How much “Convenience Tax” You are paying ?

“Convenience Tax ?? When was this tax imposed ?? Government has no other business than to impose new taxes everyday ??” might be a normal reaction after reading the title. Well, the good news is, this tax is not really levied by the Government. Rather, it is a self-imposed tax by the citizens like us who are too “Convenience Seeking” and thus have to pay this tax because of their own short-sightedness. Lets have a look in detail:

1. Investing for tax saving u/s 80C

Although most of us know and agree that ELSS is the best avenue for tax savings and investment growth, most of us are driven away with the new regulations that have come in; “KYC Mandatory”, “No Third Party Cheques” etc etc to name a few. All these make us think that ELSS investment is too complicated and too much of a headache. Let me go the convenient way of taking an insurance-cum-investment plan.
Convenience: Insurance-cum-investment plans still come with lot of convenience. The agent is available at any hour of the day (thanks to the hefty commissions), no KYC hassles (at least less than ELSS) and the premium can also be paid in cash. Occasionally, a hard bargain could also fetch some passback. What could be better than this one ?
Tax: All these “insurance-cum-investment” plans come with huge hidden costs which defeat you on all fronts i.e. insurance as well as investments. Even if you find them convenient in the short term, they might deprive you of a substantial amount when you need it the most (death claim, retirement etc).
Remedy: Though it might appear a little painful, it is advisable to go for ELSS even if it requires more regulations. Remember, the regulations are in your interest. If you find a Security Check to be a hassle, may be you are inviting intrusion.

2. Taking Life Risk Cover

Term plan or the pure life risk cover is itself a bitter bite for most of us as there are no “returns” from it. Moreover, people are seen reluctant to go for higher risk cover as it might involve a compulsory “medical test”.
Convenience: Either take a low life risk cover wherein a medical test is not needed. Or else go for a higher risk cover and sign the declarations given by the company. Much convenient than to go for a medical test. After all, who has the time to go through all this ??
Tax: Taking a low risk cover is almost like having no cover. Similarly, if you sign too many declarations with the insurance company, they basically put the ball in your court. Today, it might hand over the policy document to you conveniently, but in future your family might have to undergo a lot of painful procedures if the need of claim arises.
Remedy: Assess the right amount of risk cover you need and go for a medical test for the policy. This way you have put the ball in insurance company’s court. They might offer you the policy at somewhat higher premium (if your health report is below par), but at least there wont be trouble at the time of claim. Now its up to you to decide, whether you want a policy document in your hand or you want the claim settlement to be smoother.

3. Getting the Life / Health insurance forms filled up by the agent.

We might feel like a king when the agent tells us that he will fill up the Life / Health insurance form on your behalf. But have we ever been careful of what actually he is filling up?
Convenience: The Life / Health Insurance forms are lengthy and are full of mind-boggling questions. It is lot convenient when the agent fills it up for me.
Tax: The agent might say a generic “Yes” to all the questions which expect a Yes and a generic “No” to all the questions which expect a No. He might not have taken into account the reality, and a not-so-factual data is submitted as information provided by you and in case some information is found to be incorrect, it is you and your family who suffers.
Remedy: Insist on filling up the form yourself. If you need help, the agent might help you to fill it up. Also, better to disclose all the facts so that the chances of claim repudiation are minimised.

There is an old saying “No Pains No Gains”. May be what we are trying to suggest here is similar. The above remedies might sound a little more painful in the short term; But in the long run, they will prove to be the best strategies.

Already we are burdened with so many taxes. Lets not allow this “Convenience Tax” to get on our nerves.

We welcome your feedback and comments on the above article. Please feel free to contact us on saurabh.nidhiinvestments@gmail.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The readers are advised to use their own judgement and consult their investment advisor before making any investment decisions.)

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Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

16 thoughts on “How much “Convenience Tax” You are paying ?

  1. Good one.. Its a nice thing to start with..

    And ya, thanks to you, I got saved from one of the ULIPS blunder…

    1. Thank you so much for the comments Sir !!

      Its completely my pleasure to know that I could contribute in some way towards the eradication of mis-selling.

      Thanks again for your visit and feedback. Looking forward to more in future.

  2. bhai g… abke to iyaan ko title de diya jee bethgo… ki lyo ab yo b deno padsi…. pan padhne k baad pato chalyo ki yo to main sada hi de riyo ho… so bahot bahot dhaywaad aankhya kholne k liye…

    1. Thanks for the Comments Giriraj Bhai !!

      Many of us are paying the convenience tax but not realising it. THis article was an attempt to wake them up.

      Thanks again for your visit and feedback. Looking forward to more in future.

    1. Thank you so much bro for the valuable comments.

      Nice to see you reading this space and finding time to post your comments.

      Looking forward to more visits and feedback in future.

  3. Good article. People should be made aware of price they are paying paying for convenience. Then, of course, they free to pay that price if they wish not to take that worthy effort.
    I am lucky to have friends like Saurabh who guided me at right time and I saved the tax 🙂

  4. That is the right blog for anyone who needs to find out about this topic. You notice a lot its nearly arduous to argue with you (not that I actually would want…HaHa). You definitely put a new spin on a subject thats been written about for years. Nice stuff, simply great!

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