Prajna Capital

Unlock Your EPF before its Time
Where should you buy Health Insurance Cover?
YOUR FIRST CREDIT CARD

Posted: 10 Jun 2015 05:08 AM PDT

Partial withdrawals of fund can be done without being taxed

The Finance Ministry is now reconsidering the Budget provision to impose TDS on premature provident fund (PF) withdrawals of Rs 30,000 or more. This means breaking your EPF corpus before completion of five years of service will be taxable for bigger amounts. You are allowed to withdraw only if it has been more than two months that you are out of work and you are still unemployed.

However, there are four situations that allow you withdraw from your EPF account while on job without getting taxed.

These are partial withdrawals which are usually computed on the basis of your monthly salary or contribution made so far.

EDUCATION AND MARRIAGE

You are eligible to withdraw for marriage and education of your siblings, children and yourself if you have completed seven years in service. This reason for withdrawal can be stated three times in your working life to take out 50% of the contribution made by you till the date of application.

`Years of service' is the total number of years you have worked. EPF is a centralised scheme under the Ministry of Labour and Employment and no matter how many job switches you make, only the aggregate experience need match the criteria. This, provided you have transferred your old EPF accounts to the current one. Also, remember, the rule says `employees' contribution' only .

MEDICAL EMERGENCIES

The EPFO allows advance withdrawals whenever you need funds for medical treatment for yourself or a family member--spouse, children or dependent parents. No minimum years of service is required however minimum one month of hospitalisation is a must.

You can withdraw your full contribution or six-times your basic monthly wage, whichever is lesser. Do not con fuse the term `wage' with your salary or monthly take home. By basic wage the EPFO means your basic salary plus any dearness allowance.

The advance can be taken for all major surgical operations or for treatment of critical illness. You'll have to submit proof of hospitalization along with the leave certificate, in case the funds are for your own treatment.

FOR HOUSE, PLOT OR HOME LOAN

You can withdraw up to 36-times your basic wage once in your working life from the EPF account to fund the construction, purchase or repayment of a housing loan. You should have completed 5 years of service in case you are purchasing or building the house. If you are prepaying a debt, you should have completed at least 10 years of service. For buying land, you are allowed to withdraw only 24 times your wage and should have completed 5 working years.

REFURBISHING YOUR HOUSE

The EPFO will allow you once to withdraw a maximum of 12-times your monthly basic pay for repairs and renovation of your home. You should have been contributing to the PF account for at least 5 years in case you want the funds for renovation. For repair, you should have completed 10 years of membership. The property should be in your or your spouse's name or jointly held. You'll have to submit a copy of the completion certificate at the EPFO office.

Along with the proofs of special circumstances, you'll have to fill out Form 31 for these advances.

Note that only after your employer verifies your application will the PF office process it.

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For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

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Invest Any Mutual Fund Online

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Download Mutual Any Fund Application Forms

Where should you buy Health Insurance Cover?

Posted: 10 Jun 2015 03:52 AM PDT

Both life and general insurance companies offer health insurance policies. Which model suits you best? We weigh the pros and cons.

Think life insurance, and term policies, unit linked insurance policies and endowment plans come to mind. General insurance, on the other hand, conjures up images of motor and health covers.

However, what you might not be aware of is some life insurers also sell health insurance policies, both indemnity and fixed benefit covers, the latter being more commonly offered.

What should you opt for?

Most health covers from life insurers are defined benefit plans, where a pre-fixed sum (as a lump sum or on a daily basis, depending on the product) is handed over to the policyholder once a claim is made. These could also be offered in the form of standalone critical illness covers, hospital cash policies or personal accident covers.

Some insurers also offer an indemnity-based health cover, which typically general insurers sell, wherein the expenses you incur on hospitalisation are reimbursed, up to the extent of the sum insured.

So, it's the principle--indemnity or defined benefit--rather than the primary line of the insurer's business that should be taken into account while comparing products. However, there are some differences between health insurance products offered by life and general insurers that you need to know of.

One, health products offered by life insurers come with a premium guarantee of three years. In other words, premiums remain unchanged for three years. However, according to experts, this does not make a significant difference. This is not a great advantage as general insurance companies too have age-slab based premium. If you enter the slab early you may end up paying the same premium for 5-10 years.

The main advantage of fixed benefit policies is that you can make a claim even if you have already been reimbursed by your general insurer's hospitalisation cover. These policies do not demand original hospital bills and discharge summary--photocopies are admissible evidence. The lump sum amount disbursed can then be used to fund your recuperation or lifestyle adjustment expenses. Any daily pay outs will come in handy for travel, food and miscellaneous expenses. Only 14% of expenses incurred due to major illnesses can be attributed to hospitalisation, which is covered by the conventional health plans. The balance 86% is borne by the customers themselves. This is where fixed benefit plans come in handy. A fixed benefit policy pays out the entire pre-defined amount once a claim is filed.

On the flipside, defined benefit policies are usually costlier than regular indemnity-based policies. Also, if you buy critical illness policies, which fall in the defined benefit category, they cease to exist once the claim is paid out.

Exercising your options

Once you choose the principle--indemnity or fixed benefit--you are comfortable with, you should carry out a cost-benefit analysis, rather than a life versus general insurance comparison. Since there is hardly any difference in features, you should not be concerned whether the indemnity health insurance is from a life insurer or a general insurance company. You should do a cost-benefit comparative analysis over the long term and then decide.

Some experts suggest that your base policy should be purchased from a general insurer, while fixed benefit plans can act as supplementary covers to take care of ancillary expenses. First time health insurance buyers need to buy a cover issued by a general insurance company which pays the actual cost incurred at the time of hospitalisation. Indemnity-based covers offered by non-life insurers are cheaper. Budget permitting, you can add a top-up plan sold by general insurers and then add a defined benefit policy to your protection basket to take care of expenses beyond hospitalisation.

Several life insurers used to sell health products with savings component as well, but they have been withdrawn now.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

YOUR FIRST CREDIT CARD

Posted: 09 Jun 2015 07:54 PM PDT

The lure of plastic, with cashless transactions and free credit, is hard to resist, but it can also lead to a debt trap. Here are the things to consider before you choose your first card

Check Charges

To start with, find out the card's fee structure. Some might offer zero annual rentals, but high interest rates. The right type for you will depend on the nature of your usage.

Consider Credit Limit

It is important to check the credit limit. If you intend to use it only during emergencies, go for a low limit. It is preferable for the first time plastic user to opt for a low limit.

Rewards to Suit Spends

If you are pick ing a card with rewards benefits, make sure the offers suit your spending habits and lifestyle. Some cards are more suited to frequent fliers, some to foodies.

Balance Computation

Know how the charges are calculated. The most common method is the daily average balance, where the everyday balance is added and divided by the number of days in the billing cycle.

Use Card Responsibly

Do not start with big-ticket purchases on your new card. Avoid carrying forward the balance and maintain a good track record to ensure that your credit score is not affected.