Investing

Introduction

Inflation is a common term in economics, but did you know that your personal inflation rate can differ significantly from the official inflation rate? While governments report national inflation rates based on a fixed basket of goods, your spending habits, lifestyle, and financial goals influence your individual experience with rising costs. Understanding your personal inflation rate helps you make better budgeting and investment decisions.

Your personal inflation rate can reveal surprising insights. For example, while national inflation may show a modest 5% increase, your expenses in specific categories like healthcare, groceries, or education may rise faster. This is why calculating your personal inflation rate is crucial.

In this guide, we will explain how to calculate your personal inflation rate and provide practical strategies to manage its impact effectively.

What is Personal Inflation Rate?

Your personal inflation rate is the rate at which your individual expenses are increasing over time. Unlike the Consumer Price Index (CPI), which measures average price changes across the country, your personal inflation rate is unique to your lifestyle, spending habits, and financial goals.

For example:

• A person who frequently dines out and travels may experience higher inflation than someone who cooks at home and follows a simpler lifestyle.
• Those with children may face rising education costs, while retirees may spend more on healthcare.
• If you rely heavily on imported products or luxury goods, inflation may impact you more directly than others.

Tracking your personal inflation rate allows you to take control of rising expenses and make better financial decisions.

Why Does Personal Inflation Differ from National Inflation?

The official inflation rate is calculated based on a standardised basket of goods and services that may not align with your personal expenses. As a result, your personal inflation rate may be higher or lower depending on your spending patterns.

For example:

• Frequent Travelers: If you frequently travel, rising flight fares, hotel charges, and dining costs may inflate your personal inflation rate faster than the average.

• Parents with School-Going Children: Education costs, tuition fees, and extracurricular expenses may create higher inflation pressure for families with children.

• Retirees: Those with significant healthcare costs may experience higher personal inflation rates as medical expenses tend to rise faster than other categories.

Key Components That Shape Personal Inflation Rate

Your personal inflation rate is influenced by several variables:

• Spending Categories: Expenses on essentials (groceries, rent, utilities) and discretionary spending (luxury goods, entertainment) may rise at different rates.

• Lifestyle Choices: Those who prioritise premium brands, frequent dining out, or fitness memberships may face greater price hikes.

• Geographical Factors: Living in metropolitan areas with rising real estate prices and transportation costs can elevate your personal inflation rate.

• Income Level: Higher earners may experience faster inflation as they tend to spend more on lifestyle upgrades and luxury items.

By calculating your personal inflation rate, you gain a clearer understanding of how rising costs are impacting your financial stability. Tracking this figure allows you to plan better, adjust your spending habits, and identify cost-saving opportunities.

Your personal inflation rate is a measure of how your individual expenses increase over time, often at a pace different from the national inflation rate. Unlike the Consumer Price Index (CPI), which reflects the average price increase across a range of common goods and services, your personal inflation rate is influenced by your unique lifestyle, consumption patterns, and financial commitments.

How to Manage Your Personal Inflation Rate

To keep your expenses under control, consider these strategies:

• Create a Detailed Budget: Identify areas where costs are rising and make adjustments accordingly. Prioritise essential expenses and cut back on non-essentials.

• Invest Wisely: Consider inflation-protected investments like Real Estate Investment Trusts (REITs), gold, or equity funds that historically outperform inflation.

• Diversify Income Streams: Earning from multiple sources can help offset rising expenses.

• Switch to Cost-Effective Alternatives: Explore budget-friendly substitutes for expensive services or brands. For example, using public transport instead of cabs or switching to generic medicine brands.

• Negotiate and Compare Prices: Regularly review subscriptions, insurance policies, and other recurring expenses to seek better deals.

• Plan for Long-Term Expenses: For predictable rising costs like education or healthcare, start saving early to stay ahead of inflation.

How to Calculate Your Personal Inflation Rate

Follow these steps to calculate your personal inflation rate:

Step 1: Track Your Expenses

Record your monthly spending across key categories such as:

• Groceries
• Rent/Mortgage
• Utilities
• Transportation
• Healthcare
• Education
• Entertainment
• Subscriptions and Memberships

Maintaining records for at least a year provides a clearer picture of your financial patterns. Use budgeting apps or spreadsheets to make tracking easier.

Step 2: Calculate Total Expenses for Two Periods

For example:

Total expenses in January 2024: ₹60,000

Total expenses in January 2025: ₹65,000

Step 3: Use the Inflation Formula

Personal Inflation Rate (%) = [(New Expenses – Old Expenses) / Old Expenses] x 100

Example Calculation:

[(₹65,000 – ₹60,000) / ₹60,000] x 100 = 8.3%

This means your personal inflation rate is 8.3%, which could be higher or lower than the official inflation rate reported by the government.

Step 4: Identify Key Expense Drivers

Review your spending records to identify categories that are growing faster than others. Consider factors like: 

• Rising fuel prices may push your transportation costs higher.
• A new gym membership or streaming service may add to entertainment costs.

By identifying these drivers, you can take steps to manage those expenses better.

In conclusion, calculating and understanding your personal inflation rate is crucial for maintaining financial stability. By tracking your expenses, identifying cost drivers, and implementing proactive strategies, you can manage inflation’s impact on your savings and investments. Taking control of your spending patterns ensures you stay ahead of rising costs and continue working toward your financial goals.

Inflation is inevitable, but understanding its impact at a personal level empowers you to make better financial choices and safeguard your long-term financial security.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Introduction:

Credit cards provide financial flexibility, allowing users to make purchases without immediate cash payments. However, if not managed wisely, they can lead to mounting debt due to interest charges. Understanding how credit card interest works is essential for avoiding unnecessary costs and staying financially healthy.

Interest charges on credit cards accumulate based on several factors, including the annual percentage rate (APR), daily periodic rate, and average daily balance. By learning how these components work, you can take proactive steps to reduce interest costs and make more informed financial decisions. This guide will break down the key aspects of credit card interest and provide strategies to manage it effectively.

Understanding Credit Card Interest Rates

A credit card’s interest rate, commonly expressed as the Annual Percentage Rate (APR), determines the cost of borrowing when you don’t pay your full balance by the due date. This charge applies to any unpaid amount and increases your overall debt. The interest rate on a credit card depends on multiple factors, including your credit score, the card type, and market trends. Since higher rates can accumulate significant debt over time, it’s crucial to be informed about how they work.

Credit card issuers impose finance charges in various situations, and these rates can differ between providers. As a cardholder, being aware of your card’s applicable interest rates is essential. Whether you are a frequent credit card user or just getting started, understanding these charges can help you manage your finances wisely.

Understanding Credit Card Interest Calculation

When reviewing your credit card statement, you’ll notice the interest rate is expressed as the Annual Percentage Rate (APR). This rate represents the cost of borrowing over a year rather than on a monthly basis. The interest on outstanding balances is determined using the following formula:

(No. of days counted from the date of transaction x Outstanding Amount x Interest rate per month x 12 months)/365 ​

This calculation helps determine the exact interest amount accrued based on the time elapsed since the transaction date.

Key Elements in Credit Card Interest Calculation

Before jumping into the calculations, it’s important to understand the components that determine how much interest you pay:

1. Annual Percentage Rate (APR): APR represents the annual interest rate applied to your balance. Different types of transactions, such as purchases, balance transfers, and cash advances, may have separate APRs.

2. Daily Periodic Rate (DPR): This is the rate applied daily to your balance. It is derived by dividing the APR by 365 (or 366 during leap years).

3. Average Daily Balance (ADB): Most credit card issuers calculate interest based on ADB. This is determined by summing up your daily balances throughout the billing cycle and dividing by the number of days in that period.

4. Grace Period: Many credit cards offer a grace period of 20–25 days where no interest is charged on new purchases if the full balance is paid before the due date.

How Does Credit Card Interest Work?

Many credit card users are unaware of how interest is applied to their transactions. Let’s go through an example to understand when and how interest is charged.

Example Scenario:

Meet Mr. R, a credit cardholder. His recent credit card activity is as follows:

• Transaction Date: March 5, 2023
• Transaction Amount: ₹15,000
• Statement Date: March 10, 2023
• Minimum Amount Due (5%): ₹750
• Total Amount Due: ₹15,000
• Payment Due Date: March 28, 2023
• Annual Interest Rate: 40%

Now, let’s analyse different repayment situations.

Case 1: Full Payment by the Due Date

If Mr. R pays the full amount of ₹15,000 on or before March 28, no interest will be charged.

Case 2: Partial Payment Before the Due Date

Suppose he pays only ₹7,500 on March 20 while making no further purchases. The interest calculation will be:

1. Interest on the full amount (₹15,000) from March 5 to March 20
   • Formula: (16 days × ₹15,000 × 40%) ÷ 365
   • Interest Charged: ₹263
2. Interest on the remaining ₹7,500 from March 21 to April 10 (next statement date)
   • Formula: (21 days × ₹7,500 × 40%) ÷ 365
   • Interest Charged: ₹172

Total Interest Payable: ₹263 + ₹172 = ₹435

Case 3: Partial Payment After the Due Date

If Mr. R delays his payment and pays ₹7,500 on March 30, interest and late charges will be applied.

1. Interest on ₹15,000 from March 5 to March 30
   • Formula: (26 days × ₹15,000 × 40%) ÷ 365
   • Interest Charged: ₹428
2. Interest on the remaining ₹7,500 from March 31 to April 10
   • Formula: (11 days × ₹7,500 × 40%) ÷ 365
   • Interest Charged: ₹90

Total Interest Payable: ₹428 + ₹90 = ₹518

Case 4: Cash Withdrawal from an ATM

If Mr. R withdraws ₹8,000 in cash from an ATM on March 5 and repays it on March 9, he will be charged interest and a cash withdrawal fee.

1. Interest on ₹8,000 from March 5 to March 9 (5 days)
   • Formula: (5 days × ₹8,000 × 40%) ÷ 365
   • Interest Charged: ₹44

Since interest on cash withdrawals begins immediately, even a few days’ delay leads to additional charges.

How Compounding Interest Affects Your Credit Card Debt

Understanding how credit card interest is calculated is key to managing your finances effectively. Unlike simple interest, credit card interest compounds daily. This means that every day, interest is applied to your existing balance, and the next day, you’re charged interest on that new amount. Over time, this cycle can significantly increase your debt, especially if you only make minimum payments or carry a balance from month to month.

Example of Compounding Interest in Action

Let’s break it down with a scenario:

Initial Balance: ₹50,000

Annual Percentage Rate (APR): 36% (or 3% per month)

Minimum Payment: ₹2,500 per month

If you stick to just the minimum payment of ₹2,500 each month, it would take you around 32 months to clear the debt. However, due to the daily compounding effect, you’d end up paying a staggering ₹29,400 in interest alone. This happens because every month, new interest is added to your balance, and the following month, interest is charged on that growing amount.

Smart Ways to Reduce Credit Card Interest Costs

Understanding how credit card interest works is the first step toward managing your debt efficiently. Now, let’s look at effective strategies to minimise interest charges and pay off your balance faster.

1. Pay More Than the Minimum: Instead of just covering the minimum amount each month, aim to pay a higher portion of your balance. This reduces the principal amount on which interest is calculated, helping you clear your debt sooner.

2. Make Multiple Payments: Rather than waiting until the due date, consider making smaller payments throughout the month. This approach lowers your average daily balance, ultimately reducing the total interest accrued.

3. Tackle High-Interest Debts First: If you have several credit cards, prioritise repaying the one with the highest interest rate while maintaining minimum payments on the others. This strategy, known as the “avalanche method,” helps you save on interest in the long run.

4. Utilise Balance Transfer Offers: Look for credit cards that offer low or 0% introductory APR on balance transfers. Transferring your balance to such a card can temporarily stop interest accumulation, giving you a window to pay off your debt at a lower cost. However, watch out for transfer fees and the duration of the promotional period.

5. Negotiate a Lower Interest Rate: Reach out to your credit card provider and ask for a lower APR, especially if you have a strong repayment history. Many issuers are open to reducing interest rates for reliable customers.

6. Avoid Cash Advances: Cash advances often carry high interest rates and start accruing interest immediately. Unless absolutely necessary, steer clear of withdrawing cash using your credit card.

7. Pay in Full Whenever Possible: The best way to avoid interest charges entirely is to clear your balance each month. By doing so, you can use your credit card without worrying about accumulating debt.

Why Timely Payments Matter

Missing a credit card payment doesn’t just result in late fees—it can also increase your interest rate and negatively impact your credit score. Since payment history is a crucial factor in credit score calculations, ensuring on-time payments is essential.

To stay on track, consider setting up automatic payments or reminders. Many credit card issuers allow you to automate payments for the minimum due, a fixed amount, or the full balance. This helps you avoid late fees, penalty APRs, and damage to your credit score.

By implementing these strategies, you can take control of your credit card debt and minimise interest charges effectively.

In conclusion, understanding how credit card interest works is key to maintaining financial health. By making timely payments, reducing your outstanding balance, and utilising smart repayment strategies, you can avoid excessive interest charges. Regularly reviewing your credit card statement and adopting responsible financial habits will help you stay in control of your finances and save money over time.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In 2020, the Indian government significantly changed dividend taxation by abolishing the Dividend Distribution Tax (DDT). This move shifted the responsibility of paying dividend tax from companies to individual investors. As an investor in Indian Exchange-Traded Funds (ETFs), it’s essential to understand how this change affects you.

What Is Dividend Distribution Tax?

Before 2020, companies or mutual funds had to pay the government dividend distribution tax when distributing dividends to their shareholders. This tax was deducted at the source, meaning companies paid it before distributing the remaining dividend to shareholders. The Dividend Distribution Tax rate was 15% of the gross dividend amount, but after including the surcharge and cess, the effective rate was higher. 

Why Was Dividend Distribution Tax  Abolished? 

The primary reason for abolishing the Dividend Distribution Tax was to eliminate the cascading effect of taxation. Under the previous system, companies paid Dividend Distribution Tax on dividends, and shareholders, especially those in higher tax brackets, faced additional tax when their total income, including dividends, was taxed again. 

This led to double taxation, reducing investors’ overall returns. By removing the Dividend Distribution Tax, the government aimed to make the taxation process more transparent and align it with global standards, as investors typically tax dividends.

How Does This Affect Investors in Indian ETFs? 

With the removal of the Dividend Distribution Tax, dividends distributed by ETFs are now taxed directly to the investors. Here’s how it impacts you:

1. Taxation Based on Individual Income Tax Slabs:
   Dividends you receive from ETFs are added to your total income and taxed according to your applicable income tax slab.
   Example: If you’re in the 20% tax bracket and receive ₹10,000 as dividends, you’ll pay ₹2,000 as tax.
   
2. Increased or Decreased Post-Tax Returns for Some Investors:
   Previously, the Dividend Distribution Tax was applied uniformly, irrespective of the investor’s tax bracket. If you’re in a lower tax bracket, you might pay less tax on dividends than before. Example: If you fall under the 10% tax slab, you’ll now pay ₹1,000 on a ₹10,000  dividend. Earlier, the effective Dividend Distribution Tax (DDT) rate was 20.56% (including surcharge and cess). So, instead of ₹1,000, you would have paid ₹2,056 on a ₹10,000 dividend.
   
3. Impact on High Net-Worth Individuals (HNIs):
   The tax liability on dividends has increased for investors in the highest tax bracket (30%). They now pay more tax on dividends than under the previous Dividend Distribution Tax regime.
   Example: Previously, the effective Dividend Distribution Tax (DDT) rate was 20.56%. So, on a ₹10,000 dividend, the tax under DDT would have been ₹2,056. Now, at a 30% tax rate, you pay ₹3,000, making it less favorable for high-income investors.

Step-by-Step Guide to Understanding the Impact:

1. Identify Your Tax Bracket: Determine your total annual income to know which income tax slab you fall into.
   
2. Calculate Total Dividend Income: Sum up all dividends from your ETF investments during the financial year. Remember, dividends up to 10,000 in a year are tax-free.
   
3. Compute Tax Liability: 
   • Add the dividend income to your total income.
   • Apply your income tax rate to the dividend portion to find out the tax payable.

Practical Example:

• Scenario 1: An investor with an annual income of ₹5 lakh (falling under the 20% tax slab) receives ₹50,000 as dividends. Up to 10,000 dividends in a year are tax-free.
  • Tax Calculation: 20% of ₹40,000 = ₹8,000.
    
• Scenario 2: An investor with an annual income of ₹15 lakh (falling under the 30% tax slab) receives ₹50,000 as dividends. Up to 10,000 dividends in a year are tax-free.
  • Tax Calculation: 30% of ₹40,000 = ₹12,000.

Considerations for ETF Investors:

• Choice Between Growth and Dividend Options:
  • With dividends now taxable at your slab rate, opting for growth-oriented ETFs might be more tax-efficient. You can defer taxes until you sell the units, potentially benefiting from lower capital gains tax rates.
• Tax Planning:
  • Remember your total income and how additional dividend income might push you into a higher tax bracket.
• Consult Financial Advisors:
  • Engaging with professionals offering share advisory services can help tailor your investment strategy in light of these tax changes.

Impact on Investment Strategies:

• High Dividend Paying Stocks:
  • If you prefer regular income, investing in high-dividend-paying stocks through ETFs can provide that. However, remember that dividends are taxed at your applicable rate.
• Reinvestment Opportunities:
  • Without dividend tax, companies might reinvest profits into the business instead of paying dividends, potentially leading to capital appreciation and benefiting investors seeking long-term growth.

Understanding Related Tax Concepts:

• Tax on Mutual Funds:
  • Similar to ETFs, dividends from mutual funds are now taxed in the hands of investors. Additionally, capital gains from mutual funds have specific tax treatments based on the type of fund and holding period.
• Income Tax Concepts:
  • To effectively plan your tax liabilities, familiarize yourself with income tax concepts such as gross total income, deductions, and exemptions.

Conclusion:

The abolition of the Dividend Distribution Tax has shifted the tax responsibility to investors, making it crucial to understand how dividends are taxed based on your income slab. This change offers more personalized tax planning opportunities and necessitates a closer look at your investment choices in ETFs and other dividend-yielding instruments. Staying informed and consulting with financial advisors can help you navigate these changes effectively, aligning your investment strategy with your financial goals and tax considerations.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

Investing in real estate in India is one of the many ways to build wealth over time. Whether it’s buying property for rental income, long-term appreciation, or business purposes, real estate offers multiple financial benefits. However, real estate tax is one crucial factor that can impact profits—the taxes and deductions associated with property ownership, rental income, and sales.

Understanding real estate tax is essential for investors who want to reduce their tax burden and legally increase their profits. The Indian tax system offers various deductions and exemptions that help lower property owners’ tax liabilities. 

Leveraging expert insights from stock advisory services can further enhance returns while ensuring compliance with tax laws. Let’s explore key tax-saving strategies for real estate investors in India.

Deduction on Home Loan Interest (Section 24(b))

One of the most significant tax benefits available to real estate investors is the deduction on home loan interest under Section 24(b) of the Income Tax Act. Here’s how it works:

• Self-Occupied Property: If you reside in the property, you can claim a deduction of up to ₹2 lakh per annum on the interest paid on your home loan.
  
• Let-Out Property:  If you rent out your property, you can claim the full interest paid on a home loan as a deduction. But the total loss you can adjust against other income (like salary or business income) is limited to ₹2 lakh per year.

2. Principal Repayment Deduction (Section 80C)

Under Section 80C, you can claim a deduction of up to ₹1.5 lakh per annum on the principal repayment of your home loan. This section also covers expenses like stamp duty and registration charges, provided they are claimed in the year of purchase.

3. Additional Deduction for First-Time Homebuyers (Section 80EEA)

To promote affordable housing, the government introduced Section 80EEA, which offers an additional deduction of up to ₹1.5 lakh on home loan interest for first-time homebuyers.
 

4. Tax Benefits on Joint Home Loans

If you take a joint home loan with a co-applicant, both parties can claim deductions on the interest and principal repayments, subject to individual limits. This effectively doubles the tax benefits, making it a sound strategy for couples or business partners investing in real estate.

5. Deduction on Stamp Duty and Registration Charges

The money spent on stamp duty and registration is relatively high. You can claim these expenses as a deduction under Section 80C, up to ₹1.5 lakh, but only in the year you make the payment. 

6. Tax Benefits on Rental Income

Rental income is taxable under the head “Income from House Property.” However, you can claim the following deductions:

• Standard Deduction: 30% of the net annual value (gross annual rent minus municipal taxes paid) can be claimed as a standard deduction for maintenance and repairs.
  
• Interest on Home Loan: Entire interest paid on the home loan for the rented property can be deducted from the rental income. 

7. Long-Term Capital Gains (LTCG) Tax Benefits

If you sell a property after keeping it for more than 24 months, the profit you earn is called long-term capital gain. This gain is taxed at 20%. But the good part is that you get indexation benefits, which means the property’s purchase price is adjusted for inflation. This helps reduce the taxable profit, so you pay less tax on the sale.

Additionally, you can save on LTCG tax by:

• Reinvesting in Residential Property: Under Section 54, if you reinvest the capital gains into another residential property within a specified period, you can claim an exemption from LTCG tax.
  
• Investing in Capital Gains Bonds: Section 54EC allows you to invest up to ₹50 lakh in specified bonds (like those issued by NHAI or REC) within six months of sale to claim exemption. 

8. Tax Benefits for Affordable Housing

The government offers additional incentives for investments in affordable housing to boost the housing sector. These include:

• Section 80EEA: As mentioned earlier, this provides an additional deduction of up to ₹1.5 lakh on interest paid for affordable housing loans.
  
• Pradhan Mantri Awas Yojana (PMAY): Eligible beneficiaries can receive interest subsidies on home loans under this scheme, further reducing the financial burden.

9. Set-Off and Carry Forward of Losses

Set Off of Losses

Set off of losses refers to adjusting losses against income or profits within the same year or in future years. Losses can be set off in two ways: intra-head set off (within the same head of income) or inter-head set off (across different heads of income). For example, a loss from house property can be adjusted against salary income. Losses from business (other than speculative business) can be set off against income from different sources, except salary. However, some losses, such as speculative business losses, capital losses, and losses from gambling, cannot be set off against any other head of income.

Carry Forward of Losses

If losses cannot be fully adjusted within the same year, they can be carried forward to future years to set off against income in those years. Losses from house property can be carried forward for up to 8 years, but only against income from house property. Under the old tax regime, house property losses can be offset against other income up to ₹2 lakh in the same year, with the remainder carried forward. 

However, under the new tax regime, house property losses cannot be offset against other income, and losses from previous years cannot be carried forward. Specific rules apply to other losses, such as those from speculative business, race-horses, and capital gains, which restrict carry forward and set off. 

Source: Cleartax.in

If your expenses on a house property, like loan interest, are more than the rental income, it results in a loss under “Income from House Property.” You can adjust this loss against other income, such as salary or business income, but only up to ₹2 lakh in a year. The extra amount isn’t wasted if the loss is more than ₹2 lakh. You can carry forward the remaining loss for up to eight years and adjust it against future house property income, helping reduce tax in coming years. 

10. Tax Planning for Real Estate vs. Stocks

When comparing real estate to stocks, the tax implications must be considered. While both asset classes can offer growth potential, real estate provides more avenues for tax deductions and exemptions. For instance, benefits under Sections 24(b), 80C, and 80EEA are exclusive to real estate investors.

In contrast, stock investments primarily offer tax benefits through long-term capital gains exemptions up to ₹1.25 lakh and tax-advantaged accounts like Equity-Linked Savings Schemes (ELSS) under Section 80C.

Investopedia

11. Diversifying with Real Estate Stocks

Investing in real estate stocks, such as shares of companies in the housing sector, can provide exposure to real estate without the need for direct property ownership. These investments combine the real estate market’s growth potential with the stock market’s liquidity. 

However, it’s crucial to carefully analyze factors such as market trends, company performance, and economic conditions before investing in real estate stocks. Unlike physical property investments, these stocks can be influenced by broader stock market volatility, interest rate changes, and regulatory policies in the housing sector. Understanding the real estate tax implications on capital gains and dividends is essential for effective tax planning.

Conclusion

Smart tax-saving strategies help real estate investors save money and follow tax laws. Knowing real estate tax benefits, deductions, and exemptions can lower tax payments. Using tools like a retirement planning calculator helps with better financial planning, leading to long-term wealth and security in the housing sector and beyond.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In India, a Hindu Undivided Family (HUF) is a special legal setup that helps families manage their finances and taxes more efficiently. By creating a HUF, families can reduce their tax burden and boost their savings. In this article, we’ll explore what an HUF is, HUF benefits, HUF taxation, and how families can use it to save more.

Understanding HUF: What Is It?

A HUF (Hindu Undivided Family) comprises family members who share a common ancestor, including their spouses and unmarried daughters. It is treated as a separate legal entity under Indian law, meaning it can independently own property, earn income, and take on liabilities. 

The most significant advantage is that HUFs are taxed separately from their members, allowing families to save on taxes while more efficiently managing their wealth.

Formation of an HUF

Forming an HUF is straightforward. It automatically becomes a reality when a Hindu family starts living together and acquires assets or property. However, understanding income tax concepts is crucial, as HUFs are treated as separate tax entities. 

To formalize it for taxation purposes, the family needs to apply for a Permanent Account Number (PAN) in the name of the HUF and open a bank account. The eldest male member typically acts as the ‘Karta’ (head) of the HUF, managing its affairs, while other members benefit from shared tax exemptions and deductions. cleartax.in

Taxation Benefits of HUF

One of the primary advantages of forming a HUF is the tax benefits it offers. Understanding what is income tax can help families optimize their tax liabilities. Here’s how families can save more through HUF taxation:

1. Separate Tax Entity: An HUF is treated as a separate taxpayer under the Income Tax Act. This means the HUF enjoys the same tax slabs as individual taxpayers, allowing it to claim deductions and exemptions independently.  hdfclife.com
2. Deductions under Section 80C: The HUF can invest in tax-saving instruments like Fixed Deposits and Equity Linked Savings Schemes (ELSS) to claim deductions up to ₹1.5 lakh under Section 80C. This is in addition to the deductions claimed by individual family members. hdfcbank.com
3. Health Insurance Premiums (Section 80D): Premiums paid for health insurance policies covering HUF members are eligible for deductions under Section 80D. This further reduces the HUF’s taxable income.  hdfcbank.com
4. Exemption on Gifts: An HUF can receive gifts up to ₹50,000 without attracting tax. Gifts from specified relatives are entirely tax-free, irrespective of the amount. This provision allows families to transfer assets or funds to the HUF efficiently.  Policybazaar
5. Capital Gains Exemptions: The HUF can claim exemptions under Sections 54 and 54F concerning capital gains arising from the sale of property. The HUF can minimize its tax liability on capital gains by reinvesting the proceeds as specified. hdfclife.com

Understanding How HUF Works 

Consider a case where an individual earns a taxable salary of ₹18 lahks and receives ₹6 lakhs as interest income from fixed deposits. After claiming a ₹1.5 lakh deduction under Section 80C and a ₹50,000 deduction under Section 80TTB, their taxable income amounts to ₹22.5 lakh, leading to a tax liability of ₹5.1 lakh.

If the fixed deposits were held under an HUF, the HUF would be taxed separately, allowing for additional deductions and exemptions. This restructuring reduces the total tax liability to ₹3.6 lakh, a savings of ₹1.5 lakh.

Families can optimize taxation by splitting income into two separate taxable entities by forming a HUF. This strategy can also be applied to investments like rental properties and stock market gains.

Types of Income an HUF Can Earn

An HUF (Hindu Undivided Family) can generate income under various categories, including:

• House Property: Rental income from properties owned by the HUF.
• Business Income: Profits from businesses operated under the HUF’s name.
• Capital Gains: Earnings from selling assets such as real estate or investments.
• Income from Other Sources: Includes interest, dividends, and similar earnings.

Types of Income an HUF Cannot Earn

• Salary and Professional Income: Since salaries and professional earnings require individual effort, they cannot be attributed to a HUF.
• Freelance Income: Considered as personal effort income, freelance earnings are also not eligible under HUF.

Investments and Financial Planning through HUF

Beyond tax savings, a HUF can be a strategic tool for family financial planning:

1. Investments: The HUF can invest in various financial instruments, including mutual funds, stocks, and fixed deposits. Engaging with stock market advisory services can help the HUF make informed investment decisions and potentially enhance returns.
2. Systematic Investment Plans (SIPs): An HUF can initiate SIPs in mutual funds, promoting disciplined investment. Utilizing an SIP calculator can assist in planning and projecting future returns aligning investments with family financial goals.

Key Considerations

While the benefits are substantial, families should be mindful of certain aspects:

1. Clubbing Provisions: Income transferred to the HUF without adequate consideration may be clubbed with the individual’s income, nullifying tax benefits. Proper planning is essential to avoid such scenarios.
2. Partition of HUF: Reforming a HUF once it is partitioned isn’t straightforward. Families should consider the long-term implications before deciding to partition.
3. Compliance and Record-Keeping: To prevent legal complications, it is crucial to maintain clear records of HUF transactions and ensure compliance with tax regulations.

Conclusion

Forming a HUF offers Indian families a valuable avenue to optimize their tax liabilities and enhance savings. Families can achieve greater financial efficiency and security by understanding the intricacies of HUF taxation and leveraging available benefits. However, consulting with financial advisors or tax professionals is advisable to navigate the complexities and ensure compliance with all legal requirements.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

If you’re looking for a smart way to invest in the stock market without picking individual stocks, an ETF to invest in could be your best bet. Exchange-traded funds (ETFs) are gaining popularity in India because they offer diversification, low costs, and ease of trading—just like stocks! But with so many options, how do you choose the right ETF to invest in? 

A stock market advisor can help you make better investment decisions, but with the right knowledge, you can confidently choose the best ETF to invest in 2025.

First, let’s understand what are ETFs

An ETF is essentially a basket of securities—like stocks or bonds—that trades on the stock exchange, just like individual stocks. Unlike mutual funds, ETFs offer real-time trading flexibility, lower expense ratios, and diversification across various sectors or indices. They can track benchmarks like the Nifty 50, Sensex, or sector-specific index, making them a popular choice for investors looking for cost-effective and diversified market exposure.

Interested in adding Indian ETFs to your portfolio? Here are seven top options to consider regarding the returns they are likely to deliver.

Top 7 ETFs 

1. CPSE ETF
2. Nipp Nifty PSU
3. Kotak Niffty PSU
4. Bharat 22 ETF
5. MO Midcap 100
6. Nipp Nifty Mid
7. Motilal Oswal NASDAQ 100
   
   Source: MoneyControl 

CPSE ETF

Best for: Investors looking for government sector exposure
This ETF tracks a portfolio of public sector enterprises, offering exposure to well-established government-owned companies in India.

Why Invest?

• Diversified across major PSU companies.
• Lower risk due to government backing.
• Historically strong long-term returns.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
CPSE ETF (as of 11/03/25)	33,047.65	0.07%	-4.00%	33.73%	35.64%

Insight:

As a government-driven ETF to invest in, this fund benefits from periodic disinvestment initiatives, often leading to improved efficiency and stock appreciation.

2. Nippon India ETF Nifty PSU Bank Bees

Best for: Investors interested in India’s banking sector
This ETF tracks the Nifty PSU Bank Index, offering exposure to India’s leading public sector banks.

Why Invest?

• Exposure to top-performing PSU banks.
• Strong long-term growth potential.
• Ideal for passive investors seeking sectoral diversification.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
Nipp Nifty PSU (as of 11/03/25)	2,307.54	0.49%	-20.36%	31.14%	28.33%

Insight:

It is a worthwhile ETF to invest in as it allows you to participate in India’s banking sector expansion, which is supported by financial inclusion policies and rising credit demand.

3. Kotak Nifty PSU Bank ETF

Best for: Investors seeking stability in the financial sector
This ETF focuses on India’s PSU banks, providing an opportunity to invest in key financial institutions.

Why Invest?

• Direct exposure to India’s banking sector.
• Potential for high returns as PSU banks grow.
• Managed by Kotak, a reputable financial institution.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
Kotak NiftyPSU (as of 11/03/25)	1,246.88	0.49%	-20.37%	31.13%	28.26%

Source: Money Control

Insight:

This fund provides a promising opportunity for those seeking an ETF to invest in that benefits from government capital infusion and banking reforms.

4. Bharat 22 ETF

Best for: Investors wanting exposure to a mix of PSU and private companies
This ETF includes stocks from various sectors, including finance, energy, and infrastructure.

Why Invest?

• Broad diversification across major Indian industries.
• Government-backed companies ensure stability.
• Ideal for long-term investors seeking moderate risk.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
Bharat 22 ETF (as of 11/03/25)	16,195.47	0.07%	-5.99%	27.57%	28.86%

Source: Money Control

Insight:

This ETF offers a balanced mix of PSU and private sector firms, making it a unique option for investors seeking stability and growth.

5. Motilal Oswal Midcap 100 ETF

Best for: Investors looking for high-growth midcap companies
This ETF tracks the Nifty Midcap 100 index, which comprises India’s fast-growing midcap companies.

Why Invest?

• Higher growth potential compared to large-cap stocks.
• Good balance between risk and reward.
• Suitable for investors with a long-term horizon.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
MO Midcap 100 (as of 11/03/25)	490.53	0.22%	-0.58%	20.58%	25.89%

Source: Money Control

Insight:

As midcap stocks often deliver superior growth, this ETF is well-suited for investors to capitalize on emerging market leaders.

6. Nippon India ETF Nifty Midcap 150

Best for: Investors seeking diversification in the midcap space
This ETF exposes India’s top 150 midcap companies, offering growth potential across various industries.

Why Invest?

• Broad-based exposure to midcap stocks.
• Higher return potential compared to large-cap indices.
• Suitable for investors with moderate risk appetite.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
Nipp Nifty Mid (as of 11/03/25)	1,756.07	0.21%	0.53%	20.05%	25.73%

Source: Money Control

Insight:

With a broader selection of midcap stocks, this ETF makes sense to invest in as it spreads risk while capturing opportunities in fast-growing industries.

7. Motilal Oswal NASDAQ 100 ETF

Best for: Investors looking for global tech exposure
This ETF tracks the NASDAQ 100 index, providing exposure to leading global tech giants like Apple, Amazon, and Microsoft.

Why Invest?

• Gain exposure to top-performing global technology stocks.
• Provides portfolio diversification beyond Indian markets.
• Ideal for investors looking to hedge against INR depreciation.

ETF Name	AUM (Rs. Cr.)	Expense Ratio	1 Year Return	3 Year Return	5 Year Return
MO NASDAQ 100 (as of 11/03/25)	9,002.38	0.58%	16.13%	18.60%	22.80%

Source: Money Control

Insight:

Investors seeking an ETF benefitting from global innovation trends in AI, cloud computing, and digital transformation should consider this fund.

How to Invest in ETFs in India?

Now that you know the best ETFs for 2025, let’s go over how to invest in them step by step:

1. Open a Demat and Trading Account: Sign up with a broker like Zerodha, Groww, or Upstox.
2. Choose an ETF Exchange. ETFs are traded like stocks. You can buy and sell them on platforms like NSE or BSE.
3. Pick Your ETF to Invest In: Choose an ETF from the list above based on your goals.
4. Place Your Order: Enter the number of units and place your trade.
5. Monitor and Rebalance: Keep an eye on your ETFs and adjust your portfolio as needed.

Using tools like a CAGR Calculator can help you track the growth of your investments over time.

Final Thoughts

Choosing the right ETF to invest in depends on your financial goals. If you want market stability, go for a Nifty 50 ETF. If you’re after high growth, try the Nifty Next 50 ETF. Want international exposure? The Nasdaq 100 ETF is a better option.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

If you look at stock charts to decide when to buy or sell, you’ve probably heard about candlestick patterns. These patterns are like visual stories of price movements that can help traders and investors predict what may happen next. Among these patterns, the Doji candlestick Pattern is a key signal of market uncertainty.

But what exactly is a Doji? How can you use it while navigating the ups and downs of the stock market? Let’s dive into this concept and understand all about Doji Candlesticks.

What Is a Doji Candlestick?

The word “Doji” comes from Japanese, meaning “mistake” or “error,” because it’s unusual for a stock’s opening and closing prices to be nearly identical. A Doji candlestick is a unique pattern you’ll spot on stock charts. Picture a candle with an extremely thin or almost invisible body — that’s what a Doji looks like. It forms when a stock opens and closes at nearly the same price. 

This shows that although the price may have decreased during the trading session, it eventually settled right back where it began. You can think of it like a tug-of-war between buyers and sellers that ends without a winner, signaling uncertainty in the market.

Types of Doji Candlesticks

Not all Dojis are the same. Here are some common types you may notice on charts:

1. Normal Doji

A Standard Doji has visible upper and lower wicks with a tiny or non-existent body, meaning the opening and closing prices are nearly the same. This pattern reflects market indecision, where buyers and sellers are equally strong, causing the price to fluctuate but settle without a clear direction.

2. Long-legged Doji

A Long-legged Doji has much longer wicks on both sides, indicating significant price movement during the trading session. However, the price ultimately closes close to where it opened. This shows that although buyers and sellers were active and pulled the price in both directions, neither could dominate.

3. Dragonfly Doji

A Dragonfly Doji has a long lower wick and no upper wick. This shape shows that prices fell sharply during the session but recovered by the close, ending near the opening price. It usually signals a potential bullish reversal if it appears after a downtrend, as buyers push prices back up.

4. Gravestone Doji

A Gravestone Doji features a long upper wick and no lower wick, suggesting that prices rose high during the session but fell back to close near the opening price. This can indicate a potential bearish reversal if it forms after an uptrend, as sellers manage to overpower buyers.

What Does a Doji Candlestick Indicate?

The main message of a Doji candlestick is uncertainty. It signals that neither buyers nor sellers are in complete control. But depending on where it appears in a trend, it can mean different things:

1. Reversal Signal

A Doji appearing after an extended uptrend or downtrend could signal a potential reversal. For example, If the stock has been rising for days and a Doji forms, it may indicate that buyers are losing strength, and a fall could follow. If the stock has fallen, a Doji could mean sellers are tired, and a bounce might happen.

2. Continuation Signal

Sometimes, a Doji doesn’t mean a reversal but a pause before the trend continues. The market may be taking a “breather” before moving further in the same direction.

3. High Volatility or Low Momentum

Depending on the size of the wicks, a Doji could suggest either high volatility (big price swings) or low momentum (very little movement).

Why Should You Care About Doji Candlesticks?

Understanding Doji candlesticks can help you make smarter decisions when investing or trading. Here’s why:

1. Entry and Exit Points

A Doji near support or resistance levels could help you decide when to enter or exit a trade.

For instance, if you see a Doji at a resistance level (a price where stock often falls), it might be time to sell or avoid buying. It might be a buy signal if you see a Doji at a support level (a price where stock often bounces).

2. Risk Management

Since Dojis indicate uncertainty, they remind you to avoid risky trades or wait for confirmation before acting. You could combine them with other indicators like volume, RSI, or moving averages to make better choices.

3. Understanding Market Sentiment

Sometimes, people rely on tips from a share market advisor, but reading Doji patterns on your own gives you a sense of what the broader market is thinking.

Doji and NSE Trending Sectors

You might wonder, “How is a Doji useful when looking at “NSE trending sectors?” When a sector, like IT, Pharma, or Banking, is trending, spotting a Doji on the sector’s index chart could give you early hints about what might happen next.

For example, If the Bank Nifty index has been rising but forms a Doji, it may indicate that the upward momentum is slowing, and a correction could be around the corner. If a sector like Pharma has been under pressure but suddenly forms a Doji, there might be a chance for a bounce back. So, combining knowledge of Doji patterns and trending sectors can make your analysis sharper.

How to Use Doji Candlesticks in Trading?

Here are some practical tips for using Doji candlesticks in your trading:

1. Don’t Rely on Doji Alone

Remember, a Doji is not a strong buy or sell signal. Always combine it with other tools like support/resistance, trendlines, RSI, MACD, or volume analysis.

2. Wait for Confirmation

Once a Doji appears, wait for the next candle to confirm the trend. For example:

• After a Doji, if a bullish candle (green) forms, it may confirm a buy signal.
• After a Doji, if a bearish candle (red) forms, it may confirm a sell signal.

3. Set Proper Stop Loss

If you trade based on a Doji, always set a stop loss to manage risk. Markets can be unpredictable, and protecting your capital is crucial.

4. Follow a Share Market Advisor 

If you are new and still learning, following a share market advisor may help you understand how to combine Doji analysis with broader strategies. But always make sure the advisor is trustworthy and registered.

Final Thoughts

In summary, a Doji candlestick acts like a warning sign — signaling that the market is undecided and you should be cautious. Whether analyzing individual stocks or watching chart formations like the cup and handle pattern and rounding bottom pattern, understanding the Doji candlestick can enhance your trading and investing decisions.

However, remember to never rush into trades based on a Doji alone. It’s essential to combine it with other technical indicators or patterns, and when in doubt, consult a professional share market advisor for guidance.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

Introduction

When purchasing health insurance, most people focus on premiums, coverage, and add-ons, but one critical factor often gets overlooked—the Claim Settlement Ratio (CSR). This ratio reflects how consistently an insurer settles claims, making it a key indicator of reliability. After all, the true value of a health insurance policy is tested when you need to file a claim.

Picture a situation where you or a loved one requires urgent medical treatment, but your insurance provider delays or denies the claim. Such scenarios can be financially and emotionally stressful. A high claim settlement ratio means the insurer has a strong track record of honouring claims, ensuring you get the necessary financial support without hassle.

In this article, we will break down what CSR means, how it is calculated, why it matters, and how you can use it to choose the right health insurance policy. By understanding this crucial metric, you can make a well-informed decision and secure peace of mind for yourself and your family.

Understanding the Claim Settlement Ratio in Health Insurance

The Claim Settlement Ratio (CSR) in health insurance is a crucial metric that indicates the percentage of claims a health insurer successfully settles within a given financial year. It is calculated by comparing the number of claims paid against the total claims received by the insurance provider.

A high CSR signifies a trustworthy insurer, as it reflects their efficiency in processing and approving claims. This metric is particularly useful for individuals evaluating different health insurance providers, helping them choose one that ensures smoother claim settlements.

Opting for an insurer with a strong claim settlement track record reduces the chances of claim delays or denials, ensuring that policyholders and their families receive timely financial support during medical emergencies. Therefore, when selecting a health insurance plan, CSR should be a key consideration to safeguard your healthcare investments effectively.

Understanding the Calculation of Health Insurance Claim Ratio

The Insurance Regulatory and Development Authority of India (IRDAI) evaluates and reports the claim settlement ratios of health insurance providers annually. This ratio is derived from insurers’ yearly disclosures regarding the number of claims they receive, process, and finalise.

The formula for calculating the claim settlement ratio is as follows:

Claim Settlement Ratio = (Total Claims Settled / Total Claims Received) × 100

Example Calculation:

Imagine a health insurance company receives 1,50,000 claims in a given year. Out of these, it successfully settles 1,47,500 claims. Applying the formula:

Claim Settlement Ratio = (1,47,500 / 1,50,000) × 100 = 98.33%

Most health insurers make this data readily available on their websites, enabling customers to compare claim settlement performance and make informed decisions while choosing a policy.

Importance of Claim Settlement Ratio

A general rule of thumb is that a lower fluctuation in the Claim Settlement Ratio (CSR) indicates greater reliability. If a company’s CSR varies widely, there’s always a risk of falling on the lower end of the spectrum, which could reduce the likelihood of your claim being settled.

Prioritise insurers with a stable and consistent claim settlement track record. While a very high CSR might seem appealing, it’s more important to assess how consistently the company has maintained its ratio. Always review the CSR trends over the past five years before making a decision.

Streamlined Claim Settlement Procedure

1. Easy Claim Intimation: Policyholders can initiate a claim through multiple channels, including online platforms, branch offices, the central office, the ClaimsCare helpline, SMS, or email. These options enhance accessibility and convenience.

2. Document Submission: After reporting a claim, promptly submitting the necessary documents is crucial. This step enables insurers to review and approve the claim efficiently, ensuring minimal delays.

3. Swift Processing: A seamless and quick processing system reduces hassles for policyholders and their families. With the integration of digital solutions, insurers have significantly improved turnaround times, ensuring quicker claim approvals and disbursals.

Why the Claim Settlement Ratio Matters

• Indicates Reliability of the Insurer: A high CSR (above 90%) signals that the insurer is trustworthy and has a history of honouring claims.
• Helps in Choosing the Right Insurance Company: Comparing the claim settlement ratios of different insurers can help you choose a provider that has a proven track record of settling claims efficiently.
• Ensures Financial Security During Medical Emergencies: A health insurance policy with a high CSR ensures that your medical expenses are covered without unnecessary delays or rejections.
• Regulatory Compliance & Transparency: The Insurance Regulatory and Development Authority of India (IRDAI) publishes annual reports on claim settlement ratios, making it easier for consumers to evaluate insurers.

Preventing Claim Rejection: Key Steps to Follow

Insurance companies scrutinize claims closely, often looking for discrepancies that could justify rejection. To ensure you receive your rightful compensation, it’s crucial to eliminate any grounds for denial. Here’s how you can safeguard your claim:

1. Maintain Transparency in Your Application: Always provide complete and truthful information, including your lifestyle choices, medical history, past insurance policies, and employment details. While disclosing medical conditions might lead to higher premiums, hiding them increases the risk of claim rejection.

2. Accurately Fill Out the Nomination Form: The nominee is the person who will receive the claim benefits, so ensuring their details are correctly mentioned in the nomination form is essential. Any errors here can lead to unnecessary complications or delays in claim processing.

3. Disclose All Existing and Past Insurance Policies: Never hide information about your current or previous insurance plans. Insurers can reject claims on the grounds of “concealment of material facts.” Being upfront about your insurance history prevents such issues and helps build trust with the insurer.

Limitations of Claim Settlement Ratio

The claim settlement ratio (CSR) represents the overall percentage of claims settled by an insurance provider across all its life insurance offerings. However, this metric offers only a broad overview, rather than a breakdown for individual policy types such as term insurance, endowment plans, money-back policies, child plans, group insurance, or online and offline policies.

Moreover, the CSR is expressed as a percentage rather than an absolute figure. This means it does not reveal the exact number of claims that were denied, leaving a crucial gap in transparency.

For instance, if an insurer settles 900 out of 1,000 claims, its CSR stands at 90%. In the following year, it may receive 10,000 claims, reject 500, and report a CSR of 95%. While the ratio appears to improve, the number of rejected claims has actually increased, demonstrating how the CSR alone can be misleading.

In conclusion, The Claim Settlement Ratio (CSR) is a crucial metric that helps policyholders assess an insurer’s reliability in processing claims. A higher CSR means the insurer has a better track record of settling claims, making them a safer choice for health coverage. Before purchasing a health insurance policy, always check the insurer’s CSR, ICR, and claim rejection ratio to make an informed decision.

FAQ

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.