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In most cases, individuals start looking for tax saving products to invest only when their employer sets a deadline for submission of the documents. This leads to financial disaster

Has there been an April morning in your life when you have woken up and decided to do your tax planning? Most salaried individuals keep their tax planning for the last minute. And then at the end of the financial year, it is not uncommon for individuals to scramble to get their tax investment proofs. In fact, in most cases, individuals start looking for tax saving products to invest only when their employer sets a deadline for submission of the documents. If such a scenario plays out in your working life year-after-year, you are in for a financial disaster. In a hurry to meet the deadline, most people end up buying wrong products. One of the worst money mistakes is to buy financial products that you don’t need. The right way to do your tax planning is to start at the beginning of a new financial year, which is right now.

Why in April?
April, the beginning of a new financial year, is the right time to start planning your taxes. Remember that tax planning is just one part of your overall financial plan. Saving tax is just a by-product of the investments that you make which form a part of your overall investment portfolio. When you start planning at the beginning of the financial year, you get enough time to focus on your asset allocation and to take a well-informed decision. “Most tax-saving products have a lock-in period. The sooner you invest, the sooner your lock-in period is completed,” said Vishal Dhawan, a Mumbai-based financial planner.

The process
Firstly, you need to know what comes under 80C and how much money you save. For this financial year, under 80C, you can get tax benefit of up to Rs1.5 lakh. The investments eligible for 80C include contribution to public provident fund (PPF), employee’s share of PF contribution, National Savings Certificate, children’s tuition fee, principal repayment amount of home loan, investment in Sukanya Samridhi Account, unit-linked insurance plan, equity linked saving scheme, and five-year deposit scheme.

Keep a tab
Many are not aware that they are already investing in products that qualify for 80C. For instance, your PF contribution qualifies for 80C. To know the exact amount, check your payslip. If your PF contribution is Rs10,000 a month, automatically Rs1.2 lakh qualifies for 80C. So, in that case, you have to plan for just Rs30,000.

Starting early can get you more
Another benefit of starting early in the financial year will help you earn higher returns. For instance, say you invest Rs1.5 lakh in PPF every year for 15 years, assuming an interest rate of 7.60%. If you do it at the beginning of the year, your total returns would be Rs42.48 lakh and if you do it at the end of the year, it will be Rs39.48 lakh. You will earn Rs3 lakh more by just changing the date of investment.

Other saving products
Other than 80C, there are other deductions you get, including medical insurance for yourself and your dependents, interest on housing loan and donations. If you are paying a home loan, it forms a part of your tax exemption. To get the benefit, all you have to do is provide your loan documents.

Source:livemint.com

The best time to start tax planning is always at the beginning of a financial year when salaried class get their salary increment and self-employed and businessmen have a clear idea of how much they earned during the previous year. Unfortunately, most of us land up investing in a hurry without proper planning or evaluating various tax saving products and features during the last quarter of the financial year. So the time is now to review our tax incidence for the year and plan the investment in tax savings tool.    

If you look at the tax saving financial products available in the market, life insurance is one of the most effective ones for it not only provides financial protection for your loved ones, it also goes a step ahead to offer a host of tax benefits. You can avail a tax benefit by way of deduction towards premium paid on life insurance policies up to Rs. 1,50,000 under Section 80C of the Income Tax Act, 1961. This also includes premium paid by you for life insurance for your spouse or premium paid for your child’s policy. Any yearly income on life insurance policy in the form of bonus and even the lump sum amount at the end of policy tenure are also tax free in accordance to section 10(10D) of income tax act.  

You can purchase life insurance in the form of a term plan, traditional savings & protection plan, whole life plan, ULIP or as a pension plan. Of these, term plans are pure life cover but others are a mix of life cover and savings. However, for tax saving purposes, all are equally beneficial as the application of tax laws is same for all life insurance plans.  

Retirement or pensions plans are slightly different from other life insurance plans in the way the investment and payout is structured. Any pension plan has two parts – accumulation and payout or withdrawal. The policy works in a way that you pay premiums till the maturity date following which you are entitled to receive one-third as a lump sum payout and rest is paid out as regular pension throughout your life and that of your spouse depending on the pension option you have opted for. Tax benefits can be availed during the accumulation phase, i.e. for the premium paid each year. You can avail deduction under section 80CCC up to Rs. 1.5 Lakh. In the withdrawal phase, while the one-third lump sum payout is tax–free, the remaining amount paid as regular pension is defined as income for that year.  

Tax Benefits on Riders  
There are various riders or additional benefits that can be added to a life insurance plan, for a minimum cost. Such riders include critical illness, waiver of premium, personal accident and disability insurance. These riders offer tax benefits as well. Any additional premium paid for rider add-ons are eligible for tax deduction in line with life and health covers. Under health cover, you can claim tax benefit under Section 80D up to Rs.25,000 for yourself, spouse and children. An additional premium up to Rs. 30,000 for medical cover of parents can be claimed for tax deduction if the parents are senior citizens. In addition, you can also claim tax rebate up to Rs.5,000 for preventive health check-ups. The rider that you have opted for determines the nature of tax benefit. For example, for the critical illness rider, the relevant section for tax benefit will be 80D.  

Meeting the Income Tax Act requirements  
Before you buy insurance, you should also analyse if the cover being provided is in accordance to exemptions/deductions available under Income Tax Act. Under the Act, the life cover should be at least 10 times the annual premium to be eligible for tax deduction. For example, if you pay Rs. 30,000 as an annual premium, your policy should provide you with a life cover of at least Rs. 3 Lakh (10 times of Rs. 30000) to avail tax benefits.  

Example   

Let’s take an example to see how this works. Say, Anil has a term plan for Rs. 1 crore as a life cover for himself and has bought a traditional life cover of Rs. 5 lakh for his wife Sunita last year with a critical illness rider. Additionally, he pays a premium for Rs. 45,000 annually for a child plan he has invested in for his daughter Ria with maturity amount of Rs. 60 lakh paid in stages to provide for her education and marriage.  

Anil’s annual premium for his term cover is Rs. 8,000 and that of his wife is Rs. 4,000 and Rs.2,000 for the rider. Further, he also makes it a point to get a health check-up for himself each year. Unfortunately, due to his busy schedule, he has often ignored long-term tax planning and takes into account his tax liability only in February. Further, he is unaware of benefits he can claim from riders or health check-ups. According to his salary, he needs to invest Rs. 62,000 in tax saving instruments to save on taxes this year. Anil thinks he has already invested Rs.57000 as premiums and needs to make an additional investment of Rs. 5000 (Rs.62000-Rs.57000) to avail maximum tax benefit. But does he really need to do that? Let’s find out.  

Anil and Sunita’s policy (without taking the rider and its premium into account) clearly covers them more than 10 times of premium. Hence, these can be considered for tax deduction. Further, his child plan for Ria also meets the criteria making his tax saving investment as Rs.57000 for the year (adding the premiums of Rs.8000, Rs.4000 and Rs.45000) under section 80C. As he needs to show Rs.62000 as his annual investment, Anil thinks he is falling short of Rs.5000. However, if he makes himself aware of all tax benefits his plan provides, he will find that he has already met his tax liability with Rs.2000 that he pays for the critical illness rider and upto Rs.5000 that he spends on his preventive health check-up adding another Rs.7000 eligible for tax deduction under section 80C and 80D, taking his total tax saving investment to Rs. 63,000.  

Thus you can see that considering all the tax saving features of his policy, Anil was able to get the required tax benefit, preventing additional financial liability on him for tax saving.  

While the primary objective of life insurance is protection, it is a great tool for tax saving. What is important is to be aware of all the features and benefits from a tax saving perspective to gain maximum advantage. With life insurance you can thus serve the objective of providing for your family’s protection and also save tax in the process.  

Source:indiainfoline.com

Personal loans are a well-accepted means to access funds. Overcoming these myths can help you reach your goals faster

With quick approvals, no collateral requirement, no restriction on end use of funds and pre-approved offers, personal loans can be extremely helpful in bailing you out of a financial crisis. However, there are several misconceptions around personal loans, which often leads to people opting for more expensive or time-consuming means to meet their needs for urgent funds.

Here are some of the most common myths around personal loans:

They involve long processing time: Many borrowers believe that personal loans involve long processing time and tedious approval processes. This isn’t true. Personal loans today are quickly processed with minimal documentation, especially if you go through the online route. Lenders today extend pre-approved offers and instant approvals which ensure loans are disbursed to consumers within a day. Also, since these are unsecured loans requiring no collateral, their documentation is much simpler.

Low credit score implies loan rejection: Credit score is one of the important factors considered by lenders while evaluating your loan application. Hence, they do have an impact on your loan approval chances. However, a low credit score does not necessarily imply outright rejection of your personal loan application. Even if your credit score is on the lower side, factors such as your income and repayment capacity can certainly come to your rescue. But the interest charged for the loan is likely to be higher for people with a lower credit score.

Banks are the only lenders: Another common myth regarding personal loans is that they can only be availed through banks. There are other financial institutions - NBFCs and digital lenders - too which offer attractive personal loans. Many borrowers assume that they do not have any other borrowing option when banks reject their personal loan applications. In many cases, the loan applications rejected by banks do get accepted by other lenders such as NBFCs because banks generally have a more stringent eligibility and loan approval criteria than them.

Interest rates on personal loans are high: Many borrowers are of the view that personal loans charge unfair interest rates. However, personal loan rates can go as low as 10.99% in case you have a strong repayment capacity and credit score. Lenders have been increasingly setting interest rates on loans depending upon the borrower’s credit score. If compared to other borrowing options such as credit cards, which come with a higher interest rate ranging between 18% and 48% a year, personal loans are a less expensive option, depending on the customer’s profile.

You aren’t eligible if you have an existing loan: Even if a borrower is already tied up with another loan, they can still apply for a personal loan. While approving your loan request, lenders judge your repayment capacity by computing your net disposable income after taking into account all repayments such as loan EMI and credit card payments. So, even if you have existing loans at the time of your personal loan application, your loan application may get accepted if your repayment capacity seems to be satisfactory to the lender.

No prepayment option: Due to their shorter tenures than other loan options, personal loans are believed to have no prepayment option during their tenure. However, this is a myth. Personal loans, like other loans, also have the option of prepaying, subject to a few terms and conditions along with a prepayment fee, if levied by the lender. With their loan tenures generally ranging between one and seven years, personal loan prepayment can help borrowers save on interest cost by prepaying whenever they have additional funds.

Online application is a tedious procedure: Many borrowers still visit branches of various lenders to avail personal loans. They do not apply for loans online assuming it is a tedious procedure. However, the reality is exactly the opposite. To finalise the best loan for themselves, a borrower has to visit various bank branches and other lenders to get the most suitable personal loan. This can prove to be a time consuming and tedious task. Online financial marketplaces are offering personal loans through their platforms, with the facility of instant loan approval and a paperless process, thereby saving time. Borrowers can visit these online marketplaces and compare rates among various lenders to choose the most suitable personal loan as per their needs and financial position. Today, you can compare, choose and apply for a personal loan online, saving a lot of time and effort.

Source: moneycontrol.com
One of the biggest mistake people make when it comes to buying a health insurance policy is purchasing it simply based on the price of the policy

Buying a health insurance policy in no way guarantees that you will be reimbursed for any surgery or ailment unless you pick up the right insurance policy.

Take the case of Rakesh Kothari, a 41 year- old Kochi based pharmacist. His wife was operated for kidney stones at a hospital in Ernakulam. Despite having a healthcare policy that covered his wife, he was only partially reimbursed by his insurer for all the expenses incurred during the hospital stay. Hence, it is necessary that one does their homework thoroughly prior to choosing a health insurance policy to avoid any disagreements at the time of reckoning.

One of the biggest mistake people make when it comes to buying a health insurance policy is purchasing it simply based on the price of the policy. The cheapest policy is not necessarily the best one. There is a need to dig deeper and do a thorough check before arriving at a policy that provides the best set of benefits for the premium being charged. The insurance cover and the benefits of it depend on the premium one would have to pay. The same would differ from one individual to the other. But there are some key features that should be evaluated to ensure that you are buying the best possible policy for yourself.

Exclusions
All healthcare policies have a set of defined exclusions which is basically a set of ailments and conditions that the insurer will not cover. Most policies don’t cover ailments and injuries caused by war, activities like racing, attempted suicide, etc. By comparing multiple policies, you can ensure that the policy you pick doesn’t have a wider set of exclusions than the norm.

Sub-limits
Many insurance policies include sub-limits associated with distinct expenses such as surgery, room rent and ICU stay. One policy might dictate that the room rent above one percent of the sum assured per night would not be reimbursed. This would mean that a policy with a sum assured for Rs. 2 lakh would only reimburse room rent up to Rs. 2,000. The policy document needs to be carefully read for sub-limits because the type of room occupied would also end up affecting the total cost of the procedure. In case your insurance policy has a low sub-limit on rent but you decide to stay in a better-quality room, a huge portion of the cost would fall on your shoulders. Similarly, some policies also have sub-limit for certain surgeries like cataract, hysterectomies and appendicitis. One should be very careful when opting for a health insurance policy solely based on price as these would certainly have sub-limits and restrictions.

Waiting period
Most insurance policies have a waiting period for pre-existing medical conditions or diseases which vary from one another. This ensures that the disease or conditions you have at the time of buying the policy will not be covered by the insurer for a certain defined period of time. Comparing insurance policies will give you an idea of the shortest waiting period. Procedures that don’t need immediate treatment such as cataract and hernia have waiting periods in all insurance policies. A policy with a shorter wait time must be sought out.

Renewability
Regulation mandates lifelong renewability. Even though renewability of health insurance policies guidelines dictate that the health insurer must renew the policy except on grounds of fraud, moral hazard or misrepresentation, it is nonetheless imperative to scrutinize the terms and conditions of each policy.

Network of hospitals
It is always better to choose a health insurance company with a wide coverage of hospitals where one can avail of the cashless facility. This is important if you live in a Tier II or III town. Also, check whether important hospitals in the vicinity fall under the purview of your health insurance company.

Co-payment
This states that the policy-holder must pay a specific amount of claim while the balance is borne by the insurance company. Many kinds of policies exist in the market: some are without a co-payment, some have a provision for co-payment above a certain age and some have a co-payment requirement only if treatment is done in a non-network hospital.

This is important as the price of the insurance policy varies based on geographical location where the service is availed. For instance, lower premiums for smaller towns and cities and higher premiums for metros. If the insurance policy is purchased in a small town but treatment is availed in a metro, then the difference might have to be paid by the policy-holder. Many policies with lower premium unpleasantly surprise their clients by requiring them to co-pay.

No-claim bonus
Many insurance companies offer this feature by hiking the sum insured if a claim hasn’t been made in the previous year. One should choose insurers that offer a higher percentage of no-claim bonus.

Reputation of the insurer
It is very important that the insurer has a fast and fair reputation while in settling claims. One should also look at the health claims settlement ratio of the insurer.

Pricing
Pricing alone should never be the sole criteria for choosing a health policy. It should be compared along with product features and service levels of the company. In addition, policy documents should be downloaded from the internet and thoroughly read and reviewed before arriving at a decision. If this isn’t possible, online web portals that state ratings of healthcare policies must be scoured. Such websites use varied principles to score policies to arrive at a composite score.

Source: moneycontrol.com
Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to webmaster@sanjaysinghal.co.in.
Information provided on this newsletter has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. sanjaysinghal.co.in and its affiliates, information providers or content providers, shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this newsletter, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. sanjaysinghal.co.in, its affiliates, information providers and content providers shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this newsletter.