself from the potential downturn or correction in property prices and in a situation when the borrower can’t afford to repay the EMI (equated monthly installment) on the loan in the coming time.

Lower LTV Ratio Is Good for Borrower

A lower LTV ratio is considered better for a borrower. The lower this ratio, the better the interest rates and other terms on a home loan. A borrower can determine the LTV ratio from a lender while applying for a home loan. A borrower with a lower LTV ratio should negotiate with a lender for reduced interest rates and higher loan tenure when needed.

For example, a home loan with a 60% LTV ratio would be given with a lower interest rate by a lender. It may need a negotiation if the financial institution doesn’t provide a lower interest rate on a loan. The reason is that the more of your own money is used in the down payment for making a home purchase, the reduced risk for a lender.

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What is a Flexi Hybrid Home Loan and How Does It Work?

Wed, 16 Nov 2022 03:57:40 +0000

The Buyt Desk

Flexi hybrid home loans are a blessing when you buy a new house as it reduces your repayment burden. Let us understand all its features including interest-only EMIs.

Everyone will consider buying their own home at some point in life. An excellent way to realize this dream is by going for a good home loan along with your savings. The ease of this process can be enhanced with a Flexi Hybrid Home Loan. Getting a home loan approved and repaying it is a huge financial commitment. Since this loan is of a high amount, it is very critical that you choose the right kind of loan which you can manage to repay without any hassles or negotiating your life goals.

Today, many players in the Indian market offer a wide range of home loan solutions. Each has unique features and benefits that cater to the different needs of different borrowers. Flexi Hybrid Home Loan is one such unique home loan with added convenience and an array of benefits. You can apply for this loan online and a high loan amount of Rs. 5 Crore can be availed. It has easy eligibility and an online loan management facility.

What are the application criteria for a Flexi Hybrid home loan?

Flexi Hybrid home loan has easy application criteria as it has only two conditions to be fulfilled. If you match these criteria, you can apply for a loan and get access to funds. Along with the application you need to submit a few documents. Here are the two conditions –

The borrower must have a regular income and must be less than 50 years of age
The property for which a home loan is sought must not be under construction

How does a Flexi Hybrid home loan work?

Interest-only EMIs first – The Flexi Hybrid home loan is unique because of the EMIs you pay towards the borrowed sum. In a term loan, each EMI is the sum of the partial principal and the interest throughout the tenor. But in a Flexi Hybrid Home Loan’s EMIs, the EMI for the first 4 years of the tenor is just the interest and the principal component is added from the 5th year. Hence, the EMIs are low in value. This feature allows you to organize your finances for future repayment. First 4 years you pay an affordable EMI which is an interest-only EMIs. This will ease the repayment process and buy you more time.

Loan tenure – A Flexi Hybrid Home Loan can have a loan tenure of up to 30 years. You can make prepayments in parts towards the loan anytime you can and as many times as you wish. There are no prepayment charges. The principal amount will not reduce on prepayment. But when the loan outstanding balance is equal to the part-prepayment amount and the interest paid, the lender considers both these amounts to close your loan much before the loan tenor.

Avail of another loan with ease – By prepaying your loan, you can also access an additional benefit. When you part-prepayment your Flexi Hybrid Home Loan, the principal amount is not decreased immediately like a term loan. But, this extra paid amount is set aside by the lender and the EMI you will be paying remains the same. In the future, if needed, you can avail of this amount as a loan. You can pay only interest on this new loan. Once the outstanding amount of your Flexi Hybrid Home Loan equates to the amount you have prepaid and taken as a loan, your loan will be closed prematurely. This is a double benefit that you can enjoy. The additional benefit is you get a low-interest sanction and hence you can quickly clear your total loan amount.

Easy access to your account – Along with the ease of repayment and usage, Flexi Hybrid Home Loan also gives you access to an online account. You can track your loan details to every penny at your convenience. You get access to the customer portal so that with just a click you can access your loan data including payment details, loan statements, part prepayment ledger, etc.

Summing up

Opting for Flexi Hybrid Home Loan you can enjoy maximum benefits and flexibility. They also have a facility where you can share basic details and check your pre-approved offer immediately. With a pre-approved offer, you can further simplify the application process. This also comes with more benefits along with your loan sanction.

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What is House Rent Allowance and How Does It Helps in Saving Tax?

Wed, 02 Nov 2022 04:22:35 +0000

The Buyt Desk

HRA: House Rent Allowance is the allowance that a company pays to employees as compensation for the living expenditure in a city. It is part of the cost to the company but not part of basic pay.

What is HRA, and What Does It Stands For?

The HRA stands for House Rent Allowance. It is the amount that an organization pays to their employees to pay the rent of accommodation in the place of employment. This amount is eligible for tax deduction under section 10(13A) of the income tax act. However, HRA can be fully and partially taxable in certain conditions, such as the salary, the HRA received, the place of employment, and the actual rent employee pays, etc.

When You Can Claim Tax Deduction On HRA

There are three criteria for claiming the tax deduction on HRA,

A salaried and self-employed individual can claim an HRA exemption.
The person lives in a rented house.
Must produce proof of rent, such as rent receipt, rent agreement, etc.

How To Calculate House Rent Allowance

HRA is an integral component of salary. Three components need to be taken into consideration to calculate it.

The actual HRA component of the salary.
50% of the basic salary if the individual lives in metro cities (Delhi, Mumbai, Chennai and Kolkata). It is 40% for other cities.
Actual rent paid less 10% of basic salary.

Scenario: A person lives in Delhi in a rented home and pays 10,000 rent. His salary break will be this way.

Basic Salary	Rs.30,000
HRA	Rs.13,000
Conveyance Allowance	Rs.2,000
Special Allowance	Rs.3,000
Leave Travel Allowance (LTA)	Rs.5,000
Total Earnings	Rs.53,000

Actual HRA component of salary:	Rs.1.56 lakh
50% of his basic salary, as he stays in Delhi:	Rs.1.80 lakh
Actual rent paid minus 10% of basic salary:	Rs.84,000

There is also a PF contribution of 2000 and a professional tax of 200. The tax-exempt part of HRA in this example will be the lowest of the following, taking into account his earnings in a year.

In this calculation, the lowest value is Rs 84,000. This is the amount an individual can claim for tax exemption. The remaining HRA amount the individual receives will be taxed based on his income tax slab.

How HRA Gets Taxed?

According to the HRA tax exemption rules, any employed or self-employed individual who lives on rent can claim for HRA deduction. To claim the HRA tax deduction, one has to live on rent. If any individual did not pay rent but has the HRA component in CTC, then HRA would be taxed according to his income tax slab.

In the above example, if the person does not pay rent, the Rs 84,000 would be taxed under his income tax slab.

Self-employed individuals who do not have the HRA component in their salary to show can use HRA exemption under section 80GG of ITA to claim tax exemption. This option is available to those salaried employees also who do not receive HRA from employers.

What Are the Benefits of HRA Deduction

The HRA deduction under section 10(13A) of the ITA offers multiple benefits. These are

HRA rebate decreases taxable income.
One can get HRA tax exemption benefit even when living with parents by producing rent proof.
An individual with a home loan and paying EMI but lives in a rented house can also claim for HRA exemption provided the person lives in a rented house in the city of employment and owns the home at a different place. A person who owns a house in the city of employment but lives on rent has to produce a valid reason to claim an HRA exemption.

Points to Remember to Claim HRA Deduction

Without living on rent, you can’t claim HRA tax exemption.
The whole HRA can’t be claimed for exemption.
For HRA calculation, Mumbai, Delhi, Chennai, and Kolkata are considered metro cities.
You can claim HRA while living with your parents by producing rent proof.
Rent paid to the spouse is not eligible for tax exemption.
To claim tax exemption for rent of more than Rs 1,00,000, annually PAN detail of the landlord has to be produced.
In case the landlord does not have PAN has to give a signed declaration.

What Documents Are Required to Claim HRA Tax Exemption

ITA states to produce certain documents to claim HRA tax exemption. These are

Proof of rent. It can be a rental receipt, bank transfer, rent agreement, etc.
If the rent exceeds Rs 1 Lakh annually, then PAN detail of the landlord or signed declaration form from the landlord.
For rent paid to family members, PAN detail of the family member receiving the rent or signed declaration form.

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What is Compound Annual Growth Rate?

Tue, 18 Oct 2022 15:40:45 +0000

The Buyt Desk

Compound Annual Growth Rate (CAGR) is the term used for calculating the annual growth of investment over a duration. It is the term used for calculating how much you have earned on investment you made for a set period of time. There is a standard formula which banks and investment companies use to calculate the interest earned during the investment period.

Let’s start with the formula used for calculating CAGR. The formula for Compound Annual Growth Rate is:

CAGR = (Ending balance/beginning balance)1/n – 1

Ending Balance = It is the amount your investment ended with for the investment period.
Beginning Balance = It is the amount your investment started with for the investment period.
N = The number of years you have invested.

What is the Benefit Of CAGR?

People often calculate interest earned on an investment in absolute terms. E.g. you invested 10,000 for five years and received 15,0000 after five years. If asked how much your money grew in five years? In the absolute term, you will say 40 per cent, but it is not. The CAGR calculates the earned interest percentage precisely. It gives exact details. All years of investment are not the same with respect to investment growth. In some years, it can do good, while in some, it can go negative too. CAGR presents the picture of the percentage of your money that grew over time. Using the CAGR formula, if you calculate the earned interest on the mentioned investment, it is 8.45 per cent on average.

CAGR For Mutual Fund Investor

It is a useful tool for mutual fund investors. It is because the performance of mutual funds varies according to economic conditions. With CAGR, you can calculate how your fund is doing and take necessary actions. Here is how this calculator can help you.

If you maintain a portfolio of mutual funds, you compare their performance through the compound annual growth rate calculator. Two mutual funds cannot be the same, and so their performance. With the CAGR calculator, you can easily calculate how your fund is doing in comparison to other funds and take decisions accordingly.

Conclusion – This is useful in calculating the growth of the investment. With the help of CAGR calculation, you would be able to evaluate the past performance of your investment but can predict its future return also.

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What is Moonlighting and is It Legal in India?

Thu, 13 Oct 2022 04:30:23 +0000

The Buyt Desk

Most Indians have heard about a new Corporate Jargon – “Moonlighting” only after Infosys banned it and many cases surfaced at Infosys. Let us understand what it is.

Infosys made it very clear in its employees’ code of conduct that moonlighting is prohibited. In the offer letters issued to new employees, they have highlighted the portion talking about Moonlighting. They have clearly stated that employees cannot work for other firms without their permission.

During the COVID-19 pandemic, in India, there was a rise in moonlighting practice mostly among white-collar professionals. This was because of the work-from-home (WFH) operating mode. Now, this has become a compliance issue within many corporate companies. People are also debating if this will be the future of professionals in India. A few companies including Infosys and Wipro have already terminated a few employees who were Moonlighting and warned all employees against it.

At Infosys, the Human Resource department sent out an internal email to all its employees with “No Twin Timing, No Moonlighting” as the subject. This email warned all the employees against moonlighting and reminded all that as per the employees’ code of conduct it is prohibited. It clearly stated that violation of this would attract disciplinary action and even a termination letter can be issued.

In the offer letter issued to new employees before joining, there is a part that says that once you join the company, you cannot work for others either full or part-time as an employee, member, partner, or director of any other entity or organization or be part of any business without the consent of the employer. The company has the authority to subject the consent to any terms and conditions and can withdraw it anytime.

What does Moonlighting mean?

Moonlighting is a practice where an employee takes up more than one job to earn extra income but it is done secretly or outside main work hours which the employer is not aware of. The employers of white-collar professionals usually do not allow their employees to practice moonlighting. But during the COVID-19 pandemic, many white-collar professionals in India started moonlighting practice as all were working from home and had time and space to accommodate one more job.

Moonlighting, Is it ethical in India?

Not many knew about moonlighting. But after Infosys and Wipro news spread people are aware of Moonlighting. Now people are questioning if it is ethical in India or not. This is the latest topic of debate in India. Each employer has their view and it is a mixed view. Some say that the system needs to change with time while some call the practice ‘cheating’. Some pointed out that low entry-level salaries as the reason why people are practising moonlighting. When an employee is underpaid, he/ she will take up more jobs to earn extra money. And currently, technology is so good that anyone can take up a new job easily.

In India, there is no strict law that says it is illegal for a person to do multiple jobs. But if a person is working for similar kinds of employers then there is a high chance of breach of confidentiality. Most companies have confidentiality clauses and the same is declared in the offer letter and agreement letter of the employee. While moonlighting if the nature of work is the same, the confidentiality agreement with the employer will fail.

Who allows moonlighting?

Recently, in India, Swiggy has thrown light on a new moonlighting policy that it has designed for its employees. Swiggy allows its employees to take up external jobs or projects to make extra money. This was done to encourage its employees to follow their passion along with a full-time job. They want to build an employee organization.

How do moonlighting employees get caught?

Most moonlighting employees get caught due to their negligence, carelessness, and overconfidence. When an employee posts suppressing information on social media about the current employer they are easily caught. Using the same laptop to work for different organizations and using the same tool will get them caught easily. Employees who provide the same bank account for payment at freelancing jobs get caught easily. Cyber Security is strong and all online transactions are tracked for moonlighting.

Can one get fired for moonlighting?

Legal experts say that in the past courts have permitted employers to fire their employees who were caught moonlighting. Under the Factories Act, there is a constraint on double employment. But this law does not apply to the IT industry in many states.

Summing up

Moonlighting is not a threat to employers until there is a breach of confidentiality. Management should be monitoring its employees and keeping a check on signs. Strict disciplinary action should be taken when it impacts the company. When Moonlighting is not allowed as per the company’s policy, strict action should be taken. Also, employers should see if moonlighting is not slowly changing to daylighting and hampering employees’ productivity. The second job being illegal and the risk of confidential information and data leakage being very high, Moonlighting needs strict surveillance.

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What Is Card Tokenization?

Wed, 28 Sep 2022 04:24:19 +0000

The Buyt Desk

RBI has directed merchants not to store customer card details on their servers and asked all to adopt an alternative mode of payment through card-on-file tokenization.

The Reserve Bank of India (RBI) made new rules in September 2021 which said that from January 01, 2022, the merchants cannot store customer card details on their servers. New technology was adopted as an alternative to storing card details which is known as card-on-file (CoF) tokenization. Later the RBI extended the date of implementation by six months which is June 30, 2022. From July 1, 2022, the online players have to delete all the card (both credit and debit) data stored on their platform. And they can replace this with token technology to secure the card details of consumers

Most of the reputed banks including ICICI, HDFC, and SBI are done with the preparations for switchover and ready to adopt the new tokenization system. But the merchants are not yet ready as their backend system is not yet up-scaling for the new tokenization system and have asked RBI to grant more time to implement this new system. This new system applies to domestic and online purchases.

What is Tokenization?

The actual data of credit and debit cards when stored in a merchant platform can be misused. As a solution to this, the RBI came up with card tokenization. Now tokenization will replace the actual card data in the merchant portal. This alternate data stored in the form of code is known as a token. This token is a unique code that represents the card, token requestor, and device.

Why did RBI issue New Guidelines?

A tokenized card transaction on merchant portals is considered safe and secure for card users as the actual card details are not stored or shared on the merchant device during transaction processing. If the customer does not have the tokenization facility, then he/ she needs to key in a 16-digit card number, name, card expiry date, and CVV every time the payment is made using the card. It is a cumbersome task to key in all details whenever card details are not saved on the portal. This will impact transaction value. To make it easy for customers, card tokenization is introduced. Each card has to be tokenized so that a unique token is generated for all cards in that portal.

What is the Impact of Card Tokenization?

India’s population has more than 100 crore debit and credit cards. There are about 1.5 crore daily transactions through these cards worth Rs 4000 crore. The value of the Indian digital payments industry is very high and is increasing since the COVID-19 pandemic. During the pandemic, it was digital payments that saved many and also triggered and sustained India’s economic growth. RBI aims to protect consumer interest but implementing tokenization is a challenge because of the volume of digital transactions in India.

Earlier this year, online merchants claimed to have lost up to 30% of their revenues due to tokenization norms. This may not make much difference to big sharks but for smaller ones, this loss is too much to bear.

How will Consumers’ Life Change?

A study says that nearly 5 million customers have stored their card details on multiple portals for online transactions. These customers will be impacted if the merchants and online portals fail to implement the new guidelines in their system. E-commerce platforms will be affected badly as cards attached to monthly instalments and subscription-based transactions are stored in their database. For this reason, RBI gave 6 months extension so that all could set their systems to new guidelines and no one is at loss.

Banks are up for a new game of tokenization but E-commerce platforms, online service providers and small merchants are not yet ready with their backend. Mastercard is behind in this game, so to help them catch up RBI has banned it from issuing new cards till they comply with RBI data localization.

Why do Stakeholders Want Deadline Extension?

Merchant bodies and Digital payment firms intervened in the RBI decision and asked for an extension of the deadline for implementing new guidelines for tokenization. They have approached the central bank saying that the new mandate could cause a loss of revenue and major disruptions as they are not yet ready. If it fails, all should go back to cash transactions only as cards may not work at the merchant’s machine or portal.

What is the bank’s preparedness for tokenization?

ICICI, HDFC, and SBI Cards have their card tokenization system ready for online transactions. But merchants are not yet ready for integration. Few players have device-based tokenization like SBI Cards with Samsung devices for contactless NFC payments. Along similar lines, other banks have also initiated the process while many others are in place with the new system. Implementation of tokenization needs integration of the systems between banks and merchants so both parties being ready is necessary.

What are the steps for complete tokenization?

Tokenization implementation will happen smoothly in these three steps –

Token provisioning – Converting card numbers into a token and for this, the card networks should be in place with the needed infrastructure.

Token processing – Card transactions should be processed and completed successfully through the tokens

Scale-up for multiple use cases – Using the same token EMIs, refunds, recurring payments, promotions, offers, guest checkouts, etc should happen

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