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- Life insurance and Its tax implications
- Mutual Fund Stock Portfolio
- ICICI Prudential Life Insurance Shubh Retirement
| Life insurance and Its tax implications Posted: 18 May 2013 06:56 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
Normally people do their investment planning at the fag end of the month of March, hence majority of life insurance policies are purchased on tax considerations only and that too in the last quarter of the financial year. No wonder, many of end up committing some mistakes while buying insurance, just in a hurry to save tax. However, now that we are through with the last minute activity, and have entered into the new financial year, it is time that we take a fresh look at the various provisions on insurance as contained under the income tax laws.
Here I intend to discuss the aspects of tax treatment of Life Insurance Premium as well as tax treatment of money received from insurance company. Since implementation of DTC in the immediate future is doubtful, I have deliberately skipped discussion on DTC.
Quantum of Deductions for payment of premium:
Under the present provisions of Section 80 C, deduction in respect of life insurance premium paid is available up to a maximum of Rs. 1 lakh. This deduction is available with other eligible items like tuition fee of your children, EPF, NSC, ELSS and repayment of principal amount of home loans etc. This deduction is available for life insurance polices, on the life of yourself, your spouse or your child, though child may be major or a minor or even married or unmarried. This particular aspect can be used for tax planning.
In case of senior citizens, normally they do not have much to claim, which qualifies under Section 80C and thus the limit of one lakh in majority of the cases does not get fully utilized. In such cases they can opt to pay the life insurance premium of their earning and grown up sons or daughters. This is because in the case of the grown up sons and daughters, the limit of Rs. 1 lakh, in majority of the cases is already used up by school fees and repayment of home loans, thus life insurance premium can-- not be claimed under Section 80C. Financial dependence of son or daughter on parent is not the requisite for claiming tax benefits on insurance premiums by parents.
One more aspect about claiming tax benefit for life insurance premium, not generally known to many, that it is not necessary that the premium should be paid by the same person year after year. This can be paid and claimed by different person as long as the same is paid to keep the life insurance policies in force on the life of persons specified in Section 80 C. Thus shortfall in parents' accounts can be filled in from surplus of the earning and grown up children's account from time to time.
Please note that there is no restriction on the number of children in respect of whom you can pay the premium and claim this deduction unlike for tuition fee where the deduction can only be claimed for two children.
Restrictions on Life Cover required for calming the deduction:
As per Section 80 C, the quantum of premium, which can be claimed is restricted in relation to the amount of the sum assured. As per the provisions applicable from April 1, 2012, any premium paid in excess of 10% of the sum assured should not be allowed under Section 80 C. Earlier this limit was 20% of the sum assured. For this purpose the sum assured means that the minimum amount which the insurance company has agreed to pay in the event of death. This amount will not include any bonus payable on such policy. Moreover any premium to be refunded shall also not be considered while calculating the sum assured.
Restriction on continuance of the Life Insurance Policy
In order to ensure that the deductions claimed in respect of premium paid earlier is not withdrawn in any year; subsequently you are required to keep the life insurance policy alive for a certain number of years. In case of a single premium policy, you cannot terminate the policy within two years from the date of commencement of the Life insurance Policy. In case of any other life insurance policy, the tax benefits granted to you shall be added to your income subsequently if you do not pay the insurance premium for two years in respect of that policy.
Tax Treatment of money received from Insurance Company
Generally people perceive that all monies received from Insurance Companies are exempt. This is not so. Section 10(10) provides for exemption for money received from insurance company in respect of insurance policy. First amount received in respect of all Key man Insurance policies are taxable. Secondly money received on death in respect of all the life insurance policies are exempt except those issued as key-man's insurance policy.
In respect of money received from Insurance Company other than in the event of death on all life insurance policies issued prior to April 1, 2003 will also be exempt from tax. However in respect of life insurance polices issued on or after April 1, 2003 but before March 31, 2012, money received from insurance company, other than on death, shall become taxable if premium payable in respect of this policy exceeds 20% of the sum assured in any of the year. However in respect of policies issued after March 31, 2012, the same will become taxable in the hands of recipient if the premium in respect of such policies exceeded 10% of the sum assured in any year.
In addition to above any money received in case of life insurance policy purchased for maintenance of physically disabled person under Section 80DD if such person dies before the proposer the money received by the proposer shall also be taxable.
So from the above discussion it becomes amply clear that you should take into account various factors before you buy any life insurance policy so that the premium paid is allowed and the money received in respect of such insurance policy is does not become taxable.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
| Posted: 18 May 2013 03:48 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
ONE detail many investors look at is the ownership pattern of companies they want to sink their money in.
Within the ownership pattern data there is a sub category showing the extent to which mutual funds hold shares in a company. The question is whether looking at the mutual fund holding pattern both on an overall as well as individual fund level is actually important for individuals as far as their investment decisions are concerned. Sample the details and see how investors can make the most of situations they actually face.
Nature of stocks:
One of the first factors to check while investing in a mutual fund is the nature of stocks that are actually held by it.
Sometimes the details about the holdings tell you some important things about the fund and just a look at the stocks held in its portfolio would be enough to give you an overall picture. This is especially true when it comes to holdings that are represented by large-cap stocks where the names are well known and, hence, the stocks too are widely held. It will be clear enough that in case of such large-cap holdings, there are a lot of other investors who will have a stake and, hence, liquidity and other issues are not such a big concern for the mutual fund as well as investors.
Down the chain:
The scene shifts when the mutual fund you plan to invest in or have invested in holds several stocks in the mid and small-cap space. Concerns arise about these holdings.
There are mid and smallcap funds where the holdings have to be compulsorily from this area, thus just having such holdings is not the concern. The problem arises when the holdings are being accumulated in stocks that are not very liquid. This means volumes in these stocks are low. There is a high return risk reward present here in the sense that getting such stocks before the market spots it can be a big winner. Several mid-cap funds have actually done such a thing and earned great returns for their investors.
However, if things go wrong then the fund could end up holding the stocks with little in terms of ability to offload these as liquidity dries up in the counter.
Specific holdings:
One of the other points that often arise is also some warning signs that need to pop up when there are holdings in the fund portfolio that are slightly different from what is normally seen. This could mean some companies are present in the portfolio where the other funds or institutions are not willing to take a stake or have not actually done so. There can be two reasons why this has happened. One is that the mutual fund is ahead of the curve and, hence, has built a position that can prove to be valuable if the market catches on to the potential that the fund has spotted.
On the other hand, there could also be a situation where the fund is disregarding the risks that have been spotted by other investors and, hence, this could be a potential high-risk investment in the making.
On the whole, investors should not look at just one or two holdings in the portfolio to come to any conclusion. They need to see the situation in the perspective of the prevailing conditions with relation to the fund and the markets.
This will let them get an idea of the overall risk they face and this is an important part because all that they want is to reduce the risk in their quest to get some returns on their investment. Once this aspect is controlled then the process becomes smooth and the experience is good.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
| ICICI Prudential Life Insurance Shubh Retirement Posted: 17 May 2013 09:52 PM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
Shubh Retirement, a unit-linked pension plan from ICICI Prudential Life Insurance, works in two stages—accumulation and income. The accumulation phase involves yearly premium payment towards the retirement corpus. On reaching your retirement or vesting age, you can commute up to one-third of the accumulated corpus and get compulsory pension on the balance. You can alternatively buy an annuity with the whole amount. The income stage starts when you start getting annuities after retirement. ON MATURITY
You will receive the higher of the fund value or the guaranteed benefit amount (See: Guaranteed Benefits Table). For instance, based on the assumed growth rate of 8 per cent, the fund value for a 40-year-old (who has chosen aggressive investment style) investing `1 lakh per annum over 10 years for a policy term of 20 years works out to `24.19 lakh, of which the guaranteed amount is `10.10 lakh. The net yield is calculated at 5.78 per cent.
FUND ROLE
The premium, after deducting charges, is invested in two funds—Pension Growth Fund, an equity fund, and Pension Secure Fund, a debt fund. The allocation depends on the type of risk profiles. It also depends on the period and the premium payment term of the policy.
ON DEATH
A nominee receives the higher of the guaranteed death benefit or the fund value on the death of the policyholder. The guaranteed death benefit is the guarantee factor multiplied by the sum of premiums paid.
ON EARLY EXITS
If discontinued before the fifth year of the policy, discontinuation charges will be deducted from the fund value and the balance will be moved to the discontinuation fund. There are no surrender charges after the fifth year. However, the fund value will not be given to you before the vesting age. Moreover, on vesting, you either have to commute up to one-third of the amount and use the balance to purchase an immediate annuity plan, or buy a single pay deferred pension plan.
ON VESTING
The accumulated corpus is used to buy annuity options from the same insurer at the prevalent interest rates. You can choose from the different types of annuities available to suit your income requirements.
COMPARISON
Recently, several insurers have launched unit-linked pension plans with unique characteristics. So, they cannot be compared. However, you can consider the National Pension System (NPS), which allows up to 50 per cent of equity exposure.
CONCLUSION
Annuity works well if you don't fall in the high tax bracket. Do not expect high returns from the plan as investment in equities would be inhibited by the in-built guarantees in the plan.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
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