The Code on Social Security, 2020: How it impacts wages and benefits of employees

The new code has new rules for contribution to social security and payment of employee benefits, including retirement benefits

 

An essential step to reforming workplaces is the coming of the code on social security in India. Social security is usually understood as some form of monetary support that the government provides to those who are either incapable of being employed or are inadequately employed. In the Indian context, social security has a different meaning altogether. In India, our social security has spanned over a multiplicity of labour laws that our state and central governments have implemented over the course of many years. These regulate wages and worker benefits, address occupational safety and also set rules for labour and industrial relations.

Consolidating laws

Complying with multiple laws at both the state and centre levels has been no less than a nightmare for many businesses, posing a very real and practical hindrance to the ease of doing business in India. Therefore, the new social security code is a welcome change. The Code on Social Security, 2020, subsumes eight existing central labour laws. These laws are the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Payment of Gratuity Act, 1972; Employees’ Compensation Act, 1923; Maternity Benefit Act, 1961; Employees’ State Insurance Act, 1948; Workers Cess Act, 1996; Cine Workers Welfare Fund Act, 1981; Building and Other Construction and Unorganised Workers’ Social Security Act, 2008.

The Code on Social Security, 2020 consists of new rules for contribution to social security and payment of employee benefits, including retirement benefits. The Code has been passed by the Parliament and awaits the nod of the President. The Government is considering implementing the Code by December 2020, along with other three labour codes, viz., The Industrial Relations Code, 2020, Code on wages, 2019 and The Occupational Safety, Health and Working Conditions Code, 2020.

New-age businesses that thrive on e-commerce have created new types of jobs. Some of the workers in these new businesses were not covered under any of the existing laws. The new Social Security Code expands the scope of social security by providing for registration of all types of workers including gig workers, unorganised workers and platform workers. Therefore, in terms of coverage the scope has been expanded. Gig workers will now become eligible for life and disability coverage, maternity benefits, pension etc.

Taking care of the retirals

The law also expands scope to cover fixed-term contract workers who will now be eligible for gratuity; whereas earlier only employees which were permanent were covered. Under the Code, gratuity becomes due to an employee upon their termination from employment after a continuous service period of at least five years, which is the same as before.

The events giving rise to gratuity are superannuation, retirement, resignation, death or disablement due to accident or disease or termination of a contract under fixed-term employment or on the happening of any event notified by the central government. However, the completion of five years of continuous service is not necessary in the case of termination of employment due to death or disablement or expiration of fixed-term employment or happening of any such event as may be notified by the Central Government. In the case of death of an employee, the gratuity would be due to their nominee or legal heir. With the inclusion of ‘expiration of fixed term employment’, fixed term contract workers will become eligible for gratuity and this is a welcome move.

A social security fund will be created for paying these benefits to workers and it will be funded by central and state governments and also through CSR funding. Aggregators who are digital intermediaries employing gig workers will have to set aside at least around 1-2 per cent of their annual turnover (amount not exceeding 5 per cent of the amount payable to the workers) for the purpose of this social security fund. Hopefully, related rules may be announced in the coming days so that more clarity will be available as to how employers will estimate the total amount payable to the workers to set aside an appropriate amount. The law also states that the central government may provide for self-assessment of contribution by aggregators, leaving scope for regulation.

As per existing laws, employers in certain businesses with at least 100 workers need prior government approval to carry out layoffs and retrenchment. This limit has now been increased to 300. This change puts power back in the hand of businesses, workers may be more prone to be at the receiving end of arbitrary dismissal.

The Code also provides for the setting up of a ‘National Social Security Board’. The functions of the Board include recommending schemes to the central government and also monitoring the schemes for the different types of workers, advising the Government on the matters relating to the administration of the Code amongst others. A regulatory authority to separately administer the code would be beneficial to monitor the welfare of workers and it can better track the efficacy of schemes. The Code contains penal provisions in the case of failure to pay gratuity to employees or a failure to pay the contributions. Also, the Code prioritizes employees’ dues under the Insolvency and Bankruptcy Code, 2016.

Happy Investing

All about how dividends would be taxed from this fiscal

 

All about how dividends would be taxed from this fiscal

Dividends would be taxed in the hands of the recipients and not companies or fund houses

 

Do you expect to receive dividends from Indian companies and Mutual Funds in this financial year? Check for the tax withheld by the domestic companies and Mutual Funds from your dividends. With effect from financial year (FY) 2020-21, dividend is taxable in the hands of the shareholders and unit holders and not in the hands of the company/Mutual Fund.

For the past several years, in order to reduce the compliance burden on account of withholding taxes on dividend for both, companies (in the form of E-TDS returns and issuing TDS certificates) and individuals (in the form of enclosing the TDS certificates in the tax return), dividends had been exempted from tax in the hands of recipients. The tax burden was shifted from the recipients to the companies and Mutual Funds themselves. A domestic company or Mutual Fund in India, which had declared, distributed or paid any amount as dividend, was required to pay a distribution tax on such dividends.

From DDT to personal tax slab

Dividend distribution tax (DDT) at the rate of 15 per cent (plus applicable surcharge and cess) was lower than the highest tax rate payable by individual taxpayers at 30 per cent (plus applicable surcharge and cess). Consequently, dividends received by tax payers who had high dividend income was indirectly subjected to tax at a lower rate. To address this anomaly, from FY 2016-17 onwards, resident individuals having dividend from domestic companies in excess of Rs 10 lakhs were liable to tax at 10 per cent (plus applicable surcharge and cess) on such dividend, in addition to the companies paying DDT.

Technically, dividend is income in the hands of the shareholders and unit holders, and not in the hands of the company and Mutual Funds. Also, with the advent of technology and easy tracking system available, now the process of withholding tax or offering the dividend income to tax is no longer cumbersome. Hence, from FY 2020-21 onwards, dividends from domestic companies and mutual funds are taxable in the hands of the shareholders and unit holders at their applicable slab rates and DDT has been abolished.

As dividends have been made taxable in the hands of the individual, the provisions for withholding tax have also been reinstated. Domestic companies and mutual funds are liable to withhold tax at 10 per cent on dividend income paid to resident individuals in excess of Rs 5,000. However, as a temporary relief measure due to COVID-19, tax withholding rate has been reduced to 7.5 per cent till 31 March 2021. Please note that your annual tax credit statement (Form 26AS) is likely to have the details of only such dividend on which tax has been withheld (i.e., dividend income in excess of Rs 5,000).

Taxation of NRIs

For non-resident individuals, tax withholding would be at 20 per cent (plus applicable surcharge and cess). A non-resident individual also has the option of being governed by the provisions of the Double Tax Avoidance Agreement (DTAA) between India and his country of tax residence, if they are more beneficial to him. For instance, if a DTAA restricts taxation of dividend income to 15 per cent for a resident of that country, the tax rate mentioned would be applicable for computing tax as well as withholding tax, subject to specified conditions being met (including obtaining a tax residency certificate from the country of residence outside India).

Interest expenses incurred to earn such dividend are allowed to be deducted from the dividend up to a maximum of 20 per cent of the dividend income. No other expenses can be claimed against the dividend income.

Dividend income from foreign companies continues to be taxable at the applicable slab rates. If a resident individual has paid tax in a foreign country and is liable to pay tax in India also, he can claim foreign tax credit as per the DTAA with the foreign country.

In view of the above, it will be prudent to keep an eye on the dividends received during the year, so that the same can be factored into the estimated taxable income while determining the advance tax payable during the year and offered accurately to tax in the tax return.

Happy Investing

7 Investments That Offer Tax Free Income In India

7 Investments That Offer Tax Free Income In India


With interest rates rising, yields after tax have now gone higher. The post tax returns on investments have gained in the last few months. There is now a need to look at better investments, that offer tax free interest income in India. There are many investments that offer this kind of returns, but, in some cases, you may also get sec 80C benefits.

Here are a few instruments that offer tax free income in India.

Sukanya Samriddhi Account 

This scheme is a must if you have a girl child at home. There are a number of reasons why this is among the best tax free investments in India. The first is that the interest rate at 8.5 per cent beats most fixed yielding instruments in the country. The second is that it offers tax free interest income and the third is that amounts of upto Rs 1.5 lakhs qualifies for tax exemption under Sec 80C of the Income tax Act. This makes it one of the best investments in the country. Along with PPF, these are perhaps the two best schemes that offer a combination of tax free income and Sec 80C benefits.

SBI Life - Saral Maha Anand 

The returns and the amounts earned on the SBI Life - Saral Maha Anand is tax free. Being a Unit Linked Insurance Plan, you get Sec 80C tax benefit. So, in short the returns are tax free, your life is insured and you get benefits of Sec 80C, whereby if you invest an amount of Rs 1.5 lakhs, you get a tax exemption. This is one of the best tax free investments in the country and you should apply for the same. However, ULIPs tend to give you lower returns, because of the initially high expenses, including administration costs. However, they do offer an insurance amount up to 10 times the amount paid by way of premium every year.



PPF 

There are a number of reasons you should invest in the PPF apart from the tax free income. The first and the foremost is that there is no other investment that is backed by the government that gives you more than the PPF at the moment with a sec 80C benefit, apart from Sukanya Samridhi. An interest rate of 8 per cent per annum is better than what most banks are offering. So, these two along with ULIP plans should be the best tax free income that one can get. If you are a long term investor who is looking to save money for a child's marriage, education or to boost retirement amounts this should be a good bet.

REC Tax Free Bonds 

REC Tax Free Bonds offer you an interest rate of 8.37 per cent. The bonds are traded on the NSE and the interest earned is tax free. If you buy the bonds now you get tax free interest payment on Dec 1. This is tax free in the hands of investors. No, how much these bonds yield would depend on the rate which you buy them from the market. For example, the bonds have a face value of Rs 1,000. So, if you buy them for more the yield would fall below the contracted coupon rate of 8.37 per cent. Volumes on tax free bonds are low, so you may not get a huge quantity, if you want to buy.

NHAI 2 Tax Free Bonds 

You can buy the tax free bonds listed on the BSE. The NHAI 2 series tax free bonds come at a price of Rs 1100. The tax free bonds offer an interest rate of 8.3 per cent. The bonds can be purchased from NSE and you will receive tax free interest every year. It is extremely important to note that the price of the bonds are way above the face value of Rs 1,000. What this means is that your yields would drop to around 6 per cent on a post tax basis. Again, we wish to emphasize, higher the price, lower would be the yields. However, income is exempt from tax.

ICICI Prudential Wealth Builder II 

Under this plan you get tax free income and also tax benefits under Sec 80C. You also get insurance up to 10 times the premium paid. So, if you pay a premium of Rs 50,000, you get an insurance of up to Rs 5 lakhs. In short, the returns are tax free, there are sec 80C benefits and insurance component. However, the returns are low because of the several charges including the administration charges that are involved with the ULIP product.

HDFC SL ProGrowth Flexi 

Under this plan, you get insurance cover, as well as the amount is tax exempted. The income earned by way of returns is tax free. You can get returns from investing in bluechip funds, balanced funds or opportunities fund. A good fund for tax free returns.


REC N5 series Tax Free Bonds 

Rural Electrification's Tax Free Bond (N5 series) is also not a bad bet for tax free income. These bonds are listed on the NSE and offer an 8.01 per cent coupon rate. Interest is paid every year in the month of Dec, which allows for tax free income. Now, your returns would really depend on the price you pay for these bonds. At the moment, they are traded at Rs 1080 on the NSE. If you can get them lower, your yields would improve dramatically. Remember, you get an interest rate payment in the month of December 2018, which improves the yield even further.

Happy Investing

Use a Will to gift your property, or you may end up being homeless

 

Use a Will to gift your property, or you may end up being homeless

To save stamp duty and time, some transfer properties through gift deeds. But parents must ensure that gift deeds are water-tight

 

In 2017, when 71-year-old Mandar Bhosle of Mumbai gifted his immovable property to his children out of love, he had not imagined becoming homeless. A year after gifting the house, his son asked Bhosle and his wife to move out. “I had signed the gift deed agreement that my son had prepared. At that time, I did not realise the implications,” says a depressed Bhosle, sitting in an old-age home.

Siddharth Hariani, Partner at Phoenix Legal says that most parents tend to get swayed by their love for their children and gift away their homes. “But they do not seek legal guidance when doing so and then have a feeling of not being treated well by the children,” he adds. Often, elderly parents do not approach legal advisors while signing the gift deed, as they have complete trust and faith in their children or are doing it under the pressure of their kids.

It's important to know how to make a water-tight gift deed that can also be revoked if you feel unwelcome in your own home after gifting it away.

Is using a gift deed advantageous?

A gift deed is an instrument that allows you to transfer a movable or immovable property to the donee (the person receiving the property). In Bhosle’s case, the senior couple chose to gift their house to their children (the donees).

Such a gift deed falls under the ambit of the Indian Contract Act 1872. Also, since the couple gave away an immovable property, the Transfer of Property Act 1882 is also applicable, which entails a written agreement that needs to be stamped, registered and attested by two witnesses. In Bhosle’s gift deed, the two witnesses were his son’s friends.

Why is a gift deed used, rather than an outright transfer, say, though a Will? “The donee receives full exemption from income tax on receiving the property. Also, the donee has to pay marginal amount of stamp duty under the Indian Stamp Act,” says Zulfiquar Memon, Managing Partner, MZM Legal.

The stamp duty amount varies across states. Maharashtra has a cap on stamp duty payable on gifting of residential properties to blood relatives, at Rs 200, irrespective of the value of the property. “Whereas, if you transfer the property through a Will, the stamp duty charges are flat at Rs 75,000 in Mumbai,” says adviser Priyesh Sampat.

Gift deeds also work. Sampat says that through a gift deed, a property gets transferred within a week, whereas it takes about 8-12 months in the case of a Will.

How to make a strong gift deed?

If you must choose the gift deed route to transfer property to your children, make sure your agreement is made in a way that protects  you later. “In a gift deed, you must build a condition for the children, asserting that we (parents) have a right to continue using the gifted residential property and that it should be continued till the time we are alive,” says Mayank Mehta, Partner of Pioneer Legal.

Also, try to be a joint holder in the property instead of giving it away entirely. “There is no prohibition in law that donor cannot keep a stake in the property gifted,” says Payal Parikh, Managing Partner, ANB Legal.

How can you revoke a gift deed?

You can revoke the gift deed at a later stage only if there is a specific clause mentioned in the deed. Alternatively, if the gift deed has clauses that specify a child’s duty towards the upkeep and maintenance of their parents with dignity, providing for their basic amenities, fulfilling physical needs and so on and if any of these conditions are not met, the parents can revoke the gift deed.

In such cases, the law considers the gifting as having been done under coercion or undue influence, even without free consent or, worse, fraudulently. Parents can file an application for reclaiming the property at the tribunal court and revoke the gift deed under which it was transferred.

This maintenance tribunal is faster and quicker in resolving such disputes. “Under the welfare act, the tribunal is required to dispose the matter within 120 days of being brought to its notice,” says Hariani.

Make sure that your application clearly demonstrates how the donees (your children) has failed to live up to the terms. Section 23 (1) of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 ensures that “the senior citizens feel more protected. This act has been successful in taking the senior citizens away from the rigours of long-drawn litigation battles with their children before regular civil courts,” says Memon.

“If the donee is not willing to give back the property gifted, a lawyer can be approached to fight the case in court,” says Parikh. Also, if you are incapable of enforcing your rights for declaration of the transfer of property as void due to illness or aging, it can be executed by an appointed attorney. But, while presenting the facts to the maintenance tribunal, you need to be present.

A will is better than a gift deed

“In a Will, property continues to be in your name, whereas in a gift deed, the property stands in the name of the done, the moment you conclude the gift deed,” says Mehta.

It’s always better to give your house to your children through a Will, instead of a gift deed, especially if you have just one property – the one in which you currently reside.

You may want to experience the joy of giving away your house to your children, but the pleasure can still be yours by doing so via a Will.

Happy Investing

Source: Moneycontrol.com

Differentiating between pullback & reversal using derivative built-ups

 

Differentiating between pullback & reversal using derivative built-ups

A pullback is temporary in nature within the cycle, whereas reversals are changes in the cycle itself, says Shubham Agarwal. If we can successfully differentiate between pullback and reversal, we can optimise our trades accordingly.

The Nifty has rallied more than 100 percent in less than a year from the lows of March. While you were trading the rally, how many times on each price drop you expected a reversal and initiated a short trade?

A common mistake that traders do is to try and attempt to pick the highest high and the lowest low and they end up missing most of the general moves. We know staying with the trend can deliver the best possible output but how to really make it happen?

Data-driven analysis can help you achieve this. There is a fine line between “pullback” & “reversal”. A pullback is temporary in nature within the cycle, whereas reversals are changes of the cycle itself. So, if we can successfully differentiate between pullback and reversal, we can optimise our trades.

In a pullback, we could be hunting for bottoming opportunities (buy low strategy) in a bullish cycle and only in the case of a reversal would we be using rallies to sell (sell high strategy). Makes sense, right? But how do we identify these?

Let’s understand how to use derivative built-ups to answer this.

What are the types of built-ups?

There are 4 types of built-ups:

 

1. Long – Price moving up and OI increasing

2. Long unwinding – Price moving down and OI is also reducing

3. Short – Price moving down and OI increasing

4. Short Covering – Price moving up but OI is reducing

Out of these four types of built-ups, long & short are trends, whereas long unwinding and short covering are temporary adverse movements within the overall trend.

How to identify a temporary move and what should be the trading strategy?

 

Let’s say if the Nifty has been in a bullish trend and suddenly a correction starts creeping, the derivative data can help you find the answer if the correction is temporary or permanent.

If the correction witnesses Unwinding of Open Interest, it means that the market participants who created longs are booking profits and that is the reason for drop in open interest.

This data indicates a temporary correction and the strategy should be to wait for the pullback to end and one should hunt for bottom-fishing opportunities. Even if you create a pyramid strategy and gradually buy the dips, this strategy can prove to be a winning one.

The best value addition from this data is that you’ll know that you do not need to go short or off-load your holdings in anticipation of a correction and you’ll retain confidence in the trend.

Similarly, if an instrument is in a downtrend and suddenly starts witnessing a rally with unwinding of open interest, you’ll not get trapped in that temporary bounce as you’ll know that the overall trend is still negative. As an F&O trader, you should be looking to instead build short positions on rallies or offload any pending holdings on rallies.

Since these types of moves are mostly positional, it may take few days to few weeks to play out. So, trading these types of signals would be prudent using Futures or if you are using Options, use spreads to minimize your theta decay.

When will this study not work?

 

The built-up study may fail to provide concrete signals when the overall market or the instrument you are trading is oscillating within a range. In this kind of scenario, no trend will exist and the signals will mostly lead to whipsaws, so using this study is best in trending markets.

Summary

 

Patience pays in trading but it is equally important to know when to keep patience and when to be aggressive, the derivative built-ups can help you control the emotion of patience with a strong supported data.

Happy Investing

Source: Moneycontrol.com

Buying a new house on loan? Be aware of these tax benefits

 

Buying a new house on loan? Be aware of these tax benefits

You could get tax deductions of up to Rs 5 lakh under various sections

There are thousands of first-time home buyers  who seek clarity on tax benefits. The queries of home buyers are common and all are related to the tax benefits associated with a home loan.

A person taking a home loan does get income tax benefits under multiple sections: Section 80C, Section 24 and Section 80 EEA.

These sections are beneficial and provide a benefit of up to Rs 5 lakh, making it a very attractive.

Section 80C

The benefit from income tax under section 80C for the first-time homebuyer is up to Rs 1.5 lakh. This benefit of tax can be claimed under the home loan stamp duty as well as home loan principal categories. There are certain conditions to this claim of tax benefit such, as the person availing the home loan is bound to keep the property for at least five years from the date of possession.

Section 24

The tax exemption for the home buyer as per section 24 of the income tax act would be an exemption of up to Rs 2 lakh. This exemption would be under the home loan interest category. However, there is a condition on such exemption and that is a family member or even taxpayer himself must be residing in the property for which the loan is taken.

Section 80 EEA

Section 80EEA also offers income tax advantage for the first time home buyers of up to Rs 1.5 lakh. However, the condition over here is that the stamp duty value of the property, being residential, should be up to Rs 45 lakh only. And the tenure for the approval should be in the time frame of April 1, 2019 to March 31, 2022.

There are some most basic condition to be kept in mind:

-Borrowed loan must be financed from a financial institution

-No claim should be made under income tax section 80EE

-No residential property must be in the name of assessees till the loan is sanctioned

-The stamp duty value of property must be under Rs 45 lakh

For example, let’s say a person buys a house for Rs 50 lakh and taking Rs 40 lakh as loan, i.e., 80 percent loan, with 7 percent interest for 20 years tenure. The EMI for such a loan would be Rs 31,000 and the total amount paid in the first year would be around Rs 3,72,000.

The claim of Rs 95,000 can be taken under 80C, while the Rs 55,000 (from the Rs 95,000) can be taken for stamp duty payments, and is only valid for the first year. The annual earning is taken at Rs 15 lakh as of now and Rs 2,00,000 would be allowed under section 24.

Under the section 80EEA the individual can also claim Rs 77,000 interest amount.

Preparing for buying:

Start saving for your down payment: There is a requirement of having at least 10 to 25 percent of the amount as down payment while purchasing a property. If the property value comes to Rs 50 lakh, then one needs to have a corpus of around 20 lakh in hand.

 

Budget should followed: It is better to be economical for the time being.

Research for the property: Take multiple suggestions and tips before purchasing the house. Any other property with better rates and value proposition can also be considered.

Happy Investing

Best-selling author David Epstein underscores role of detours, breadth and experimentation in career success

 

Book review | Best-selling author David Epstein underscores role of detours, breadth and experimentation in career success

Switching from one interest to another may not be “a failure of perseverance”. It could be an “astute recognition that better matches are available”.

David Epstein’s new book Range: How Generalists Triumph in a Specialized World is highly recommended for readers who are fed up with pursuit of hyper-specialisation, and want to know how to create a life of meaning and success by developing broad interests and skills. It was first published by Riverhead Books in 2019 but the edition this review is based on was published in 2020 by Pan Books. The latter includes an afterword, which makes for insightful reading especially during the COVID-19 pandemic as the job market seems precarious.

The author has master’s degrees in environmental science and journalism. He has worked as an investigative reporter and a sports writer. The book has personal significance for him because, as a child, he was not quite sure what he was going to be when he grew up. His aim here is to capture how to cultivate “the power of breadth, diverse experience, and interdisciplinary exploration, within systems that increasingly demand hyper-specialization, and would have you decide what you should be before first figuring out who you are.”

If this sounds like an unnecessary tirade meant to coddle individuals that you think of as drifters, read the book before you dismiss it. It draws on the career paths of many scientists, athletes, inventors and artists. There are stories and lessons in here that could benefit young individuals who are entering the job market, senior employees who love their job but struggle to keep pace with new developments, and people who make a lot of money but do not find any alignment between what they do for their livelihood and what brings them joy.

Epstein writes, “Told in retrospect for popular media, stories of innovation and self-discovery can look like orderly journeys from A to B.” According to him, “inspirational-snippet accounts” appear straightforward “but the stories usually get murkier when examined in depth or over time.” With this book, he challenges prescriptions for success that seem not only tidy and attractive but also “low on uncertainty and high on efficiency.” What he emphasises instead is “the role of detours, breadth and experimentation.”

The book is divided into 12 chapters excluding the introduction, conclusion and afterword. It might be most rewarding when read at a leisurely pace, with enough time to take in ideas --developed across chapters – and to assess their merit and relevance. In addition to quotes from the various people he interviewed, Epstein refers to several research studies throughout the book. Readers who have the curiosity and the patience to wade through his notes at the end would find them extremely thoughtful, informative and fascinating.

If the spam folder of your email account is filled with advertisements urging you to make your child’s brain “coding ready,” you will easily relate to Epstein’s main argument. He refutes the idea that an early start and the quantity of deliberate practice determine success in every field under the sun. He is a cheerleader for sampling, changing directions, “learning to drop your familiar tools” and “flirting with your possible selves.” While working on this book, he learnt something startling -- that experts with terrific credentials can become “so narrow-minded” that they “get worse with experience, even while becoming more confident.”

Does this resonate with you? Is Epstein exaggerating for the sake of effect? Why do so many organizations value seniority over skill? Epstein sums up the findings of psychologists Gary Klein and Daniel Kahneman. He writes, “Whether or not experience inevitably led to expertise, they agreed, depended entirely on the domain in question. Narrow experience made for better chess and poker players and firefighters, but not for better predictors of financial and political trends, or of how employees or patients would perform.”

There are innumerable Twitter threads by young research scholars lamenting the lack of job opportunities in the academic market. People who have spent several years gaining expertise in a tiny area of specialisation are struggling to find teaching positions. What are the options available to them if they cannot afford to wait for a call from a university that wants to employ them? Does higher education hone what Epstein calls “the ability to apply knowledge to new situations and different domains”? Can they take care of their financial needs if there is no fellowship, grant or other kind of institutional funding on the horizon?

Epstein engages deeply with the ideas of James Flynn, a professor of political studies. During the course of an interview, Flynn told him, “Even the best universities aren’t developing critical intelligence. They aren’t giving students the tools to analyze the modern world, except in their area of specialization. Their education is too narrow.” Epstein clarifies that Flynn does not mean “that every computer science major needs an art history class.” He is of the opinion that “everyone needs habits of mind that allow them to dance across disciplines.”

What can organisations do to support generalists? Epstein shares that people with varied career histories often downplay their rich backgrounds because they fear that employers would see them as scattered or not serious enough. He writes, “Perhaps it would be a good idea for sites that host resumes, and organizations that review them, to include some function that allows users the chance to share their resume as a narrative journey in which they can explain the lessons of their zigs and zags, rather than just list them as bullet points.”

What can you take back from this book? Remember that switching from one interest to another may not be “a failure of perseverance.” It could be an “astute recognition that better matches are available.” We keep changing through our lifespan, so it is alright if our career goals change in keeping with “more self-knowledge.” Do not push children or adolescents into a “premature commitment to a singular passion.” It could be more damaging than you can imagine. Taking time to find a good fit does not imply an absence of a healthy work ethic.

Happy Investing

Source: Moneycontrol.com

 

Six Key Trends Paving The Way Forward For Luxury Industry

The last few months have seen a significant shift in the luxury consumers’ beliefs, values and lifestyle.

COVID-19 has hard hit the luxury industry resulting in the biggest fall in the personal luxury goods market since 2009. The industry has witnessed major transformation with digital being one of the biggest and the most impactful ones. E-commerce has proved to be a silver lining for many companies that were initially skeptical to embrace digital technologies.

The last few months have seen a significant shift in the luxury consumers’ beliefs, values and lifestyle. The key question remains: Will the pandemic alter the way shoppers buy in the future? What will the ‘new normal’ look like?

Here are the 6 key trends paving the way forward for the luxury goods industry:

Darwinian jolt

According to the recent Deloitte report, the leading 10 luxury goods brands sold more than the next 90 combined. The big luxury players are becoming bigger than ever while the weak are traumatised by the crisis; thereby resulting in massive consolidation in the industry.

Many stressed players, such as debt-laden multi-brand retailers and cash-poor independent brands are finding it difficult to survive. The exceptionally complex situation of 2020 undeniably increases the likelihood of more mergers and acquisitions and consolidation within the luxury industry.

Note: In the post-pandemic world consolidation of the luxury industry will further deepen. Leading companies need to be agile to grab the opportunities as weak players shutter.

First-time digital buyers on rise

COVID-19 undoubtedly accelerated the speed of digitisation as companies had no other option but to go ‘online’ to reach their prospects. Many consumers who historically purchased through physical luxury mansions have switched to online channels for the first time during the pandemic. Also, there is upsurge in the demand from buyers residing in tier 2 and tier 3 cities who had limited avenues earlier to buy their favorite designer labels at the click of their fingertips.

As per a recent report by Bain & Company, online luxury purchases were worth $58 billion in 2020, as compared to $39 billion in 2019, nearly doubling the sector’s share of the market for global luxury sales to 23 percent from 12 percent.

Note: In the post-pandemic world, some of these buyers are likely to stick to digital.

 

Surge in serious buyers

The fear of COVID still looms large across the globe. Consumers are shying away from visiting physical stores. They are making focused, to the point visits to retail outlets to fulfil their luxury purchase requirements and not spending time on window shopping and browsing through goods in the physical stores. Further, the ticket size of purchases has gone up due to a decline in frequent visits. In addition, consumers have become much more informed and are very clear about their needs and preferences. Hence, marketers need to go the extra mile to engage and capture consumer’s attention during these times.

Note: In future, brands need to inspire and motivate their buyers by innovative tactics- both offline as well as online.

Back to possessions

Today, luxury consumers can’t travel. They cannot splurge money on lavish dinners or big fat weddings. In this scenario, affluent people are parking a good amount of their money on acquiring luxury goods. They are celebrating their special moments like birthdays and anniversaries by purchasing high-end labels. Possessions have become a way to feel good at the time of this crisis. Although, this trend will be more prevalent in the short-term till experiential luxury again gain momentum.

Note: Brand should take this situation as an opportunity to acquire new consumers by creating targeted, focused customer acquisition and marketing strategies

Pre-loved luxury taking lead

As per ThredUp’s 2020 resale report, 50 percent of individuals are decluttering their closets more than pre-COVID times since they are spending more hours at home.

Today, increasing number of young consumers are seeing the brands in their closet as not just a way to express themselves but also as a valuable tradeable resource. At the same time, pre-owned fashion gives the opportunity to cash-strapped aspirational buyers to live their dream of owning luxury goods without making a big hole in the pocket.

Recently, Italian fashion house Gucci has collaborated with consignment site, The RealReal to expand their target audience in a circular manner. The luxury fashion second-hand goods market is estimated to grow from $24 billion in 2019 to $51 billion market by 2023. Further, the second-hand apparel market is projected to overtake fast fashion by 2028.

Note: In the post-pandemic world, pre-loved luxury may become the new norm.

Rise in ‘woke’ consumers

Young consumers are extremely concerned about people and the planet. With the onset of pandemic, they are rooting for those brands that are aligned with their value system and beliefs. Nine out of ten Gen Z consumers believe brands have a duty to address environmental and social concerns. Therefore, a growing number of luxury brands today are repositioning themselves as ‘caretaker of mother earth’.

Note: In future,  brands are expected to demonstrate increasing commitment towards sustainability. Today, luxury companies in all categories are compelled to adapt and reinvent themselves in order to survive in the new luxury landscape. There is an increasing need for companies to become ‘customer first’ entities to attract and retain their customers.

Consumer expectations and buying behaviour has evolved during the pandemic and luxury companies need to be on toes to remain in sync with the changing market trends.

Happy Investing

Source: Yahoofinance.com

 

Please Pay Your Complete Attention To Attention

Attention is not merely staying focused on the task at hand but is also how to process other information in the brain.

Hello December!

It is a good feeling to step into December. It has the ability to carry hope and light.

December is the month of looking back and at the same time, looking forward. December, unlike every other month, has stayed focused on what it brings to us. This year, every month derailed our line of focus. Our attention shifted from what we called a regular life to keeping ourselves safe. It shifted from growing at the workplace to simply being able to deliver work from home. It shifted from parties and vacations to online celebrations and condolences. It took the effort to keep the attention on the broader picture. It took the attention away from our own attention.

December brings the entire year into focus. We have the ability to review our highs and lows, love and loss, innovations and misses. In business, we saw new launches, new adoption of old launches and technology becoming seamless. The attention shifted from offline to online. It opened up a whole new world. And sometimes, an unwanted world.

In China, a company in the business of live streaming is based on fake attention, actually true attention but of fake people, not people, but bots. On a live streaming platform, influencers showcase real-time videos of activities like cooking, makeup and singing for fans and viewers can send them cash gifts or purchase products featured in the videos directly from the stream.

YY live is a live streaming venture of JOYY, a China- based social media firm listed on Nasdaq. Last week, JOYY reported a 36 percent year-on-year increase in revenue, 390 million global average monthly active users (MAUs) across all platforms and 92 million average MAUs on its live-streaming services. But a report by Muddy Waters Research, an online publication that produces due diligence-based reports on publicly traded securities, accused YY Live of extensive fraud, the fraud of using bots instead of people as the audience.



Muddy Waters made a statement that it had been investigating YY Live for a year and said "YY Live is about 90 percent fraudulent". Muddy Waters said, “It was clear to us from early on that YY Live was almost entirely fake. YY Live is an ecosystem of mirages. Its supposedly high-earning performers in reality take home only a fraction of their reported totals. The purportedly independent channel owners are largely controlled by YY in order to facilitate continuous sham transactions. The legions of benefactor fans are almost entirely bots operating from YY’s internal network (~50 percent of YY Live gift volume), bots operating from external bot farms, and performers roundtripping gifts to themselves. We conclude that YY Live is ~90 percent fraudulent.”

The allegations are unusual in accusing the platform of creating fake users. “Technological complexity and minimal human oversight means the ‘attention economy’ is full of virtual eyeballs,” says The Economist.

Back home, according to the Mumbai Police, rapper Badshah confessed to having bought fake views for one of his music videos in a bid to break a world record. He has denied the allegations.

All these attention-grabbing attempts mean there is a world of people fighting for our attention, which, in turn, means we are left with scattered, divided attention for everybody, including ourselves.

This December as we look back in review and look forward in hope, let us keep our focus on one thing in the attention economy—our own attention. In today’s Habits for Thinking, please focus your complete attention on attention.

Speaking at the Future of Work conference last month, Microsoft CEO Satya Nadella said, “People are saying, ‘data is the new oil’ but I fully agree with you that attention is the new oil.” “Data is plentiful. Attention is scarce and we'll never get more of it. Thinking about how we focus that correctly, I think, is one of our most significant opportunities.”

Attention is the cognitive process that makes us respond to stimuli around us. Attention is not merely staying focused on the task at hand but is also how to process other information in the brain. Daniel Goleman, author, Focus: The Hidden Driver of Excellence, explores the power of attention. “Attention works much like a muscle,” he writes, “use it poorly and it can wither; work it well and it grows. Just like the muscles in our bodies, attention can become fatigued. Common symptoms of attention fatigue are lowered effectiveness, increased distractedness, and irritability. These symptoms also indicate depletion in the energy required to sustain neural functioning.”

There are three types of attention that each of us is required to pay attention to:

1 Attention to your own thoughts

Inner focus, or attention to our thoughts, is our understanding of our emotional needs, our values; how we make choices and take decisions. The more we understand our values and motivations, the more capacity we have to direct our attention instead of having it scattered. It also helps us to direct our attention to what truly matters most to us.

2 Attention to your work process

There are two areas of attention that one must understand at work. First, the ability to function in a focused manner without any distractions. Second is to have relaxed attention towards work to avoid tunnel vision. Yes, relaxed attention means that you should not be so focussed on your work that you miss out on the opportunity arising from another direction. This is especially important during critical thinking.

Mails, messages, social media notifications, calls, meetings, agendas are all distractions to a continuous flow of attention. Cal Newport leaves a critical message in his book Deep Work, “Overcoming your desire for distraction is what we need.”

3 Attention to your social being

We are a sum of people in our lives. Typically, a mother pays more attention to a child’s needs as her cognitive process is more tuned in with the child than the father’s. With training and effort, the father pays attention to details too. Parenting is just an example where we are naturally responsible to pay attention. As humans, we have social needs—to work with teams, to enjoy with friends, to be responsible about the family and it is imperative that our mind stays attentive to our social needs. When we are distracted, some of our social attention takes a back seat. While chasing a goal at the workplace, we may miss paying attention to reasons behind a colleague’s poor performance, this may further reduce the entire team’s productivity. Practicing empathy is one way to pay attention to social needs.

Attention is needed in different styles in different situations. For example, a focussed and sustained attention is needed while doing a single work for a longer duration of time. The power to disengage our attention from one thing and move to another is also essential for our well-being.

What is, therefore, important is to pay attention to different attention needs. If we do not control how our attention muscles are grown, some bot may start controlling us too.

And yes, this December, as I am thankful for many learnings throughout the year, I am eternally grateful for your attention.

Happy Investing

Source: Yahoofinance.com

The ‘Invisible Hand’ Of Economics In Our Everyday Life

 

Book Review: Author Sudipta Sarangi Focuses On The ‘Invisible Hand’ Of Economics In Our Everyday Life

The book demonstrates how our behaviour is impacted by considerations which are avidly studied by economists – that much of our behaviour can be explained and demystified by explanations found in the science of economics.

The Economics of Small
Things by Sudipta Sarangi (Penguin Books)

At one place in this wonderfully ‘infotaining’ book, we are given an insight into game theory, “any rule-governed situation, where the final outcome depends on the actions of more than one person”. We get a breezy explanation of “today’s utility (our immediate consumption) versus future utility (the consumption of our future generations)”. We are told about repeated games, those which recur, and are also told that “... many of the seemingly irrational things that we do/observe can actually be explained using notions from repeated games”. This assertion is illustrated by a beautiful example showing why “many drivers in India will say a quick prayer while passing a temple... to protect themselves from mishaps on the road. The same drivers, however, will typically not wear a seat belt (a device guaranteed to provide greater protection in the event of an accident)...” Humour is present in this example, which is set up as a repeated game featuring the driver, God, and the seat belt itself, as players. I am tempted to offer spoilers as to the game, but will desist.

Behind stories of people going about their daily behaviour – from the trivial, such as eating (or not eating) the last slice of pizza, proudly displaying a pen in their shirt pocket (or not), to the important, such as selecting a health insurance policy, or, indeed, deciding to wear or not to wear a seat belt – are choices. Behind those choices is “serious economic behaviour”, the author says.

The book follows the winning ways of most nonfiction that seeks to explain a specialist topic to a general audience – it features plenty of autobiographical anecdotes, engaging examples, and deft analogies. For instance, the example of the bottled-water industry is used to explain the concept of ‘price discrimination’, or “charging different prices to different segments of the market for the very same product”. Surprised? Companies routinely practise price discrimination “by selling different quantities (bulk discounts) or qualities (different classes of airline travel) at different prices, besides offering stuff such as discount coupons”. Also, the author says, by charging late fees – credit card companies do this, combining these high late fees with low interest rates. Through price discrimination, the company can enhance its profits through selling, essentially, the same product to people who willingly pay more for it.

This book deals with the ‘invisible hand’ of economics in our everyday life. So, I suppose, the book will inevitably be clumped with Freakonomics by Steven Levitt and Stephen J. Dubner. But Freakonomics deals with major, life changing questions, while, as the title of this book suggests, its theatre is the commonplace life, for the most part. Also, this book is more theory-heavy while being as interesting as Freakonomics – no small feat, that.



Another example, rich and earthy, and oh-so-Indian: The author explores the vexatious and rousing problem of whether the best quality mangoes produced in India are exported to the US and other places, leaving lesser quality (though still good) mangoes for us Indians. His explanation for why this might happen is wonderfully simple (though the underlying concept is counterintuitive at first glance).

The author has the gift of grabbing your attention by joining together seemingly unrelated ideas to drive home his explanations. For instance, he uses the example of a gang of thieves in Sweden who stole “designer shoes from store windows”, even though the stores only displayed “shoes meant for the left foot”. It emerged the thievery was a trans-national operation, also involving stealing from stores in neighbouring Denmark, which exhibited shoes meant for the right foot. The thieves were stealing from both countries, then assembling pairs and selling them in the grey market. This example highlights the concept of “complementary goods”, and also complementarity existing between “different sectors of the economy” such as “the rail, steel and coal industries”. These sectors, we are told, “feed off each other”. If investment in either of these sectors lags behind (mis-coordination), “it will pull the other sectors down and the economy may experience losses”. Investing in just one or two of these sectors can “lead to wasteful expenditure, like spending money on jam but not buying the necessary amount of bread to roll it on”. This is one of the most lucid, as well as entertaining, explanations of an economic concept that I’ve ever read.

Despite the name of the book, the author does take on a few important topics. For instance, he mentions research published in Science magazine, which says that being poor “imposes a heavy tax on one’s cognitive abilities” because “immediate financial worries” leave the poor with “much less mental bandwidth”, which impacts their “cognitive capacity and makes them prone to errors”. This reduction in cognitive capacity can be as much as 13 IQ points – the equivalent of “being a chronic alcoholic, or losing an entire night’s sleep”.

The author also tackles racial, caste-based and religion-based discrimination through the lens of economics. He says there are two “simple and adequate” notions of discrimination – “statistical discrimination and taste-based discrimination”. In this connection, we are introduced to the work of Nobel awardees Kenneth Arrow and Gary Becker.

Many of the research conclusions mentioned are counterintuitive to the point of being mindblowing. For instance, we are told that while earthquakes obviously cause havoc in the short term, it is also true that “in the long run earthquakes affect income positively”. Wait, what? Also, is there a correlation between more Facebook use and less corruption? Yes, says the author, and explains how. And could a book meant for Indians avoid the topic of cricket? The author discusses research that explores whether “[t]he Twenty Twenty (T20) format required a different style of play from that of the One Day International (ODI) matches”. The answer makes for intriguing reading. And is more choice good? Cheerleaders of capitalism may well say “Yes!” But the author introduces us to the concept of “choice overload” – the phenomenon in which, “... faced with more choices/options, people often do not choose at all”.

This book is easy to recommend to the general reader. It features superbly entertaining anecdotes and examples, as well as delicious and accessible explanations, and apparently the desire to spark an interest in economics among those who pick it up. The book demonstrates how our behaviour is impacted by considerations which are avidly studied by economists – that much of our behaviour can be explained and demystified by explanations found in the science of economics. ‘Dismal science?’ Hardly.





SUHIT KELKAR is a freelance Journalist. He is the author of the poetry chapbook named The Centaur Chronicles.

 

Happy Investing

Source: Moneycontrol.com