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Posted: 25 Dec 2011 06:40 PM PST
 ESOPs (Employee Stock Option Plans) were hottest during the ‘dot com’ boom years among software and internet based services companies. They are picking up now after many years. The difference is that now-a-days even manufacturing and banking companies are offering ESOPs to their employees. What are ESOPs? ESOPs, which give employees a stake in the ownership of the company, are provided by the company to employees to boost their motivation and loyalty. ESOPs give an employee the right to buy the company’s shares during a predetermined time period and at a predetermined price (strike price). Generally the strike price of the shares are offered to the employees at par or at a discount to the prevailing market prices. ESOPs are structured in such a way that the option to buy the shares at a discount can be exercised only after a certain period of time, which is known as the vesting period. So for example, an employee may be able to exercise his right over his shares after a vesting period of one year. In some instances, he may be allowed claim to a certain percentage of shares, known as the vesting percentage after one year and the rest over the next few years. Can a Non-Listed Company give ESOPs? Yes, even a non-listed company can give ESOPs. In fact, ESOPs in innovative, fast growing, unlisted companies were the reason many professionals made their millions in the Silicon Valley in USA. This trend however is yet to pick up in India. When does one pay to get the shares? Generally, in practice, there is no need to make a payment when ESOPs are allocated to the employee. Recent case as example Last week Suzlon, had announced an ESOP covering almost 90% of its employees to celebrate its 15th anniversary. Here, options of 1500 shares are allocated equally to all its eligible employees. The price at which the shares are offered (strike price) is at Rs.72.70/- per share compared to the current market price of about Rs.73/- per share. The vesting date is the day the employee gets the right to own the share at the strike price. In case of Suzlon, they get the first ownership of 500 shares after one year (vesting date) and 500 more every year for 2 more years. The actual date on which the employee wants to reap the benefits of his shares is the exercise date. In the case of Suzlon this can be upto 31st march 2014. What happens when there is an increase or decrease in the market price? Here, the whole point of the option is that the employee reaps the profit of any increase in the market value of the shares on the chosen exercise date and if the market value is not significant or is lesser than the strike price, he can choose not to exercise his right, which then is the crux of the ESOP. Can I transfer the right for the ESOP to somebody else? No, this is not allowed. The ESOP is provided to an employee as a benefit for his/her specialized skill / contribution to the company. This cannot be transferred to anybody. However after the shares are bought by the employee he/she is free to trade/ transfer/ gift the shares to anybody as per his/her wish. How many options am I eligible for? It depends upon the company’s management to decide who gets how many options. But as a general guide, people in higher management are offered more options. Sometimes people in special projects which brought the company more profits are offered more options. Suzlon, as discussed earlier has given equal number of options to all its employees. The CEOs and key managers in companies like L&T, ICICI Bank, HCL Tech, Biocon, Dr.Reddy’s Laboratory, HDFC Bank, Dabur, etc have huge assets in their portfolios because of their stock options. How are ESOPs taxed? The stocks bought using an ESOP are taxed as fringe benefit when bought. The value to be taxed will be the difference in value between the actual value at which shares are bought and the market value of the shares. They are taxed as normal shares are taxed at the time of selling. The usual rules related to capital gains tax will apply, now. Post the implementation of the New Direct Tax Code, the proceeds of the sale will be added to income and taxed accordingly. The calculations related to the taxation are beyond the scope of this primer and will be discussed in a separate article. Will employees get special benefits in an IPO? Yes, generally employees are given some special considerations during an IPO (Initial Public Offering). An Employee Stock Purchase Plan (ESPP) is the preferential allotment of shares most at preferential prices to employees when a company comes out with an IPO. Typically in India, shares are offered at about 5% discount to the final offer price to the general public. As employees the additional benefit can be that some portion of the shares offered may be preferentially allotted to them. So there is a higher chance for an employee to get he shares allotted to him/her. This is definitely an advantage for employees. | ||||||||||||||||||||||||||||||||||||||||||
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Posted: 25 Dec 2011 06:15 PM PST
Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them.
Sameer (name changed), is a business man, who has always been prudent with his money. Whenever he used his credit card, he ensured that he would pay his dues back immediately. He also made sure that he never used his credit card for expensive purchases, using cash instead. Imagine his unpleasant surprise, when he got a credit card bill showing that he had used up his entire credit limit. On checking his statement, he saw purchases that he had never made. He went through hell trying to making payments over those purchases. Apparently, Sameer was the victim of credit card fraud. Credit card frauds are on the rise these days. The credit card number, the Card Verification Value (CVV) or the Card Security Code (CSC), date of birth, credit card limit, residential address (stored on your card’s magnetic tape) is all that is needed for someone to misuse your credit card. Being vigilant while using your credit card is the only way of preventing fraud. Here are some tips. Card Verification Value (CVV) or the Card Security Code (CSC) The CSC or CVV number is a security feature for credit or debit card transactions, giving increased protection against credit card fraud. It is not embossed like the card number, and is always a group of numbers printed on the back signature panel of the card. This provides a level of protection to the bank/card holder, in that a corrupt merchant cannot simply capture the magnetic stripe details of a card and use them later for “card not present” purchases over the phone, mail order or Internet. Whenever you use your card, always ensure that the transaction is completed in front of you and that no details are written down by the merchant. Do not provide photocopies of both sides of the credit card to anyone. The card verification value (CVV) which is required for online transactions is printed on the reverse of the card. Anyone can use the card for online purchases if the information is available with them. Using cards online When using your credit cards for making purchases online:
The first and foremost thing to do, after you have confirmed that you have lost your wallet or card or have seen suspicious transactions on your credit card statement, is to call up the bank’s 24 hour call centre and deactivate the card or inform the customer service representative about the suspicious transactions. The representative will help you file a complaint in regard to this. In case of lost cards, check if any transactions have been made on the card and if there are any; inform the bank about the ones that are not yours. This has to be done within a particular number of days which varies between 30 and 60 days according to different banks. Some general tips
Finally, always stay at least 40% below your credit limit and review your account information either online or through the credit card company’s call center frequently. This will help you identify any suspicious transactions immediately. Credit cards, though an easy way to have access to money without carrying around a lot of cash can become a big liability if not used prudently and carefully. Ensure that you use the card responsibly. Get the best deals on loan offers Some useful personal finance calculators | ||||||||||||||||||||||||||||||||||||||||||
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Posted: 25 Dec 2011 05:40 PM PST
Photo credits : team dalog
All of us having motor vehicles have to go through the yearly ritual of buying Insurance on our car; Motor insurance as the market calls it. This article tries to demystify the jargon and processes involved in General Insurance. The basic jargon: Insured - Owner of the private car Insurer - The Insurance Company Under the provision of motor vehicles act all vehicles running in the public should have car insurance policy. The car insurance policy can be either
Whereas comprehensive Car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and specified dangers Motor Insurance Policy Covers Section 1. Loss of or damage to the vehicle insured The company will reimburse the insured against the loss or damage to the vehicle insured for the following
Vehicle Valuation The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less. Factors determining premium of a car
In case of an accident, the insurance company pays for cost of damaged parts which are to be replaced and the labor cost to repair the vehicle. Will I be eligible for complete reimbursement? No, it is all subject to a deduction or depreciation at the rates mentioned below in respect of parts replaced
Due to bodily injury/death sustained by the owner-driver of the vehicle by violent accidental external and visible means which independent of any other cause shall within six calendar months of such injury results in
It means the minimum amount which cannot be claimed
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