VOL IX , ISSUE IX

If you are planning a shopping binge this festive season—online or offline—make sure you don't fall prey to these retailer tricks.

Decoy Pricing
This tactic is used by many stores. If a product worth Rs 1,000 is placed next to those worth Rs 500 and Rs 1,100, you are likely to pick the Rs 1,000 product and think of it as a good deal. It's a diversion to make the costly items seem economical. It's also used in restaurants, where menus list highcost items next to cheaper ones.

Open the Wallet
At the checkout counter, have you noticed small items like low-priced wallets, accessories, snacks and chocolates? They are there for a reason. After an exhaustive shopping session, you are an easy prey with little self-control. So you will easily succumb to chocolates and small items.

Gruen Transfer
If you feel lost in big stores, it's intentional. Named after mall architect Victor Gruen, the term refers to building designs that confuse shoppers and make them spend more time so that they make impulse buys. Crossing the same spot again also makes you less price-sensitive due to the false feeling of price familiarity.

Bag Snare
Have you wondered why you are instantly handed a carry bag in a clothes chain or a supermarket? One, if you have to hold stuff in your hand, you are likely to buy fewer things. Two, they play on your loss aversion bias, which means that the longer you have the thing in your possession, the more the sense of loss while parting with it. So ditch that bag.

Denomination Effect
This cognitive bias is exploited freely by shops. It makes a person less willing to use a higher denomination note than a lower one. So while you are unlikely to buy a big shampoo bottle worth Rs 400, you won't mind spending Rs 100 on a smaller one. The shops display more such items. This is also why you buy a Rs 10 candy at the cash counter.

Dynamic Pricing
Most online retailers use this trick, offering different prices to different customers as per demand. This means that if you have been on a website for long, you may be offered a higher price as opposed to one who has stayed for a very short period. This is because the user's browsing and spending patterns can be tracked by online retailers. To avoid it, browse incognito, erase cookies and log out of your account.

Eyelevel Products
It may not have struck you, but the products that are at eye level are typically costlier and more profitable than the ones on the bottom rack or higher up. Similarly, toys, games and other stuff for children will be placed at lower level as per the kids' ages and heights. The stores also tend to move customers from right to left because most people are right-handed and find it easier to grab stuff as they go past aisles.

Essential Items at the end
Essential food items are typically placed at the end of a grocery store or supermarket so that you are forced to cross the aisles loaded with other, attractive stuff. So, even if you had no intention of picking the items and these were not present in your shopping list, you will be tempted to buy, and most often do.

Discount Traps
'Buy one, get second at 50%' or 'Buy one, get one free' don't make for good offers. The first one is only providing a 25% discount on each item. In the latter, the price may cover both items. Online sales may also offer discounts with limited validity or on the next purchase.

Small Packages Sell Big
If you think you are saving money by buying items that come in packs, say, a six-pack of juice cartons or probiotic packs, think again. Research shows that you invariably end up consuming more over time, a smart way to make you spend more each time. So unless you are entertaining or planning a trip, try not to go in for the 'economical' packs.

Free Samples
The free sample stations strategically placed in malls and grocery stores are not just a marketing strategy for a new product or eatable, but are also intended to make you linger around and buy other items placed in the area or aisles positioned next to these stations.

Mesh Bags Costlier
Did you think the vegetables packed in mesh bags were for your ease of picking and carrying? Not always. They are costlier than loose items, and may also be a mix of good and damaged items. So it may be more cost-effective to spend five more minutes and pick the vegetables by hand.

Downloading Apps
How many e-commerce apps have you downloaded on your phone? Even if you are not an avid shopper, you may succumb to regular alerts and messages of early-bird notices and buy things just because they are on sale or make impulse purchases for items that you don't really need.

Forced Urgency
If you have tried to book a hotel via an aggregator, you are likely to have come across pop-ups that tells you '11 people are checking this hotel' or 'Only 2 rooms left on this site'. Similarly, many online and offline sales flash 'Last few days' or 'Only 5 items left' signs to force you to take action and loosen your purse strings.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. ecrmagic.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. ecrmagic.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.
News Despatch
VOL IX, ISSUE IX
The existing tax provisions provide beneficial tax treatment both in case of house rent allowance (HRA) and rent-free accommodation (RFA).

We would all agree that avenues of tax optimisation for salaried individuals are limited. Most of the companies widely offer accommodation benefit to its employees in the form of allowance or in kind. The existing tax provisions provide beneficial tax treatment both in case of house rent allowance (HRA) and rent-free accommodation (RFA).

1. House rent allowance

The quantum of HRA exemption under the Income Tax Rules shall be least of the following:

* HRA received

* 50% of the salary if the rented property is located in Mumbai, Delhi, Chennai or Kolkata or 40% of salary in case of other cities

* Actual rent paid less 10% of salary

Salary for the purpose of calculating HRA exemption includes basic salary, dearness allowance and commission based on fixed percentage of turnover, but excludes all other allowances and perquisites.

In order to claim HRA exemption, where rent paid during the year exceeds Rs 100,000 a year, employees are required to submit Form No. 12BB to the employer, incorporating the name, address and Permanent Account Number (PAN) of the landlord. In case the landlord does not have a PAN, a declaration to this effect from the landlord, along with the name and address of the landlord should be given to the employer. Employees are exempted from production of rent receipt to employer, if the house rent allowance is up to Rs 3,000 per month or Rs 36,000 a year.

2. Rent-free accommodation

Many companies also provide rent free accommodation (RFA) to some of its senior level employees. It is particularly prevalent in case of expatriates, where landlords generally prefer entering into lease agreements directly with the employer. The benefit so provided by the company is a taxable perquisite which is calculated as follows:

a) If accommodation is owned by employer:

  • * 15% of salary in cities having population more than 25 lakhs;
  • * 10% of salary in cities having population between 10 lakhs to 25 lakhs;
  • * 7.5% of salary in other areas


b) If accommodation is leased by employer, taxable value will be lower of the following:
  • * 15% of salary in case of residential house and 24% for hotel accommodation; and
  • * Actual rent payable by the employer as reduced by rent paid by the employee (if any)


Salary for the purpose of calculating RFA includes basic salary, dearness allowance, bonus, commission, all taxable allowances and any monetary payment chargeable to tax.

The above valuation rules can serve as a guide to determine the take home salary in the hands of an employee to whom either of the two benefits are extended by the company.

Salaried employees have limited avenues for tax planning, hence corporates could make use of HRA and RFA as effective tools for reducing their employees’ tax burden.

The writer is partner Deloitte Haskins & Sells LLP. With inputs from Divya Agarwal, senior manager, Deloitte Haskins & Sells LLP.

An important aspect of shifting is intimating the change of address to all concerned, in order to ensure seamless communication. Any change in the permanent or correspondence address should be promptly communicated for the smooth functioning your bank and investment accounts.

1 Options available

With respect to bank accounts, there are two options available. You can retain your existing account with the old branch and just communicate the new address to the bank.The other option is to shift the account to a new branch.

2 Form

If the account with the old branch is to be retained, a form intimating the change in address needs to be filled out by the customer and submitted to the nearest branch. If the branch is to be changed, the form for account transfer must be filled.

3 Documents

Only proof of the new address needs to be submitted. However, in case of account transfer, the bank may ask for the cheque book, ATM card or debit card to be returned, .If the cust Processomer has completed KYC formalities with his old branch, he is usually not required to submit those documents again.

Once the customer submits the completed form with documents to a branch close to the new address, the bank will verify the credentials of the customer and process the request.

4 Dispatch

In case of account transfer, a cheque book with the new branch address and a new debitATM card are dispatched to the client. In cases where the customer has only changed his address and retained his branch, any new communication shall be sent to the new address of the customer.

6 Points to note

  • All joint bank account holders are required to sign the form for address change or shifting the account.
  • New contact details such as landline or mobile phone numbers should also be updated while filling the requisite form.
  • With core banking, customers can perform almost all banking functions at any branch without shifting their account.


Investors can now track and manage investments in multiple mutual funds through the Mutual Fund Utilities (MFU), a shared service platform of asset management companies. To use it, an investor has to register on the MFU platform and obtain a Common Account Number (CAN). This can be obtained online or at AMC offices or POS locations.

1 Website

To fill the form online, the investor must visit the following link: https:http:www.mfuindia.comCANFormFill.

2 Information

The investor has to fill in information such as name, PAN, Aadhaar ID and contact details.Additional KYC and FATCA details also need to be submitted. Bank account details have to be furnished. The form also provides for registration of nomination.

3 Submission

Once the online form is filled and the Finish and Submit button is clicked, the pre-filled CAN form is generated. This needs to be printed, signed and submitted at any of the POS locations or AMC offices. One can also courier the form with required documents to the MFU office.

4 Documents

  • The following documents are required to be submitted along with the MFU CAN application form
  • Self-attested copy of PAN CARD
  • Self attested copy of bank statement or cancelled cheque or letter from bank manager
  • Necessary documents pertaining to factors as may be required.


5 Process

Once documents are verified and processed, a unique CAN is generated. All existing investments in mutual fund folios, under the same PAN are mapped to the CAN.

6 Points to note

  • Investors can carry out changes to the CAN form by accessing the form online before printing and physical submission.
  • One also has the option to print the form and fill it by hand or use the PDF editable format to fill the form offline after downloading it.
Paying only the minimum due on your credit card will not help as interest is charged

The utilisation of available credit limits of credit card holders varies every month. Some may make use of the entire credit limit and some may be conscious about their credit card purchases. Depending on their spends, some users may have been saddled with a hefty bill due to unavoidable or impulsive spending. At such times, it is more likely that the term “minimum payment due” on their bill statement will catch the eyes of many individuals. Is it wise to pay just this minimum due and carry forward the balance to the next month bill cycle? Here we look at what it means and the pros and cons of the term “minimum payment due” on the credit-card bill.

What is it?

The minimum payment due is a certain per cent of the total outstanding amount due for payment. In general, it is 5 per cent of the total outstanding balance. That is, if your outstanding balance due for payment on your credit card in a particular month is Rs. 10,000, then the minimum payment due for that month would be Rs. 500 (5 per cent of Rs. 10,000). So, is it enough if I pay only Rs. 500 for that month? Yes, if you pay this minimum due, you will not be considered a defaulter. Sounds good? Not really.

There is a myth in the market that one will not be charged the interest rate if he pays only his minimum due. Aditya Agarwal, Founder, Wealthy.in says, “That is not the case. Only the late fee is not levied in this case. But the interest is charged on the balance amount and will be added to your next month billing cycle.”

Higher charges

Annual Percentage Rate (APR) is the term used for interest charged on credit cards. This APR is huge compared to other loan instruments. For instance, Axis Bank charges 46.78 per cent per annum (3.25 per cent per month) for its “My Choice Credit Cards” variety. While State Bank of India charges 40.2 per cent a year, for ICICI Bank, it varies between 30 and 42 per cent, depending on the type of card you hold.

Say, you have paid only Rs. 500 (the minimum amount due) of your total bill value of Rs. 10,000 for August. In the next month bill, the APR will be charged on the previous month due amount of Rs. 9,500 and it will be added to that month amount. If you have spent Rs. 5,000 in September, then, the next month outstanding balance will be Rs. 5,000 (current month spending) + Rs. 9,500 (previous month balance) + the APR charged on the previous month balance of Rs. 9,500.

So, what happens if I continue to pay only the minimum amount due for a prolonged period of time? The APR on the balance amount will get accumulated and at one point in time you will reach or even exceed your total credit limit. Once the credit limit is exceeded, you will be asked to pay the minimum due plus the amount by which you have exceeded your total credit limit. Say, for example, if your credit limit is Rs. 1,00,000, but upon accumulation by just paying only the minimum due, your current month total bill comes at Rs. 1,25,000. Then you have to pay the minimum amount due of Rs. 6,250 (5 per cent of Rs. 1,25,000) plus Rs. 25,000 (the excess amount above total limit)

Getting into a debt trap

So, ideally, paying only the minimum payment due on your credit card will only increase your outflow since interest is charged. Ranjit Punja, CEO & Co-Founder, Credit Mantri, says, “If you keep on paying only the minimum amount due, the outstanding does not reduce at all or there will be only a marginal reduction in the outstanding since the APR gets accumulated with every bill cycle.”

Also, the major advantage of getting the free credit period, which is available only for credit card spending, will be lost as you end up paying interest charges. In addition, it will also increase your credit utilisation ratio (outstanding balance divided by the total credit limit). A higher utilisation ratio has a negative impact on your credit score.

Credit card is one of the easiest ways of taking a short-term loan. But the higher interest rate in the form of APR makes credit cards the most expensive unsecured form of loan. So make sure that you always pay the entire bill amount to insulate yourself from a debt trap.

With inputs from The Economic TImes , The Hindu & Financial Express

Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. ecrmagic.com and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. ecrmagic.com, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.