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“Choosing a school is so difficult these days. How do I choose a school?“, remarked my colleague. She was sharing her experiences on visit to a school fair over the weekend. It is that time of the year when parents are busy picking the school they would like to have their child admitted.. We then had a discussion on CBSE/ICSE, About the international schools that have come up and about the rising education costs. The next academic year is still 6-7 months away, but schools start the admission process early in the year. Let’s see some facts related to private education system in India.
- Parents want their kids to get the best education possible
- Indian educational institutions are not among the front ranking institutions in the world, though Indians students have done brilliantly outside India and have top positions in many organizations.
- The number of education boards in the country has increased in the past decade, resulting in more options, but at the same time more stress, for already anxious parents. Gone are the days when a parent had just schools of state board or the Central Board of Secondary Education (CBSE) or Indian Certificate of Secondary Education (ICSE) to choose from. Today, there is a wide range of options, including schools following the The International Baccalaureate (IB)/International General Certificate of Secondary Education (IGCSE) curricula.
- Every school promises an education system, which provides an all-round holistic education excellent infrastructure giving a positive and challenging environment for children to develop their natural talents. Children are encouraged to be creative, independent, inquisitive, and explorative. But number of schools are mushrooming? Teachers quality is debatable, and attrition rate is High. My friend’s daughter had 3 teachers in an year!
- Education has become expensive. In our earlier article Rising Education costs! we had shared the findings of Associated Chamber of Commerce & Industry of India (ASSOCHAM) survey How much does a school education for a child costs in 2011? Rs. 94,000 annually for single child on school education. This includes fees, books,transport, stationery, uniform, educational trips,building fund, extra tuition and extracurricular activities. Break up of cost give The minimum outgo for an ICSE /CBSE school is Rs 50,000 to 1 lakh . For International curricula IGSCE/IB, it goes upto few lakhs. This is not just a one-time commitment, it is rather a recurring expense and it keeps rising year after year. Majority of parents spend on average more than Rs 18 lakh-20 lakh in raising a child by the time their teen graduates from high school.
- Education in school is just not sufficient. People are enrolling their children in tuition classes, foundation courses(for IIT starts from class 7 at many places)
- Other than school education a child goes for extra-curricular classes such as dance,music,playing musical instrument, playing games like badminton, football,cricket. And the fees of such classes are also rising.
- If you are worrying about this sharp rise in school education expense, there’s a bigger time bomb ticking away. Higher education costs are growing at an even faster rate. Average fees of Engineering course is roughly Rs 6 Lakh today, five years down the line it would be close to double meaning Rs 12 Lakh. In 10 years’ time, it’s likely to cost around Rs 20 Lakh. There is also trend of sending children to abroad for higher studies (even undergraduate). Raising the question of should I save for retirement or higher studies of children.
Choice of Curriculum : ICSE, CBSE, IB, IGCSE or State Board
The debate between concerned parents and educators on whether a CBSE or an ICSE system is better has been going on for years. With the increasing numbers of schools offering the International Baccalaureate, International General Certificate of Secondary Education (IGCSE) from University of Cambridge International Examinations and the Waldorf system; the debate has widened, providing both stress and options to parents.
Number of Schools offering ICSE, CBSE, IB, IGCSE or State Board
Till Oct 2014 every employee had a Provident Fund (PF) account number which was associated with the employer. Change of job meant another Provident Fund number. It involved transferring from one account number to another. Multiple account numbers have been a major area of concern as a majority of grievances of employees are related to transfer of funds from one account number to another. To address this problem EPFO has launched a Universal Account Number (UAN) driven Member Portal to provide a number of facilities to its members through a single window. Member has to activate his registration to avail various facilities such as UAN card download, member passbook download, updation of KYC information, listing all his member ids to UAN, file and view transfer claim. It is a major improvement by EPFO. In this article we shall focus on what is UAN number, what are advantages of having UAN number,how to check if UAN number is allotted to you, how to activate UAN registration,how to login using UAN,how to download EPFO Passbook, What is UAN Card.
What is Universal account number or UAN?
The UAN is a 12-digit number allotted to each Employee Provident Fund member by the Employee Provident Fund Organization(EPFO) which gives him control of his EPF account and minimises the role of employer
How will UAN help you?
- No need for fund transfer: Earlier, transferring EPF account from one employer account to another was a tedious process. But the UAN will do away with the need to transfer your funds at all. All you have to do is furnish your UAN and KYC details to new employer. Once the new employer verifies these details, the money from the older account will get transferred to the new account. But for old accounts (opened before the allotment of UAN), you still need to apply for funds transfer either in digital or physical form.
- No employee involvement in withdrawals: At present any request for EPF withdrawal has to be signed by your previous employer and then sent to the EPFO. There would be no need for transfer requests as money lying at your previous account would automatically get transferred to your new account once your present employer verifies your KYC details.
- Receiving monthly SMS alerts: Every month when you and your employer contribute to your EPF account, you will receive an SMS alert from the EPFO. This will be similar to the SMS alerts you receive every time your bank account is credited or debited. You can even check your total balance by downloading the EPF passbook. However, this facility is not available to employees of exempted establishments at present.
- Better utility of employee pension scheme: Due to the tedious process of transfer of fund from one account to another, members preferred to withdraw (which is an easier process) their EPF money. When you withdraw your PF money you also withdraw the fund contributed to Employee Pension Scheme. This affects the pension that you ultimately receive after retirement. With UAN, your EPF money along with that under EPS is automatically transferred. Transferring the money instead of withdrawing will result in better pension money when you require it most.
Equity Linked Saving Scheme or ELSS Mutual funds offer a choice to investors of providing equity exposure along with tax deduction benefit under Section 80C but come with a three year lock-in. These funds are an alternative to other tax saving instruments like NSC, PPF and fixed deposits. Let’s understand theELSS Funds in detail.
What are Equity Linked Saving Schemes (ELSS)?
Equity Linked Saving Schemes or ELSS are diversified equity mutual funds(it invests more than 65 per cent in equity) in which investments are eligible for tax exemption under section 80C of the Income Tax Act. Under Section 80C, you can invest up to Rs 1.5 lakh in a set of investments, one of which is ELSS funds. In Equity funds it is suggested to remain invested for long term. This long-term imperative is compulsorily enforced because under the tax laws, investments made into these funds are locked in for at least three years. ELSS Funds offer you a simple way to get tax benefits, while aiming to make the most of the potential of the equity markets. They offer the twin benefits of tax deduction and capital appreciation.
What is the lock-in period of ELSS Funds?
All tax-saving investments have lock-in periods which range from 3 to 15 years. ELSS funds have a lock-in period of three years, the shortest among all Section 80C investment options. While this reduces liquidity and prevents the investor from making changes, it can be a blessing in disguise. It also means that redemptions are not a worry for the fund manager and he can take long term investment decisions.
For the investors who take the SIP route, each monthly instalment is treated as a separate investment and gets locked in for three years. So, the SIP started in Oct 2014 will be eligible for withdrawal in Oct 2017. Similarly, the SIP invested in Dec 2014 will be open for withdrawal only in Dec 2017.
What is the taxability of ELSS Funds?
ELSS funds fall under the exempt-exempt-exempt (EEE) category.
It’s a complex financial world out there, lots of choices and sadly not much of financial education. We would not allow one to drive a car without getting a driving license yet we allow people to enter the financial complex world without any financial education.
Complex world of Everyday Finance
Questions Questions Questions! Should one put in Mutual Funds or direct equity, If mutual funds then how to choose from thousands? Or should I go the way my parents went putting money in Fixed Deposits? Should I go for personal loan ?Should I get a credit report?How do I understand the Credit Report? Should I trust the sauve Bank relationship manager or my neighbourhood uncle who is pushing a LIC policy? Gold or Gold ETF? Long term capital gain? How do I find EPF balance? What does EE and ER in SMS from EPFO means? How do I understand Form 16, Which ITR to fill, how to find TDS information, how to fill Challan 280,What to do when I get notice from Income Tax Department. Ug..h Too many choices, too much information. A financially uneducated individual armed with a credit card and access to a mortgage can be just as dangerous to themselves and their community as a person with no training who is given a car to drive.
From 1st September 2014 there have been changes in EPF, EPS and EDLI by Employee Provident Fund Organization (EPFO). This post discusses these changes. New PF rules may lower take-home pay. But increase in the statutory contribution will boost retirement corpus. There is increased Insurance cover if an employee dies in service. The Pension fund has also gone changes and those who started their jobs after 1 Sep 2014 and earn more than 15,000 do not have to contribute to Pension scheme of EPF. The process for transfer of EPF and withdrawal of EPF remain unchanged.
EPF regulations Before 1 September 2014
Employee Provident Fund (EPF),commonly called PF, is one of the main platforms of savings for retirement in India for salaried class i.e nearly all people working in Government, Public or Private sector Organizations. The tax saving under section 80C, tax-free interest, compounding and the maturity ensures a good growth of our money. Interest rate on EPF is announced every year. In the past several decades, the interest rate has ranged from 8-12 % of the balances maintained in the fund. Our article EPF Interest Rate from 1952 and EPFO, discusses it in detail.
The employer and the employees need to contribute to the EPF from the monthly basic salary plus the dearness allowance towards EPF.The employee contribution is 12% of the monthly basic salary plus dearness allownace. The employer contribution is 13.61 % of the employees’ salary. Employer’s contribution actually gets split into EPF, Employees’ Pension Scheme (EPS) which offers pension on disablement, widow pension, and pension for nominees and Employees Deposit Linked Insurance Scheme (EDLIS) which offers life insurance cover to the PF member. An employee with monthly salary of up to Rs 6,500 was a member under the three schemes . An employee can always invest more than 12% of his basic salary in EPF which is called Voluntary Provident Fund (VPF). Our articleVoluntary Provident Fund, Difference between EPF and PPF discusses it in detail. The Distribution of employer’s contribution is as given below. Our article Basics of Employee Provident Fund: EPF, EPS, EDLIS talks about EPF, EPF, EDLIS in detail.
|Scheme Name||Employee contribution||Employer contribution|
|Employee provident fund||12%||3.67%|
|Employees’ Pension scheme||0||8.33%|
|Employees Deposit linked insurance||0||0.5%|
|EPF Administrative charges||0||1.1%|
|EDLIS Administrative charges||0||0.01%|
Our article How to get information about EPF balance : Annual Statement, SMS, E-Passbook and EPF SMS What is EE, ER? How much on Withdrawal from EPF? talks about actually how much would one get.