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I Stopped Paying Premium for My ICICI Pru Savings Suraksha Plan. Should I Continue?

Milind

Milind Vadjikar  |873 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 11, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Pradeep Question by Pradeep on Dec 11, 2024Hindi
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I had taken ICICI Pru Savings Suraksha plan for yearly premium of 3L in 2019 for 10 years. As I am not feeling the return is more than 6%, I stopped to pay the premium from 2024, but paid all previous 5 instalments up to 2023. I thought to claim the policy amount in 2029 only to get the other benefits. Is it a good decision?

Ans: Hello;

Traditional endowment life insurance policies provide poor returns.

Term life insurance is the optimal solution for protection.

Now that you have stopped paying premium for this policy it may have been converted into a paid-up policy with reduced benefits at maturity, by the insurer.

In such cases it is better to surrender the policy and invest whatever money you get, into mutual funds.

I presume you have adequate term life cover as protection.

Best wishes;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7593 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 2024

Asked by Anonymous - Jun 25, 2024Hindi
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I took ICICI PruLife Wealth Stage II policy for policy term of 15yrs. I completed paying premium (total of 10L in 10years) and current FV is about 18L. Is it good to wait till 2027 for policy term to complete or is it advisable to move the money elsewhere for better returns
Ans: You've completed the premium payment for your ICICI PruLife Wealth Stage II policy. Paying Rs. 10 lakhs over 10 years and seeing it grow to Rs. 18 lakhs is a good achievement. Now, deciding whether to hold on until 2027 or withdraw and reinvest elsewhere is crucial.

Disadvantages of Insurance-Cum-Investment Policies
Insurance-cum-investment policies, like ULIPs, often come with several disadvantages:

High Charges: These policies have high fees, including mortality charges, fund management fees, and policy administration charges. These eat into your returns, reducing overall gains.

Complex Structure: The structure of these policies can be complicated. Understanding all terms and conditions is challenging for many policyholders.

Lock-In Period: Such policies usually have a long lock-in period. This restricts liquidity, making it hard to access your funds when needed.

Lower Returns: Insurance-cum-investment policies often provide lower returns compared to pure investment products like mutual funds. The primary purpose of insurance should be protection, not investment.

Benefits of Mutual Funds
Switching to mutual funds can offer better returns and more flexibility:

Higher Returns: Mutual funds, especially equity funds, have the potential to deliver higher returns over the long term compared to insurance-cum-investment policies.

Transparency: Mutual funds are more transparent with clear information on charges and fund performance.

Flexibility: Mutual funds offer liquidity, allowing you to redeem your investments anytime without significant penalties.

Diverse Options: You can choose from various mutual funds based on your risk appetite and investment goals. Equity, debt, hybrid, and sector-specific funds offer a wide range of options.

Professional Management: Mutual funds are managed by professional fund managers who actively monitor and adjust the fund's portfolio to maximize returns.

Reinvesting in Mutual Funds
Here's a step-by-step approach to reinvesting your policy proceeds in mutual funds:

Withdraw the Policy: Since your policy’s current value is Rs. 18 lakhs, consider withdrawing it. Check any surrender charges or exit loads before proceeding.

Assess Your Risk Appetite: Determine your risk tolerance. If you're comfortable with higher risk for potentially higher returns, equity mutual funds are a good choice. For moderate risk, consider hybrid funds. For lower risk, opt for debt funds.

Diversify Your Investments: Diversify your Rs. 18 lakhs across different mutual fund categories. This reduces risk and increases the potential for higher returns.

Start Systematic Investment Plans (SIPs): SIPs help in rupee cost averaging and compounding. You can start SIPs with a portion of the lump sum and invest regularly.

Suggested Mutual Fund Categories
Equity Funds: Suitable for long-term growth. Large-cap funds offer stability, while mid-cap and small-cap funds provide higher growth potential with higher risk.

Debt Funds: Ideal for stable returns with lower risk. They invest in fixed-income securities like bonds and treasury bills.

Hybrid Funds: Offer a balanced approach by investing in both equity and debt. Suitable for moderate risk appetite.

Example Portfolio Allocation
40% in Equity Funds: Split among large-cap, mid-cap, and small-cap funds for diversification.

30% in Debt Funds: Ensure stable and less volatile returns.

20% in Hybrid Funds: Balanced growth with moderate risk.

10% in Liquid Funds: For emergency needs and short-term goals.

Regular Monitoring and Review
Regularly monitor your mutual fund investments. Review performance at least annually and make adjustments as needed. Staying updated with market trends and your financial goals will help you stay on track.

Power of Compounding
Mutual funds benefit greatly from the power of compounding. The earlier you invest and the longer you stay invested, the more your money grows. For example, investing Rs. 18 lakhs today and letting it grow at an average annual return of 12% for 10 years can significantly increase your corpus.

Final Insights
Given the high charges, complexity, and lower returns associated with insurance-cum-investment policies, it's advisable to withdraw your ICICI PruLife Wealth Stage II policy and reinvest in mutual funds. This move will likely offer higher returns and more flexibility. Diversify your investments across equity, debt, and hybrid funds based on your risk tolerance. Regularly monitor and review your portfolio to ensure it aligns with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7593 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 06, 2024

Asked by Anonymous - Oct 30, 2024Hindi
Money
Resp. Sir, I need your guidance regarding Insurance cum guranteed Income Plan. I did purchased ICICI Pru Guaranteed Income For Tomorrow (GIFT) Plan in 2023. I purchased 12 yrs PPT + 2 Year Plan. The annual premium is Rs. 5 Lakh + GST. ( 522500 in 1st year, 511250 for rest of 11 years ). I have paid 2 installment ( 2023 and 2024). Last installment to be paid in March 2034. I have choosed annual Payout. the first payout will start in September 2038 ( as I have chossed save on date) The payout amount will be Rs. 790926- tax free for 25 years ( upto 2062. I will be 95 by 2062). ICICI will return all premium also with 10% bonus. That mean Rs. 6600000/-( 66 Lakhs) will be paid with last payout. Now I am again confused for If I should contimnue or not. Policy is now fully paid after payment of minimum payment of two premium ( it means I will get reduced payout from 2038 onwards). Pl. guide me , 1) If I should continue the payment of premium, 2) what will be the rate of return and XIRR, 3) alternate investment if I discontinue the payment of Premium. Waiting for your reply. Thanks in Advance.
Ans: Your decision to purchase the ICICI Pru Guaranteed Income For Tomorrow (GIFT) Plan reflects a prudent approach to creating a future income stream. The policy offers guaranteed returns and aligns well with long-term financial security. However, it’s essential to carefully assess whether continuing with the premium payments will help you meet your financial goals efficiently.

Let’s evaluate the key elements of this plan, the expected returns, and alternative options to help you make an informed choice.

Key Highlights of Your Current Insurance Plan
Here’s a quick summary of your ICICI Pru Guaranteed Income For Tomorrow Plan:

Premium Payment Term (PPT): 12 years
Annual Premium: Rs 5 lakh + GST (Rs 5,22,500 in the first year, Rs 5,11,250 for the next 11 years)
Annual Payout Start: September 2038
Annual Payout Amount: Rs 7,90,926 (tax-free) for 25 years
Return of Premium with Bonus: Rs 66 lakhs at the end of the payout term in 2062
Evaluation of Returns: Rate of Return and XIRR
Rate of Return: This insurance-cum-guaranteed income plan typically offers returns in the range of 5-6%, which is relatively modest compared to other investment vehicles.

Expected XIRR: Calculating the exact XIRR is complex as it considers both premium payments and the eventual payouts. Given the guaranteed amount, the XIRR is expected to be in the range of 5.5-6.5%.

Opportunity Cost: This return may appear low compared to the potential returns from other investment options like mutual funds, especially when compounded over 12 years. High inflation rates may further erode the purchasing power of the fixed payouts, potentially affecting your financial freedom in the future.

Benefits of Continuing with the Plan
If your primary goal is guaranteed income and stability, here’s why you might consider continuing:

Assured Income: This plan provides a predictable, tax-free income stream for 25 years, helping you maintain cash flow without market risk.

Capital Preservation: With the return of premium and bonus at the end, the plan ensures capital preservation, which may suit a conservative investment outlook.

Tax-Free Income: The payouts are tax-free, which can be beneficial, particularly if you anticipate a high tax bracket in the future.

Considerations for Discontinuing the Plan
Although this plan provides guaranteed income, certain factors may urge you to consider discontinuing:

Lower Rate of Return: Traditional insurance-cum-investment plans generally offer lower returns. These returns may not match the long-term growth rates required for wealth accumulation.

Liquidity Constraints: The plan restricts liquidity since you must commit for 12 years, with no flexible withdrawal options. This can be a drawback if you anticipate needing funds for other investments or emergencies.

Inflation Impact: While the payouts are fixed, the real value of the income will diminish over time due to inflation. Alternative investments can offer growth that more effectively counters inflation.

Alternate Investment Options
If you decide to discontinue premium payments, here are some diversified options to consider for potentially higher returns with a balanced risk:

Actively Managed Mutual Funds: Investing in actively managed funds can offer a blend of equity and debt exposure. Experienced fund managers adjust portfolios to capture market gains while managing risk. Unlike index funds, actively managed funds may outperform due to professional insights. Explore equity mutual funds with a long-term focus for higher returns.

Balanced or Hybrid Funds: These funds offer a combination of equity and debt, reducing volatility while aiming for reasonable growth. Balanced funds are suitable for generating wealth over time, with moderate risk.

Debt Mutual Funds: For conservative growth, debt funds provide stable returns with relatively low risk. Note that debt fund returns are now taxed at your income slab rate, which may affect post-tax returns. Consider debt funds if you prefer a safer, predictable growth without long lock-ins.

Public Provident Fund (PPF): If you haven’t maximized your PPF contributions, this instrument offers tax-free interest and principal, with long-term compounding benefits. PPF is risk-free and provides stable, inflation-protected growth over time.

Sovereign Gold Bonds (SGB): For those interested in gold investments, SGBs offer regular interest income and long-term price appreciation potential. SGBs come with tax-free redemption if held to maturity, providing a hedge against inflation.

Systematic Withdrawal Plan (SWP) in Mutual Funds: An SWP offers regular payouts by systematically redeeming mutual fund units. Unlike insurance payouts, SWPs give you flexibility, and the invested corpus has growth potential, enhancing overall wealth.

Recommendation for Next Steps
To determine whether to continue with the premiums, consider the following steps:

Re-evaluate Your Financial Goals: Consider your long-term objectives and whether guaranteed, fixed returns align with them.

Assess Liquidity Needs: If liquidity is crucial, continuing this plan may limit your ability to allocate funds to better-suited investments.

Discuss with a Certified Financial Planner (CFP): Consulting a CFP can provide tailored insights and assist in calculating the precise XIRR and assessing the tax impact on your returns.

Final Insights
Your current insurance plan provides stability and guaranteed returns, which is suitable if you prioritize capital preservation. However, if wealth accumulation and inflation protection are key, consider exploring other options that offer higher growth potential with some market exposure.

Choosing the right path ultimately depends on balancing security with growth, ensuring that your investments remain aligned with your future financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Nitin

Nitin Narkhede  |53 Answers  |Ask -

MF, PF Expert - Answered on Jan 21, 2025

Asked by Anonymous - Jan 14, 2025Hindi
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Hi sir/mam, I'm 32 years old working in a private firm as Manager. I own 9 lacs in FDs, accumulated 17 lacs in Mutual funds through SIP of around 23k pm (currently XIRR at 15-16% in with 75% in equity). I also have 2.5 lacs in PPF and 1.2 lacs in NPS. For tax savings I do yearly investments in PPF and NPS of about 1 lacs and rest I cover with ELSS (part of my SIPs). I want to retire at the age of 50, my current salary is 1.2 lac per month in hand, and receive few incentives of 1.5 lac a yr. I live in Mumbai with my wife and plan to buy a house of 60 lacs (out of which 20 L I'm borrowing from family, and rest of it will be loan with about 35k EMI). I also have a flat in NCR worth 80 L (purchased at 35 lacs), for which I have an EMI of 11k per month which is covered by rent I receive from there. I don't have kids yet, but I plan to have two of them. What should be my plan of investing that I can retire by max between 50 and 55 yrs of age with an upper middle class lifestyle in either Mumbai or NCR. How much should my corpus be? My current expenses are around 60k including rent in Mumbai, and my parents are independent. I have both health and life insurance of 1 cr+ cover.
Ans: Dear Friend,
To retire comfortably at 50-55 with an upper-middle-class lifestyle, you’ll need a retirement corpus of ?5 crore. Currently, your mutual funds, PPF, and NPS are projected to grow to ~?1.82 crore by 50. To bridge the gap of ?2.18 crore, increase your SIPs by ?30,000/month in equity funds, which can grow to ~?2.25 crore at 12% CAGR in 18 years. Prioritize repaying the ?20 lakh family loan after buying the Mumbai house, ensuring the ?35,000 EMI doesn’t hinder your additional investments. Post-retirement, rely on rental income from your NCR property and a 4% systematic withdrawal strategy from your corpus to cover inflation-adjusted expenses. Maintain ?5-6 lakhs in an emergency fund and continue tax-saving investments like ELSS, PPF, and NPS. Regularly review and rebalance your portfolio to stay aligned with your goals. With disciplined savings and investments, you’re on track for a secure retirement.
Regards, Nitin Narkhede
-Founder Prosperity Lifestyle Hub,
Free webinar https://bit.ly/PLH-Webinar

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Ramalingam

Ramalingam Kalirajan  |7593 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 21, 2025

Asked by Anonymous - Jan 20, 2025Hindi
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Hello sir, I am 35yo with 2 (4yo, 1yo) children. Can I retire now, with following corpus: mutual fund and stocks : 3.5 crore, lands: 50 lakh, PF&PPF: 80 lakh, FD: 25 lakh, SGB &Gold:50 lakh. Currently doesn't own any house. Monthly expense is around 1 lakh.
Ans: Your corpus and monthly expenses show a solid foundation. Retirement at 35, however, requires careful assessment. Let’s analyse your situation step by step.

Current Financial Assets and Allocations

Mutual Funds and Stocks: Rs 3.5 crore

This is a significant part of your corpus. Equity investments offer high growth potential.

Lands: Rs 50 lakh

Real estate investments are illiquid. Consider them only for long-term growth or inheritance.

PF and PPF: Rs 80 lakh

These provide stability and assured returns. These are good for meeting long-term goals.

Fixed Deposit: Rs 25 lakh

FDs are low-risk and ensure liquidity. This is beneficial for emergencies.

SGB and Gold: Rs 50 lakh

Gold is a strong hedge against inflation. It also offers diversification.

Monthly Expense Analysis

Your monthly expense of Rs 1 lakh equates to Rs 12 lakh annually.

Accounting for inflation, this expense will grow over time. Planning for this is crucial.

Core Observations

Your total corpus is Rs 5.55 crore. This is substantial for your age.

Inflation and rising expenses over time will impact your corpus.

Without a house, rent becomes a recurring expense. Factor this into your calculations.

You have no guaranteed income sources post-retirement.

Key Areas of Improvement

Housing

Consider buying a house if feasible. Owning a house ensures stability and reduces rent.

Do not invest excessively in real estate as it is illiquid.

Corpus Utilisation

Avoid over-reliance on equity investments for withdrawals. Equity is volatile in the short term.

Use a mix of debt and equity for regular withdrawals.

Children’s Education and Marriage

Both are major financial goals. Plan dedicated investments for these.

Use long-term instruments for education and marriage funds.

Emergency Fund

Maintain an emergency fund of at least 12 months of expenses.

Keep it in liquid funds or high-yield savings accounts.

Recommended Financial Strategies

Asset Allocation

Diversify your portfolio across equity, debt, and gold.

Maintain 60% equity, 30% debt, and 10% gold as a starting point. Adjust as needed.

Mutual Fund Investments

Continue with actively managed funds. These can outperform index funds in emerging markets like India.

Avoid direct funds if you lack time or expertise. Regular funds offer advisor support and insights.

Debt Investments

Increase debt allocation for stability. Consider high-quality debt mutual funds.

Ensure these align with your withdrawal needs.

Tax Planning

Monitor tax implications of mutual fund withdrawals.

LTCG from equity funds above Rs 1.25 lakh is taxed at 12.5%.

Plan withdrawals to minimise tax liabilities.

Insurance Needs

Ensure adequate health insurance for your family. Cover at least Rs 25 lakh for each member.

Check if you have term insurance. Secure Rs 2-3 crore coverage for your family’s financial safety.

Inflation and Lifestyle Adjustments

Inflation can erode your purchasing power. Plan investments to counter inflation.

Avoid lifestyle inflation. Stick to essential expenses wherever possible.

Income Generation Options

Systematic Withdrawal Plans (SWP)

Use SWP from mutual funds for regular income.

Choose hybrid funds for better stability and returns.

Rental Income

Invest part of your corpus in commercial properties.

Ensure this aligns with your liquidity needs and risk profile.

Freelance or Part-Time Work

Consider light work for additional income. It can extend your corpus.

Use your skills to generate flexible income streams.

Monitoring and Review

Review your portfolio annually. Adjust allocations as goals evolve.

Work with a Certified Financial Planner for periodic checks.

Final Insights

Retirement at 35 is ambitious but achievable with meticulous planning. Your current corpus is strong, but consider the following:

Plan for inflation, children’s needs, and healthcare costs.

Diversify investments and secure guaranteed income sources.

Avoid premature decisions. Evaluate thoroughly before retiring.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Ravi

Ravi Mittal  |508 Answers  |Ask -

Dating, Relationships Expert - Answered on Jan 20, 2025

Asked by Anonymous - Jan 11, 2025Hindi
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Relationship
I am a 20 years old guy and in my past romantic relationships, have shown signs of emotional instability, too much dependency and lack of awareness of boundaries which affected my relationships badly...I hadn’t interacted with people in a long while since 2020 (precisely when lockdown had started) and feel that some aspects of my personality are not developed fully as they should be at this age. How to work on this? Also, i have noticed that I am able to create a good first impression but it soon pales and I feel like I am subtly disrespected or talked down to, and this has been happening in all interactions...i am always respectful (often to a fault!) and even have people pleasing tendencies...i sometimes ask immature weird questions and that might probably be the reason (but they’re never inappropriate)...but i do want to gain insights into why i am experiencing what i am and how to navigate this situation well so that I can maintain healthy relationships in future. Thanks you!
Ans: Dear Anonymous,
First of all, I want you to understand that it is no small feat to realize the quirks and imperfections in ourselves- you have done it. Your effort to understand and rectify them deserves to be acknowledged and appreciated.
Now, coming to your question, I can only give you some general advice on each-
Emotional instability and dependency- these behavioral patterns can stem from various factors; it can be a lack of confidence or some past issues that are left unresolved. It is difficult for me to tell you exactly why it is happening. It can also arise from a lack of validation. To manage it, you can focus on self-regulation- like meditation or journaling whenever you feel these emotions rising. This way you are expressing them but not damaging your relationships. Take up new hobbies or goals. Achieving milestones can build confidence.
Navigating Boundaries- You can speak to your partner in the early stage of the relationship to understand their boundaries. This way there will be clarity and you won't overstep. You can set up some boundaries too.
For better interpersonal skills, you can proactively follow some rules- like active listening, avoiding overthinking, asking open-ended questions, and resisting the urge to seek your partner's approval.
About the awkward questions- it is important to understand that you might perceive them as awkward, but the person opposite to you might think of it as a genuine curiosity. As long as it isn't intrusive or inappropriate, there are no awkward questions.
Like these, I can only offer you some general advice. But the best advice of them all would be to seek counseling. It has done wonders for people. And the first step, which is identifying the issues is already done. Bravo! What's wrong with taking a little professional help in navigating the next steps? They can guide you in a more structured manner.
Hope this helps.

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Kanchan

Kanchan Rai  |499 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Jan 20, 2025

Asked by Anonymous - Jan 09, 2025Hindi
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Relationship
I’ve been in a relationship with a girl for the past 4 years, but due to various issues, things have become extremely complicated. Her father doesn’t approve of me, and my mother doesn’t like her either. Despite this, we’ve managed to stay together all these years. The problem is now escalating. My family is pressuring me to marry someone else, but I’m unable to leave her. At the same time, I feel I can’t marry her either because of her behavior and the ongoing issues with my family. I’ve tried to ask her to change certain things, but she hasn’t made any efforts in that direction. To make matters worse, her mother supports our relationship and trusts me, which makes it even harder for me to walk away. I don’t want her to marry someone else, but I also feel stuck because of my family’s expectations and the challenges in our relationship. Even If I leave her I don't know what she is going to do. What should I do in this situation to make the best decision for everyone involved?
Ans: it's crucial to reflect on what you truly want and need from a relationship. Ask yourself if this relationship brings you the happiness and fulfillment you seek, or if the challenges you face are too significant to overcome. It's important to differentiate between staying out of love and staying out of fear or obligation.

Talking to your partner openly is essential. Share your concerns honestly and listen to her perspective. If there are changes you've hoped for, express why they matter to you. At the same time, recognize that change is a two-way street—it requires effort and willingness from both sides. If she hasn't made efforts in the areas you've discussed, it may be worth considering whether this is a pattern that can be changed or a fundamental mismatch in expectations.

Your family's disapproval complicates things further, but it's important to remember that this is your life and relationship. While their opinions are significant, they shouldn't be the sole deciding factor in your happiness. Balancing respect for their wishes with your own needs is a delicate task, but ultimately, you need to make a decision that feels right for you.

If the relationship feels unsustainable despite your efforts, it may be time to consider a different path. It's understandable that you’re concerned about her well-being, especially given her mother's trust in you, but staying out of guilt or obligation can lead to further unhappiness for both of you. If you decide to part ways, doing so with kindness and honesty can help mitigate some of the hurt.

Ultimately, this decision is deeply personal. Weighing your feelings, the relationship dynamics, and your family's expectations will guide you toward a resolution that prioritizes your well-being and future happiness.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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