Why insurance should not be an investment tool

Insurance as life cover OR insurance as Investment is often a dilemma of many people. The main problem is misconception. Many people are looking at it as an investment but a basic purpose of as insurance is to provide financial security to the dependents in case of death of the only earning member of the family.
But unfortunately even today it is grossly misunderstood concept, both entry & exit from any policy for all the wrong reasons.

People are looking at insurance as insurance cum investment product. They don’t realize that these products remain complex & such product complex in its nature are worst for the investors. It is a basic rule of investment. So it is always better to have a single product with less financial complexities.

Another important dimension is those who are looking for combined product (i.e Insurance & Investment) any such product caters both the aspect won`t be able to give adequate cover for there life because of its very high premium, where as adequate amount of life cover should be main aspect of the insurance policy. And at the moment there is no insurance product in India that offer adequate amount of insurance cover with better return on investment.

Statistic shows that return on investment by insurance companies are only 1.5 to 5 percentage ( If traditional plan ) or maximum 6 to 8 percentage ( If ULIP Plan ), where as if we compare them with any mutual fund’s scheme with hybrid or balance fund gives 12 to 15 percentage return minimum. Even bank or company FDs offers better returns than insurance.

INSURANCE

Another popular reason for considering the insurance as an investment is tax saving aspect. Many times people without understanding the policy in detail takes there investment decision randomly, & end up in investing 5 to 8 insurance product of same features.

Tax saving is a short term benefit as against it is long term obligation because of its years long investment period some time decade long. Another problem with this type of long term investment is its non liquidity. What is a use of any such non liquidity investment when at the time of investors financial crises won`t comes to its use.

But purely for tax saving purpose other financial options are available offer attractive returns such as mutual funds with there equity linked saving schemes properly known as i.e. ELSS offers better return up to 12 to 15% p.a or even in some companies able to generate more than 18% & more importantly its lock up period is only 3 years.

People while “investing” in insurance companies for investment purpose unfortunately never pay any attention of its return on investment. Investor never compare its return with other investment options such as MF, or even bank or company FDs.
The obvious question is why insurance companies are unable to generate better returns. Its answer lies in its nature of business & certain stringent directions of the Insurance Regulatory Development Authority i.e. IRDA.
As per IRDA traditional plans such as endowment/money back/ whole life insurance companies have to invest 85% in debt & 15 % in to equity. There are several guidelines & broadly defined categories of investment with its limits of investment prescribed by the IRDA.

In some cases equity exposer is restricted to even 10 % to the insurance companies & in other cases it varies between 12 to 15 %.Rest of the corpus needs to be invested in central govt & state govt securities which curbs insurance companies efforts of generating better returns.

Considering all this term insurance is a good choice with its simple nature, low premium,& policy holder treats it as expenses & does not expect any thing from it.
Inspite of all this miss selling of insurance policies are rampant in India. Insurance agents are the one who get the excellent returns instead of investors for selling complex schemes. Even in some cases agents get 30 to 40% as commission for which they often misguide the investors. They are least interested in selling a single product like term policy because of its low percentage of commission.
IRDA is also very well aware of this problem & came down heavily on insurance companies & agents as well.

Strategy for Indian Equity market

Where we stand today on market specific parameters

• Reasonable valuations

After recent reasonable consolidation, the Indian market is trading at near long-term average valuations on Forward Price to Earnings (PE) basis. Nifty index is trading at 16.3 times of FY16 earnings. India’s market cap-to-GDP at 77% is much lower than its 2007 peak of 105%. The Indian equity market is relatively underpenetrated compared to market cap-to-GDP ratios in developed markets (US 140%, UK 130%, Japan 105%).

FRIDAY

Source: Bloomberg

• Turnaround in macro variables bodes well for earnings growth

Earnings growth of the Indian stock market has been extremely subdued over the last two years. However, as macro variables are all falling in place, earnings growth is set to recover in FY16. Indeed, Indian earnings are expected to grow at the fastest pace in India compared to any other large equity market. (Source: Bofa ML research)

EPS

• Early signs of shift in domestic investors’ preference towards equities.

Despite the run-up in the last 15 months, domestic ownership of Indian equities remains near record low levels. Prior to 2014, domestic household investors withdrew from equities for 6 years. There are multitudes of factors responsible for this apathy of local investors towards equities. Not only was overall gross savings coming down in last 8 years but also share of financial savings as a percentage of total gross savings came down significantly. Within financial savings, equity assets as a percentage of total financial assets have fallen to 3.8% (compared to 6% in 2007). This was largely driven by savings flowing into alternative asset classes like gold and real estate.

• Alternative assets turning less attractive.Gold and real estate have yielded muted returns in the last two years and are turning less attractive due to increased regulations. Equities, on the other hand, have outperformed significantly. In fact, there are early signs of domestic investors favoring equities over other assets. Mutual Funds saw highest ever annual inflows in FY15 of Rs 68,000 crore compared to net outflows in the previous 6 years (Source: Bloomberg). History suggests that investors preference towards an asset class lasts many years. We may well be at the beginning of this lasting shift in investors preference towards financial assets in general and equities in particular. Given the pent up demand for equities and rising attractiveness from absolute and relative standpoint, domestic flows could rise substantially in the next 3-5 years.

Overall, in a world where growth is scarce, deflationary concerns abound and interest rates are trending upwards, India provides a rare favorable blend of high and rising growth, supportive inflation and downward interest rate trajectory.
Factors that could aid the market over the next 12 months If any of the below materialise, it could be significantly positive for the market in the coming quarters.

• Long pending reforms get implemented – GST and land acquisition bills get cleared and implemented in the coming year.

• Financial conditions ease materially – Policy rates are cut much more than expected by the market and domestic liquidity conditions become benign

• External environment both from demand perspective and capital flows perspective turns supportive.

Factors that could aid the market beyond the next 12 months

The government has undertaken a series of reform steps that are good in the medium term while they may not yield immediate results. The government is clearly working with medium term objectives of removing bottlenecks and increasing transparency and efficiency. We envisage a situation where lot of these reforms would start yielding results thereby taking India to a higher growth orbit.

Few of these policy actions which may have positive impact in the next 1-3 years are as follows:

• Full benefit of interest rate easing will start to positively impact overall demand as well as corporate profitability.

• Benefit of above cited supply side reforms start to yield returns. Full benefit of DBT, spread of DBT to cover fertilizer and food subsidies, GST and new age Indian infrastructure projects can simultaneously result in higher potential growth.

• Realised benefits of soft reforms in critical areas of governance and ease of doing business.

In every growth story, there will always be short-term challenges. Our advice is to look at the big picture. Keeping an eye on the near-term events but please don’t get carried away by them. As I tweeted a few days back, “India’s GDP at $4 trillion in a few years is all that matters to long-term investors”. For others there is monsoon, Greece, interest rates, etc to worry about”.

Keep the faith!
Share view by Sunil Singhania, CIO ( Reliance MF )

Don’t buy real estate in a flash sale

Don’t buy real estate in a flash sale

For potential home buyers, the coming three days (Friday-Sunday) could be a great opportunity to purchase property. With two companies — Amura Marketing Technologies and 99acres.com — organising a Realty Flash Sale (IRFS) that will showcase properties from all major cities and discounts of up 20 per cent,potential buyers could get lucky.

These online sites have tied up with 50 builders, including Tata Housing, Shapoorji Pallonji, Godrej Properties and Shriram Properties, Sobha. Vikram Kotnis, managing director of Amura, says this has been organised because most buyers are sitting on the fence waiting for real estate prices to correct further. He believes prices in most markets have bottomed out and it’s the best opportunity to buy a house. So, these companies went to developers and asked them to pass the marketing cost to customers so that they would make a purchase now rather than wait.

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Reality check

The discounts are not a straight reduction on the selling price. While some may give free stamp duty and registration, others would waive off floor rise (like Hiranandani Constructions), offer free second parking, and value adds at no extra cost, such as fully furnished homes.The process is quite simple. Once buyers short list a house, they will receive a coupon specifying the discounts. After the online event ends June 28 (Sunday), users will need to take the coupon to respective developers and book the property. The coupon will be valid for either seven days or until the stock lasts.

Already 40,000 people have registered for the Flash Sale. The properties showcased will be for all budgets, from Rs 45 lakh to over Rs 10 crore. These two companies put in some safeguards: They also have vetted the permissions these realty players have obtained. Most projects featured in the sale are already in various stages of construction.

Further, to ensure the buyers are protected, there will be no money involved when a user selects a property online. There is word of caution though. All the properties are under construction. Experts say that buyers are already facing issues such as construction delays, builder asking for extra money citing some new provisions, and dishonouring contracts. Buyers should not get lured by the discount. Consumers may get a good price but it’s not similar to buying electronics or clothes online. A house is the life’s biggest purchase for most. Experts say that buyers should physically go and check the property and due their due diligence.

World’s largest fund EPFO to start equity investment

India’s state social security fund will start investing in equity markets next month, as part of a reform drive aimed at boosting the economy. With more than USD 100 billion of assets from some 80-million members, the Employees’ Provident Fund Organisation (EPFO) is one of the world’s largest. It will begin by investing in exchange traded funds, with the goal of earning higher returns.

“Starting with 1 percent in July and by the end of this (fiscal) year it will go up to 5 percent” of annual investments.

epfo--621x414--621x414

India’s fiscal year ends March 31. An EPFO official said the fund annually invested nearly 1 trillion rupees (USD15.72 billion), out of which it could invest nearly 50 billion rupees (USD785.95 million) in equities between July and March.

The new EPFO rules may help Modi hit an ambitious target of raising nearly USD11 billion through selling shares in state-run firms and minority stakes in private companies this fiscal year, because for the first time EPFO will be able to buy the government’s shares.

Real estate rental yield is below one percent

The Right strategy is to sell real estate sector (over supplied there are no buyers as per data) and buy equities and bonds. Real estate rental yields are around 1.0% to 1.5% p.a. across metros.

What is rental yield? Take for example a house worth Rs 1 crore. If you have to buy the house outright you pay Rs 1 crore. You also have the option of renting the Rs 1 crore house with rentals at around Rs 18,000 per month. Total rent for a year works out to Rs 2,16,000. Total rent divided by the cost of the house is the rental yield, which in this example works out to 1.8%. And if you are in 30% bracket then Rs.18000/- p.m. Less Rs.5400/- Total Rent Received Is Rs. 12,600/- also deduct maintenance charges,propperty tax etc.. Rs.36000/- p.a ( i.e. Rs. 3000/- p.m paid by owner ) that means Net Rent received is Rs.12600-Rs.3000 = Rs.9600/-p.m it means Net rental yield is below 1.0% p.a. While Inflation is ranging at 8-9% p.a.

Resale Property ( 1-3 year old property ) price is already down by 20% to 35 % from last 2 years due to over supply,Hidden charges by builders,Lack of transparency in project,not completed in time etc…

Two Major real estate companies price in Sensex DLF IN 2008 Rs.1200/- per share and now nearby Rs.110/- per share Unitech Rs. 546/- per share and now in 2015 is Rs. 7/- per share from last 7 years Market capital is depreciated more then 80% – 90 % . Investors are pulling money from real estate from last 24 months.

Ok, so rental yields are at 1.0%p.a. to 1.5%p.a. levels, why does it present a compelling case to sell a house worth Rs 1 crore and invest it in bonds and equities? The argument for selling the investment and buying bonds and equities is that you are effectively funding your investments at 1.0% to 1.5% p.a, which is the rental yield which is less then saving bank account deposits.

How is it that if you sell a real estate investment, your funding cost for investing in bonds and equities is just 1.0 %? You have been earning just 1.0% every year as the rental yield on your investment of Rs 1 crores. Once you have sold your investment, you stop earning 1.0% on your investment as you stop receiving taxable rent. Hence your opportunity cost of not receiving rent is 1.0%, which in effect is your borrowing cost for funding your investments in bonds and equities.

Ten year benchmark government bond yields are at levels of 7.75%. Your funding cost is just 1.25 %p.a. You earn an arbitrage income of 6.5% by selling your real estate investment and buying the government bond. Your arbitrage income can come down only if rental yields rise over the years which is not possible due to oversupply in the market.

If you are an equity investor, you can buy into the Sensex or Nifty ( P.E.is 20 attractive still with balance and diversify portfolio for long term and tax free return ). If the Sensex and Nifty values do not rise, you will be earning a 0% by selling real estate and buying equities as your cost of funding is 1.25 %. However even if the Sensex and Nifty rise by just 10% every year, you make a clear 10% ( TAX FREE GAIN ) on your investment annually. Equities will rise much higher than 10% annually going forward if India gets its act together.

INDIA-ECONOMY-BUDGET-REAL ESTATE

The risk you take in selling your real estate investment is that prices continue to rise despite all odds. Prices have risen multi fold over the 2008-13 period even as the economy has stuttered with growth rates coming off from 9% levels to 5% levels. Why should real estate prices not rise despite odds?

To answer the question, can real estate prices rise despite odds? You would need to reason out the following. A) Mortgage cost is at 10% and above levels while rental yields are 1.0%. The 9% difference between yields and borrowing costs is huge and real estate prices should rise by 6% every year just to break even. B) Inflation in the economy is running at 9% levels (five year average Consumer Price Inflation), household income levels have hardly kept pace with inflation and price to income ratio is around 8 times, even for a senior level professional in non-extraordinary pay companies. Real estate affordability has come off sharply. Hence for real estate prices to rise, there must be a very strong reason such as a sharp pickup in economic growth, sharp fall in interest rates and high liquidity in the system. If this does happen, the primary beneficiaries will be equities and bonds as these asset classes have reacted to economic downturn and inflation and the last beneficiary will be real estate as it is highly overvalued given any kind of yardstick.

India to be among top 3 economies by 2030

India to be among top 3 economies by 2030

While other emerging markets, such as Indonesia and Mexico, would rank among the top ten economies at market exchanges rates by 2050, overtaking economies such as Italy and Russia.

Emerging markets are expected to grow faster than developed economies, and India is likely to become the 3 rd largest economy by 2030 in the world after China and the United States.

According to the Economist Intelligence Unit (EIU), emerging markets are expected to grow faster than developed economies, and as a result developing countries such as China and India are likely to overtake current global leaders such as the US, Japan and Western Europe. “China is expected to overtake the United States in 2026 in nominal GDP in US dollar terms and maintain its position as the largest economy to 2050.

indiaaa

India is expected to move up the rankings to third place, with real growth averaging close to 5 % up to 2050.

By 2030 the top 3 economies of the world would be the US, China and India.
Meanwhile, other emerging markets, such as Indonesia and Mexico, would rank among the top ten economies at market exchanges rates by 2050, overtaking economies such as Italy and Russia.

INDIA2

Besides, China, the US and India, the 10 economies in 2050 at market exchange rates would be Indonesia (4th), Japan (5th), Germany (6th), Brazil (7th), Mexico (8th), the UK (9th) and France (10th). Such will be the growth of China and India that by 2050 they will each be richer than the next five (Indonesia, Germany, Japan, Brazil, and the UK) put together, the report said adding “this will represent a scale of wealth relative to the rest of the top ten that is unique in recorded history”.

“Given China’s and India’s economic might, they will take on a much bigger role in addressing global issues such as climate change, international security and global economic governance,” the EIU report titled ‘Long-term macroeconomic forecasts’ said. However, despite their low growth outlook advanced economies cannot be ignored, as the spending power of consumers in these regions will remain significantly higher, the report added.

Manpasand IPO review

Manpasand IPO review

The issue is jointly lead managed by Kotak Mahindra Capital Co. Ltd, IIFL Holdings Ltd and ICICI Securities Ltd and Karvy Computershare Pvt Ltd is the registrar to the issue.

ICICI Securities has not rated the issue.

Proceed is being used for:

• Setting-up of a new manufacturing facility in the state of Haryana.
• Modernization of our existing manufacturing facilities i.e. Vadodara 1 Facility and Varanasi Facility.
• Setting-up of a new corporate office at Vadodara.
• Repayment/prepayment of certain borrowings availed by the Company.
• Funding expenditure and for general corporate purposes.

Overview :

“Mango Sip”, is a mango fruit based drink with approximately 12-14% mango pulp content. Processed at a third party facility, it currently selectively distribute free bottles of “Pure Sip‟ along with “Mango Sip‘. To part finance its modernization of Vadodara and Varanasi facilities and setting up of new unit at Haryana, setting up of new office at Vadodara and repayment of part debt and general corporate fund needs the company is coming out with a book building process IPO to raise Rs. 400 crore.

The company is issuing approx 12500000 equity shares of Rs. 10 each (approx 25% dilution based on upper price band). This book building process IPO has a price band of Rs. 290-320. The issue is opening for subscription on June 24 and will close on June 26. Minimum application is to be made for 45 shares and in multiples thereon, thereafter. Post issue shares will be listed on BSE and NSE.

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The company clocks a CAGR of nearly 35 % over FY-17E, at the upper end of the price band, the issue will be valued at P/E of 28 times.

It pointed out that 75 % of the total mango drinks market is controlled by Coca-Cola’s Maaza, Pepsico’s Slice and Parle Agro’s Frooti in the ratio of 40:20:15.The company has to make its space in the 25 % of the market that has companies Hershey India (Jumpin), Hector Beverages (Paperboat Aamras), Surya Food and Agro (Priyagold and Scandic Foods (Sil).

Peer Group Comparison (Rs. in Millions)

MANNNN

The company is highly dependent on a single brand (Mango Sip), which currently has rural and semi-urban focus. Any further slowdown in rural markets could likely result in lower spending on discretionary products, it believes.

“Going forward, for penetrating the brand in urban markets, MBL would face stiff competition from strong existing brands like Frooti, Slice, Mangola, Pepsi, Coca cola etc,” the brokerage said in a note.

The Company has not been regular in depositing undisputed dues, including provided fund, income tax, sales tax, service tax, custom duty, excise duty and other material statutory dues applicable to it with appropriate authorities. (Unprofessional).

Manpasand is yet place orders for orders for plant, machinery and equipments.

Outlook

Manpasand Beverages is a fruit drink manufacturing company with a primary focus on mango fruit, and holds a strong brand identity especially in the underpenetrated semi urban and rural markets in India. The company is having a wide distribution network including 73 consignee agents and 654 distributors spread across 24 states in India to whom it sell directly. The company has been witnessing good interest from PE investors and in fiscal 2012; it received an investment of Rs 45 crore from SAIF Partners India IV Limited. In fiscal 2015, it received another round of investment of Rs 45 crore from SAIF Partners India IV Limited and an investment of Rs 26.25 crore from Aditya Birla Trustee Company Private Limited.

VALUATION AND RECOMMENDATIONS:

The company will have an equity around Rs 50 cr, post IPO. The offer is being made around 40 plus PE, based on FY16 earnings, which is expensive for a single segment / product company. New capacity planned with ₹152 crore of the issue proceeds is likely to commence production only in January 2017. The company’s margins, RONW and EPS have come down in the last 2 years.

The immediate past record of the BRLMs are also not encouraging. Kotak managed Ortel and Adlabs. Both are trading below IPO price, where as ICICI Securities managed PNC Infra. That too is trading below its offer price. For IIFL this is the first IPO in the last 3 years.

High risk Low return IPO, Strongly avoid this IPO.

Japan’s Nikkei Hits More Than 18-Year High

Japan’s Nikkei Hits More Than 18-Year High ( Highest since December 1996 )

Japan shares have had a steady run since October. Support has come from buying by the government’s huge pension fund, a weaker Japanese yen and buying by foreigners.
Local investors are also more interested in equities as Japanese bonds are returning low yields.

japan nikki

NIKKEI 20,868.03 up 58.61 (0.28%)

1 US Dollar = 124.03 Japanese Yen

1 Indian Rupee = 1.95 Japanese Yen

The BoJ is buying government debt at an annual pace of about Y80tn, suppressing yields and thus encouraging funds to move into riskier assets like shares.

Japanese shares — exporters, in particular — have been buoyed by the weakening yen, which earlier this month fell to its lowest against the US dollar in 13 years amid the Bank of Japan’s quantitative easing programme.

Changes made in Income Tax Return Forms in details

IT Department is creating a new online based tool for filing IT Returns, which will be active within June 3rd week. Tax Payers can directly log on to the tool, and file their returns.

1.Foreign Trips Details

2.Bank Accounts Details

3. Relief to Non-Indian Citizens

4. New Income Tax Return Form 2A

5.Length of the ITR

6.Filing ITR 1 (Sahaj)

7. Extension of Income Tax Return Filing Date

1.Foreign Trips Details

No foreign visit details or bank balances required . Assesse only needs to quote his/her passport number, if any.

2.Bank Accounts Details

Details of Bank Accounts are also not required to disclose now, only the IFS code together with the account number of all the current/savings account held by assesse in the previous year is required to be filled-up.
Further, details of dormant bank accounts in which no transaction is done from the last 3 years are not required to be furnished.

3. Relief to Non-Indian Citizens

Foreign Nationals who are not Indians and are living in India on either business purpose, employment purpose or education need not declare their overseas assets and income while filing for IT Returns. This is a huge relief for them, as they could have been prosecuted under the new ‘Black Money Law’ being implemented in India.
The Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015 or the Black Money law has powers to imprison an expat or a NRI for 5-6 years for ‘willful attempt to evade taxes’ and for failure to file return of foreign assets and bank accounts.

INCOME TAX

4. New Income Tax Return Form 2A

A new income tax return form 2A is introduced for the class of assesses having income from more than one house property but does not have any capital gains, income from business/profession or foreign asset/foreign income.
Earlier, assesse having income from more than one house irrespective of having any capital gains or income from business/profession had to file ITR 2. But now ITR 2A is to filed by them.

5.Length of the ITR

The length of the ITR Forms 2 and 2A will not be more than 3 pages. The scheduled is required to be filled-up only if applicable.

6.Filing ITR 1 (Sahaj)

Individuals who does not have any taxable income i.e. whose all incomes are exempt from taxes other than agriculture income exceeding Rs.5,000 can now file income tax return form ITR 1 (Sahaj).

7. Extension of Income Tax Return Filing Date

Since the forms have just been notified, the software for these forms will be launched by the 3rd week of June, 2015.
Due to the delay in releasing the income tax return forms and the software, it has also been proposed to extend the return filing date to 31st August, 2015.

Changes in Provisions of TDS and Rate of Service Tax

Changes in Provisions of TDS and Rate of Service Tax

1. TDS on Provident Fund Withdrawal

2. New Service Tax Rate of 14%

3. TDS on Recurring Deposits Interest Income

4. TDS on Fixed Deposit Interest Income

5. TDS on Life Insurance Proceeds

1. TDS on Provident Fund Withdrawal

Effective from 1st June, 2015, TDS @ 10% would be deducted from the money withdrawn from your provident fund before 5 years of continuous service. Earlier, withdrawal from the provident fund account before completion of 5 years of continuous service did not attract TDS but taxpayer is required to show the same under the head of income from other sources and pay tax as per his/her tax slab.
However, withdrawal up to Rs.30,000 is tax-free and no TDS will be deducted from the amount withdrawn. Further, if you transfer your EPF balance from one employer to another, the period of the service with the previous employer shall be counted while calculating the 5 years of continuous service.
Few other cases of tax-free withdrawal irrespective of the amount are:
Where the business of the employer is discontinued.
Employee is severely ill.
One thing to keep in mind is that while making withdrawal you should quote your PAN card else the rate of TDS shoots-up to flat 30% i.e. highest tax slab rate.

2. New Service Tax Rate of 14%

Hiking Service tax to 14% is the most controversial change in the budget 2015. As there are talks going on implementing GST (Goods and Service Tax) from the April, 2016, increasing of service tax hurriedly is not understandable.

Noticeably no date of applicability was announced in budget 2015 but on 19th May vide Notification no. 14.2015, finance ministry announced the applicability of the new service tax rate would be 1st June, 2015.

The new service tax of 14% is flat rate and both education cess or higher education cess get subsumed in the new service tax rate. This means service tax @ 14% will only be applicable on the services provided on or after 1st June 2015. Before this date Service Tax @ 12% would be levied on all the services provided.

The new service tax applicable on the various services w.e.f. 1st June, 2015 is as follows:

Restaurant – 5.6%
Hotel Lodging – 8.4%
Vehicle Rent – 5.6%
Hall with Catering – 9.8%
Catering – 8.4%
Building Repairing – 9.8%
Civil Contract with Material – 5.6%
Building Residential – 3.5%
Building Commercial – 4.2%
GTA Transports – 4.2%
All other Services – 14%

TDS

3. TDS on Recurring Deposits Interest Income

Another disappointing change in budget 2015 is bringing recurring deposits interest under the ambit of TDS. Now, if the interest earned from the recurring deposits exceeds the threshold limit of Rs.10,000, TDS @ 10% would be deducted. In case you fail to mention your PAN, the rate of TDS would be 20%.
However, the impact of the amendment is NIL on the taxpayer because earlier taxpayers had to include the recurring deposits interest income under the income from other sources and pay tax accordingly and now the same will be done by the bank on behalf of the taxpayer.
This amendment would cause problem only to the taxpayers who does not have any taxable income or having total income below the taxable limit. They would now be necessarily required to fill Form 15G (non-senior citizens) or Form 15H (for senior citizens) to request the bank not to deduct TDS.

4. TDS on Fixed Deposit Interest Income

Fixed Deposit interest is always taxable but a liberty of making fixed deposit in different branches of the same bank and gets escaped from the TDS provision, if the interest income at each branch falls below Rs.10,000, was there before budget 2015.
Budget 2015 has taken this liberty from the taxpayer by making a small change in the provision. Now interest from fixed deposit from all branches of the same bank will be summed up to calculate the threshold limit of Rs.10,000 under section 194A of the Income-Tax Act.

You can duly submit Form 15G or Form 15H to avoid the deduction of TDS from your interest income, if your total income falls below the taxable income limit.

5. TDS on Life Insurance Proceeds

Provision of deducting TDS @ 2% from the life insurance proceeds above Rs.1 lakh was introduced in budget 2014 under Section 194DA. Budget 2015 has granted a relief to the policy holder that if his/her income is not chargeable to the tax, he/she can furnish Form 15G or Form 15H before the end of the year to get tax-free payments.