What is social media for you?
A means of entertainment? Or
A platform where you promote your business and create your personal brand?
Or a source of information on current trends?
It can be anything.
You may use social media for entirely different reasons, but the intention behind social media’s existence was simple: To help people communicate irrespective of the distance between them.
After all, we humans are social beings, and we want to communicate, share and feel inclusive.
Social media, according to Merriam-Webster, is an electronic communication through which people can:
- Create online communities to share information
- Share personal messages, ideas, and other content such as videos
Social media has been around for 40 years. And has grown from direct electronic message exchange to a virtual gathering place, a retail platform, a marketing tool, and much more.
The Foundation For Today’s Social Media Empire
The emergence of the internet paved the way for social media existence. In the 1980 – 1990s, the growth of the internet led to the beginning of online communication services such as CompuServe, Prodigy, and America Online.
These platforms enabled the users to communicate digitally through bulletin board messaging, email, and real-time online chatting.
And in 1997, the earliest social media networks, named Six Degrees, came into existence. It enabled the users to upload a profile and send friend requests to other users (pretty much today’s Facebook, right?).
Another platform, Friendster, followed it in 2001.
Do you know when blogs, an early form of digital social communication, became popular?
It was with the launch of the LiveJournal publishing site. And this coincided with the launch of a blogger publishing platform by a tech company named PyraLabs.
And hence created the social media sensation that is still relevant.
21st Century Began With a Bang
After the invention of blogging, social media’s popularity exploded. Later on, many social media sites came into the spotlight for various reasons.
Here is a small brief of your favourite social media platforms:
- LinkedIn (2002): It is a social media site of choice for job seekers and human resource managers.
- MySpace (2003): It began as a storage platform, but later transformed into an online social network.
- Facebook (2004): Mark Zuckerberg, a Harvard sophomore, created it to connect Harvard students. And now it has 1.7 billion users worldwide.
- Reddit (2005): It began its journey as a news-sharing platform. Soon its users turned it into a combination of news aggregation and a social commentary site.
- YouTube (2005): The primary intention behind its launch was to allow anyone to upload, share, and view any video content with no restrictions. And today, it has grown into one of the major video distribution sites in the world.
- Twitter (2006): This could have been a podcasting platform if Apple hadn’t launched its iTunes podcasting. Now, this has developed into a microblogging and social networking service, which allows its users to post and interact with tweets.
- Instagram (2010): Do you know the reason behind its existence? It is Kevin Systrom’s, the founder’s love for photography. And in no time, this photo-sharing app became a global sensation.
- Pinterest (2010): Ben Silbermann founded this visual discovery tool for techie people and the public to share ideas and inspiration for various projects.
- Snapchat (2011): The students of Stanford University founded this social media app which enables its users to post photos and videos that disappear from the site after a few moments.
- TikTok (2016): It is the product of Chinese tech giant, ByteDance. What was the purpose behind this? To provide people with a platform that allows them to express themselves, create videos and share them across the community.
Is this list going to have a few more add-ons in future?
When you look at how these social media sites have become a part of our daily lives, it wouldn’t be surprising if a few more apps join in, don’t you agree?
How Do These Apps Earn Money?
“If you are not paying for the product, you are the product.” And this stands true for social media apps.
An astounding number of people use social media platforms every day for free.
As of December 2019, Facebook has over 2.5 billion, Twitter has 321 million, and LinkedIn has about 260 million monthly users!
So, if you are not paying for these platforms, then who does?
And what do social media companies sell them?
It is your time and attention!
As per Facebook’s 2019 fourth-quarter report, its worldwide ARPU (Average Revenue Per User) was $8.52. And the combined ARPU for the US and Canada was $41.41.
Now you multiply this amount with the estimated user base of Facebook.
And now you know how Facebook could make market capitalization of over $600 billion.
Long story short, the advertisers pay a fee to the social media companies to get their ads and sponsored posts in front of people.
The higher the user base, the higher is the potential audience for the advertisers. And that’s why these advertisers prefer the platforms which have a higher user base.
So, the primary goal for any social media platform is to attract more users and to make the platform more attractive for high-paying advertisers.
These social media companies have been successful in attracting more users by providing the platform for free.
Who wouldn’t go for free stuff, right?
Is User’s Privacy Compromised?
Do social media platforms sell your data to third-party advertisers?
Well, there are a lot of opinions and information about this.
But, one of the sources shares that Facebook and other social media platforms don’t sell your data; instead, they use your data to sell access to you.
When the advertisers set up the ad, the social media companies offer them an opportunity to select the specific interests, behavioural patterns, and demographics they want to target.
But, the platforms refrain the advertisers from checking the users’ private information and profiles.
The concept of running advertisements while offering free services is not new. The media companies, newspapers, and television have been doing this before the social media platforms existed.
However, it is fascinating to see how immensely social media platforms have grown financially and have transformed into marketing tools. And with the massive technological development, newer methods are coming up. It is indeed exciting to see what the future holds and how social media will make money.
Rbi Bans American Express and Diners Club From May 1, 2021
RBI swipes away Amex from India
Everybody loves to flaunt the upgraded status of their credit cards at airport lounges and restaurants.
But, what if you think of doing so the next time and have to cut a sorry figure, as you come to know that your country’s central bank has banned these cards.
Yep! If you own an American Express or a Diners Club card, you need to know that RBI has passed a notice on banning American Express and Diners Club from May 1, 2021.
But, why has RBI been so severe on these multinational financial services providers? What is next in store for you if you use these cards? Can you use it hereafter?
What happens to all the privileges you gained on your Amex and Diners Club card all these years? Is your privacy at stake?
Let us find out all these answers, one by one.
RBI has banned Amex and Diners Club from acquiring new customers from May 1, 2021.
This ban has been imposed by an order issued by the RBI on April 23, 2021.
Reason For The Ban
According to RBI, Amex and Diners Club have violated data storage norms.
“These entities have been found non-compliant with the directions on Storage of Payment System Data,” the RBI said.
Both these card service providers are authorized payment network operators as per the Payment and Settlement Systems Act, 2007 (PSS Act).
RBI has taken this decision as per the powers vested in RBI by the PSS Act.
But this is not a sudden outburst by RBI. Both the card service providers were warned about the same in April 2018 itself.
In April 2018, RBI directed all the payments service providers in India to store all the data (full end-to-end transaction details, information collected, carried, and processed as part of the payment instruction) in Indian online data storage facilities. RBI allotted 6 months to put this order into effect.
It also required the payment card companies to report compliance to RBI and submit a board-approved System Audit Report (SAR).
But American Express and Diners Club failed to submit the compliance report, and hence the ban.
It is shocking to know that American Express, a leading payments card company, paid less heed to the central bank’s instructions!
This was very unlikely to happen. What was American Express doing all these 2 years since April, 2018?
When Will The Ban Be Lifted?
The ban has been imposed will full certainty by the RBI.
But, Amex and Diners Club can make some early moves to convince RBI about their future intentions. If they act responsibly and take the path as guided by the RBI over secure storage of data locally, they present themselves a better opportunity.
The employees of Amex and Diners Club will feel stranded at the moment. The marketing teams working for onboarding new customers to their companies will be left with no work from May 1 onwards. This will be an add-on worry for the employees during the ongoing pandemic.
Hence, RBI can reconsider the ban in the future, if Amex and Diners Club adhere to its norms.
The Existing Customers
The ban does not speak anything about the existing customers of American Express and Diners Club.
Hence, all the card owners will be able to transact normally- they can use, upgrade and enjoy privileges as before.
To redeem its brand value, and more importantly, to redeem its customers, Amex can offer a few giveaways in the form of offers and discounts. The ongoing pandemic in India will restrict the users from availing these benefits, though.
But now that both these card companies are on the radar of RBI, the cardholders better hope their card issuers remain in the ‘good books’ of the regulators.
Other Similar Bans
This is not the first time that a card company or a financial services provider is banned by the RBI.
HDFC Bank faced such a ban in December, 2020.
Yes, the so-called leading bank of India faced a similar ban. It was barred from launching any new digital services and issuing new credit cards.
This ban came as a result of the frequent outages on the mobile banking and net banking systems of HDFC Bank for a period of 2 years.
Even after 6 months of imposing the ban, there are no signs of the ban being lifted.
HDFC Bank is partners with Diners Club for the sale of credit cards and specialized payments systems.
Diners Club did not learn the lesson from HDFC Bank it seems.
Both HDFC Bank and Diners Club under the radar of RBI at almost the same time- this shows the ‘taken for granted’ attitude of the financial services sector towards RBI.
Do you know, Diners Club International, founded in 1950, is the first independent card company in the world to issue credit cards to its customers. But , RBI has put swords on the oldest credit card company in the world.
Options For Customers
After this ban, the customers are left with options like- SBI Card, Axis Bank Cards, Icici Bank Cards, to name a few.
SBI Card will be the biggest beneficiary of this move. The ‘sarkari’ tag associated with SBI has done wonders to its retail banking business. The same is expected with SBI Card as its penetration strengthens in the tier-2 cities of India.
Foreign Companies – Go Away
Citibank has shut down its retail banking business in India. It will leave India soon.
Many other international leading brands from the financial sector- like Standard Chartered and Deutsche Bank have fled India, too.
And now that American Express and Diners Club are feeling the heat, it is to be understood where things are heading.
Non-compliance of the norms set by RBI within the stipulated time cannot be just a brain-fade from Amex and Diners Club. There can be more to it.
Is it that these companies did not want to store their data locally in India and were waiting for RBI to call the shots?
Whatever it is; well-done RBI!
We shouldn’t let anyone misuse our country’s data, should we?
If we can swipe, we can swipe them away too!
Tax Benefits of Investing in Real Estate
If you feel equity is overvalued currently, real estate can be a better option.
Real estate and gold are the favorite asset classes of Indians for investments. Equity comes last on the list.
Investing in real estate comes with a few tax benefits.
But, the benefits have got so many ifs and buts that it is confusing for a regular taxpayer to comprehend for his use case.
Do you know that selling a house before and after 24 months of purchase attracts a different tax rate?
Do you know that a house constructed, and a house purchased, both come under different purviews of the income tax? Or does it not come under income tax at all?
Then where does it find its place in the tax regime?
Well, like all the topics here on TBM, let’s disintegrate this topic as well for better and easy understanding.
Let’s take it one by one.
So, here we go!
Real Estate- A Capital Asset
Real estate is a capital asset. But not all real estate is a capital asset.
Rural agricultural land is not considered a capital asset. This is because the income generated from the sale of rural agricultural land is exempt from taxation.
Section 10(1) of the income tax rules says that any income which is earned by agricultural sources is exempt from income tax.
But, all other forms of real estate like- residential property, commercial property, plots come under the taxation regime.
In fact, urban agricultural land also comes under the purview of taxation.
The gain on every asset considered as a capital asset is called capital gain.
So, if you buy a house for Rs. 25 lakhs and sell it for Rs. 50 lakhs, your capital gain is 50-25= Rs. 25 lakhs.
So the capital gain is nothing more than ‘apna fayda’ in any transaction of buy and sell. It is just that these terms are packaged heavily.
Now, capital gains are classified into two categories:
- Short-term capital gain (STCG)
- Long-term capital gain (LTCG)
The difference between the two can be gauged by their literal understanding.
Here is the detailed difference between the two:
STCG is applicable when the difference between buying and selling of the residential property is less than 24 months. LTCG is applicable when the same is more than 24 months.
STCG is taxed as per the income tax slab of the individual. The income tax slabs are as under for the current financial year:
LTCG is taxed at a flat rate of 20%. There are many exemptions in LTCG taxation and are discussed below.
Indexation benefit takes into account inflation.
So it’s like- why should you pay more tax if you sold your house at a higher selling price, just because there was a boom in the real estate prices due to heavy inflation? Is it your fault?
Hence, the indexation benefit has been introduced to remove this drawback.
Indexation is considered in LTCG, but is not considered while processing the taxes for STCG. This is fair enough as inflation has a minimum effect in 24 months.
There are no exemptions in STCG. A few exemptions can be availed in LTCG.
Let us talk about these exceptions in LTCG, which make real estate investments beneficial.
Benefits Under Section 54
This section has provisions for reducing your LTCG tax on the sale of residential house property only. The residential house can be a purchased one or a self-constructed one.
But, plots and commercial properties don’t come under its purview.
Who can claim this benefit?
Only individuals and HUF can claim this benefit under Section 54.
To claim the benefits under this section, the residential property should be held for a minimum of 24 months.
So, you cannot buy a house every month, and keep on claiming benefits by selling them every single month.
Because if you do that, you will come under the purview of STCG, which anyhow has got no exemption benefit.
But what is the benefit?
The benefit is that you don’t have to pay the LTCG tax at a flat rate of 20% (as mentioned above) on the profits earned by selling a house.
You have to buy another house with the amount you earned from the earlier property sale. You can also construct a new house, if not buy an already constructed one. But, you cannot buy a plot to claim this benefit.
Also, it is mandatory to buy a new property within 2 years of the sale of the original property. A property bought 1 year before the sale of the original property will also serve the purpose. If the taxpayer prefers constructing a house over buying one, the time limit is extended to 3 years.
Let’s take an example.
If you sell a house for Rs. 50 lakhs, which you had bought earlier at Rs. 25 lakhs; then your capital gain is Rs. 25 lakhs. You will have to buy another property or a maximum of two properties worth Rs. 25 lakhs; so that you don’t pay the LTCG tax of 20% on this Rs. 25 lakhs.
This is a saving of Rs. 5 lakhs.
Now, it is not necessary to buy another property worth Rs. 25 lakhs only. You can buy another property worth Rs. 50 lakhs as well; but only Rs. 25 lakhs can be claimed for tax exemption.
Maximum LTCG Capping
This benefit is not for the real estate tycoons; as it should be.
The maximum LTCG which can be exempted using Section 54 is Rs. 2 crores.
Also, it is not for real estate brokers and traders.
This is because you can avail of this benefit just once in your lifetime.
“Why not buy a new house and enjoy this taxation benefit, and then sell the new house immediately after and relax with cash in hand”? – A naive taxpayer can question their Chartered Accountant.
This, too, is not possible, as if the new property used for claiming the benefit is sold within 3 years of purchase, the exemption will be reversed. The individual will then be liable to pay the LTCG tax in the next assessment year.
The taxation guys are smart, it seems. No room for mischief!
To add to the strict norms, it is mandatory to park the LTCG in dedicated capital gain account schemes of banks. It cannot be kept in savings accounts.
Also read: Private Company vs Public Company
This was an elaborate explanation of Section 54, which provides tax benefits to real estate investors.
But there are various other sections that are targeted towards the taxation benefits of the real estate investors.
Here is a brief explanation of the other sections, as the nature of the benefits remains more or less the same, as in section 54.
All capital assets- including house property, plots, and commercial property, come under the purview of Section 54EC.
All taxpayers can take benefit under this section, unlike Section 54.
To claim an LTCG benefit under Section 54EC, the real estate property should be held for a minimum of 3 years.
After the sale of this property, the LTCG should be invested in specified bonds with a lock-in period of 5 years. This investment should be done within 6 months of the sale of the property.
The investment can be done in National Highways Authority Of India (NHAI) bonds or Rural Electrification Corporation (REC) bonds.
So, as per the example mentioned above, Rs. 25 lakhs need to be invested in these bonds to exempt them from LTCG taxation.
A maximum of Rs. 50 lakhs of LTCG can be claimed under this section.
Unlike Section 54, no dedicated bank account is needed here.
The returns on these bonds are very low, which are around 5-6%. These returns are taxable as per the income tax slabs. Hence, Section 54 stands out in front of Section 54EC.
Commercial properties, plots, and all other capital assets except house property come under the purview of Section 54F.
The major difference between Section 54F and Section 54 is- The ‘entire sale value’ of the original real estate property should be invested for the purchase of a new ‘residential property only’.
Hence, as per our example, the entire Rs. 50 lakhs have to be invested to buy a new property.
If only Rs. 25 lakhs is invested, you get 50% benefit, i.e. benefit on 50% of the LTCG (Rs. 12.5 lakhs).
Real Estate And Unrealistic Expectations
Investments in real estate are not always fruitful. It depends on the bull and bear cycles of real estate, each of which lasts for 10 years, historically.
Grabbing all the available loans to buy real estate disturbs the equations even further.
Real estate investors need to make informed decisions, which is rarely seen amongst a generalized pool of investors.
Not many know the exact tax benefits as well for their use-cases.
Tax Benefit Is Not A Discount
A tax benefit is sometimes seen as a discount.
A tax benefit is not a discount number on the price tag of a piece of land or a flat.
You can see it as a cashback offer- the closest you can relate to in this domain.
A middle-class person has to spend the savings of his lifetime, along with additional loans to buy real estate.
The tax benefit shouldn’t be the only decisive factor behind buying it.
You shouldn’t forget to claim your tax benefit too.
There is much more you can do to save tax on real estate apart from the above-discussed points.
Keep following TBM for more on this in the future. You can always reach out to your CA, if in a hurry.
That is the best way, as you don’t have to tax your mind.
It’s April. If you have paid the tax, just relax!
CIF Number – The Only ‘Aadhar’ Of Your Bank Account
The ‘know how’ and ‘DIYs’ of the CIF number
If you have a bank account, you might have come across the term CIF number; at least once in your lifetime, surely.
If you don’t know what the CIF number is, then you are at the right place.
We’ve got you covered.
Let us dive deep into what a CIF number is and how it is important for the prompt working of the banking system.
What Is The CIF Number?
CIF stands for ‘Customer Information File’. As the name suggests, the file has a number which is known as the CIF number.
The format of the number varies with the banks i.e. different banks follow different formats for this number.
- SBI: 11-digit
- Central Bank of India:10-digit
- AXIS Bank: 4-digit
- HDFC: 8-digit
This number is highly essential for mobile banking or internet banking as this number works as the user ID. The user ID can be changed later on, but the CIF number is the digital virtual identity to every username changed in the future as well.
This customer information file carries all the banking information of the account holder in a digital form. So yes, your banker has all your banking information, that too, in detail.
So, does it imply- “Do not share your CIF number with anybody”?
Well not at all. It is not like a secret ATM pin. It is mentioned in every document related to your banking identity.
It contains information about the owner of the account, ongoing as well as previous loans, demat services, account type, account balance, and transaction information.
All the accounts you have with the bank can be linked to one single CIF number. This is useful in growing your Total Relationship Value (TRV) or Customer Relationship Value (CRV).
It is used by banks to determine how much minimum balance you can maintain, or how much credit can be given to you.
Just like the Aadhar card number gives you a unique identity, a CIF number gives you a unique banking code for all your banking needs.
This code cannot be changed as it is specially coded with all your information.
Also read: Private Company vs Public Company
Where Can You Find Your CIF Number?
There are various ways of finding your CIF number. Both offline and online.
It doesn’t matter in which bank you have your account, the process is the same for every bank.
Let’s get to it.
This is the easiest way to find your CIF number.
The CIF number is printed on the first page of your passbook, just above the account number.
Just like the passbook, the CIF number is printed on the first page of your checkbook. You won’t find it on the cheques.
You can always go old school and contact the customer care number to know your CIF number.
- Log in to your internet banking.
- Select the ‘e-statement’ option.
- Choose the period for e-statement.
- The account summary page will show your CIF number.
Nowadays, every major bank has their app for the comfort of its customers.
You can easily find the CIF number in the app of your respective bank.
Every bank provides an e-statement at your will, it is usually through SMS, but you can opt for email.
Just send a request to customer care. The automated operator will guide you through the process.
Do You Need The CIF Number Often?
You won’t require the CIF number often, as it is mainly for bank administrative purposes.
You will need it if you wish to change your bank branch or if you wish to access mobile banking and internet banking.
Every bank you change will pass on the CIF number to the next bank. The new bank will fetch the data from this CIF number.
A loan, mutual fund, fixed deposit is managed through the existing account number usually; hence producing your CIF number all the time is not required.
CIF Number- The Aadhar For The FinTechs
The FinTech companies are evolving.
The services of personalized bank accounts, personal and health insurance solutions, loans, and peer-to-peer transfer of assets are being made easy and fast for the customers.
Hence, the information of the CIF number is like gold dust for the FinTech companies.
The CIF number with self-learning algorithms can do wonders to transform the financial services sector.
In today’s world, where online frauds are the order of the day, financial data security is the need of the hour. It is time to segregate data and work more upon data privacy. CIF number is the key here.