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- No Income Tax on Gratuity of up to ₹ 10 lakh
- Investing for Senior Citizens
- Renewing Lapsed Car Insurance Policy
| No Income Tax on Gratuity of up to ₹ 10 lakh Posted: 09 Dec 2014 03:57 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
No tax on Gratuity of up to ₹ 10 lakh
Generally, benefits received at the time of retirement are taxable under the Indian Income tax law as profits in lieu of salary in terms of section 17( 3) of the Income Tax Act (' Act'). However, one can avail various tax benefits on the amounts received on retirement from the employer, subject to provisions contained in the Act.
Let us take a look at some of the provisions that can help retirees claim tax benefits.
Gratuity
Gratuity is a part of salary that is received by an employee from his/ her employer in gratitude for the services offered by the employee in the company. Gratuity is paid when an employee completes five or more years of full time service with the employer. Taxability of gratuity depends on the recipient. In case of government employees there is no tax on the gratuity In case of private sector employees, if they are covered under the Payment of Gratuity Act, 1972, then the gratuity is exempt from tax subject to a maximum of ₹ 10 lakh or 15 days salary for each completed year of service ( or part thereof) Where the gratuity is received in any of the previous years and if any exemption was allowed for the same, then the exemption to be allowed during the retirement year gets reduced to the extent of exemption already allowed, subject to the overall limit of ₹ 10 lakh.
Commuted Pension
Pension received by government employees, is exempt from tax. In case of private sector employees, if he/ she receives gratuity, the commuted value of one third of the pension is exempt. Otherwise, the commuted value of half of the pension is exempt Pension received from LIC pension fund is entirely exempt
Leave encashment on retirement
Leave encashment during service is fully taxable in all cases. However, such payment received by government employees at the time of retirement is fully exempt. In case of other employees ( including employees of local authority and public sector undertakings), leave encashment at the time of retirement, whether on superannuation or otherwise, is exempt from tax to the extent of least of the following amounts: Actual leave encashment received; 10 months of leave encashment, based on last 10 months average salary; Cash equivalent of unavailed leave calculated on the basis of maximum 30 days leave for every year of actual service rendered. The cash equivalent is calculated on the basis of average salary; ₹ 3 lakh Leave encashment received by the family of government employees, who died while in service, is not taxable. Similarly, leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
Voluntary retirement payments
Payment received on voluntary retirement, by employee of a public sector undertaking is exempt from income tax subject to a limit of ₹ 5 lakh. Such an exemption is available only when such compensation is received in accordance with the scheme of voluntary retirement or in the case of a public sector company, under a scheme of voluntary separation.
The scheme governing the voluntary retirement payment should be framed in accordance with guidelines as prescribed in Rule 2BA of the Income Tax Rules. The benefit is also available to employees of authority established under State, Central or Provincial Act; Local Authority; Co- operative Societies; Universities; IITs and Notified Institutes of Management.
It may be noted that such an exemption is available to an employee only once and if it has been availed for any assessment year, it shall not be allowed to him for any other assessment year. Further, if relief is availed by an employee under section 89 of the Act in respect of any payment on voluntary retirement, termination or voluntary separation, no exemption can be availed by him further.
Superannuation funds
In terms of section 10( 13) of the Act, any payment received by an employee from an approved superannuation fund is exempt from tax, if it is made in lieu of or in commutation of an annuity on his retirement at or after a specified age.
Provident funds
Any payment made to an employee from a provident fund to which Provident Fund Act, 1925 applies or from any other provident fund set up by the central government and notified by it in this behalf, is exempt from tax. The Public Provident Fund ( PPF) established under the PPF Scheme, 1968 has been notified for this purpose.
Other than these exemptions, employees can also invest in any of the instruments under Section 80 C to the extent of ₹ 1.5 lakh to save on tax. These include senior citizen deposit schemes, PPF, National Savings Schemes, National Savings Certificate, National Pension System, life insurance policies and Equity Linked Saving Scheme of mutual funds.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF             |
| Posted: 09 Dec 2014 01:58 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Investing concerns of senior Citizens
It's time planners customised their services to meet specific financial requirements of senior citizens
My 90-year-old uncle has been looking for a wealth manager to take care of his over `5 crore assets.
However, this segment of investors has not received the attention it rightly deserves. Senior investors represent an excellent learning ground for a financial planner or adviser.
First, senior investors spend a lot of time reading. Add to it the wisdom and perspective that comes with age, and you are looking at an investor who can size up a financial adviser in a matter of minutes. To advisers who want to build a solid knowledge-based practice, such investors can become mentors.
Second, senior investors want their financial affairs to be in order. They like quality paperwork and have a keen eye for detail. They also persist in solving operational problems. A large number of complaints and representations in the financial services business are by senior citizens, who have examined an issue in great detail and want to know how a problem can be resolved. Many advisers do not spend time on operational issues. They typically have back office staff to handle paperwork. Many of them have limited knowledge or training to deal with detailed or complex queries. Relationship managers and private bankers are supported by service managers who take care of the paperwork. Senior investors are seen as pesky by many in the financial services business even though they can offer the best scope for service and operational excellence.
Third, asset allocation for senior investors is a completely different ball game because virtually all standard recommendations are irrelevant to this group because most asset allocations tend to stop at retirement planning. The challenges in asset allocation for the seniors include converting physical assets, such as real estate and gold, into liquid assets that can be used; ensuring cash flow management happens without frequent juggling of assets; determining how much to keep and how much to draw down and use; ensuring they do not outlive their assets; and protecting living expenses from inflation. And, these are the toughest challenges in asset allocation and well worth an adviser's time and effort.
Fourth, insurance is an ironic challenge for seniors. Many of them are aware of their mortality but are not eligible for life insurance. If adequate assets have not been created and jointly held, as well as allocated in a manner that these can generate a steady income, there is no way a senior investor can compensate for the lack of life insurance for dependants. This switch from insurance-based to asset-based protection has not received the attention it should from finance professionals.
Fifth, the biggest concern for senior citizens is health. While some may be hale and hearty, many others are not, and most of them are mortified about hospitalisation and medicare expenses. They rue the fact that no attention is paid to the quality of life of a senior, and that he is treated only as a `patient' who needs tests, treatments and supportive equipment at prohibitive costs. My uncle thinks that the choice of staying at home with his cats and dogs should be respected, instead of hauling him to a cold hospital if he were to fall ill. According to him, loving and being loved more important than staying alive and fighting death.
We have a skewed system that hurts senior investors, who should be able to exercise their choices about medical expenses. Financial advisers can help such people in building a corpus for medical expenses, and managing it in accordance with their wishes. My uncle wanted to execute a power of attorney that restricted approvals for expensive medical treatment for him at his age, and has found it to be a legally valid option. Only, he is unable to find an adviser who will sign in.
Sixth, senior investors need advice on estate planning. My uncle's children are well-settled and do not need any of his wealth. He is still keen to leave behind some of the assets for his grandchildren, some of it to his caretakers and the rest to charity. Except for expensive and laborious trust structures suggested by his bankers and chartered accountants, he has not been able to complete this task. There are complexities in what he wants to do. There are properties still carrying his deceased wife's name; there are legal heirs who are NRIs; there are minor grandchildren; and there are beneficiaries who are not his heirs. It is his biggest cause for concern. He has a registered will, but is not sure how it will be executed eventually .
We are a very proud young nation. However, this should not stop us from taking financial planning and wealth management to senior investors. They are waiting for good quality advice, and can recognise it when they see it. So advisers and planners need to find a way to address this segment of investors as well.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
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 Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF      |
| Renewing Lapsed Car Insurance Policy Posted: 09 Dec 2014 12:41 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Renewing lapsed Car Insurance Policy is expensive
Getting your car insurance renewed soon might be a good idea as driving an uninsured vehicle will attract a huge penalty once the Road Transport and Safety Bill, 2014, is passed.
Owners and drivers of uninsured motorcycles and light motor vehicles will have to cough up ₹ 10,000. Those driving an uninsured car or truck will have to pay ₹ 75,000. At present, the fine for driving uninsured vehicles it is a meagre ₹ 1,000. According to insurance sector estimates, 45 to 50 per cent of two- wheelers on the roads across the nation are uninsured. Experts say it would be wise for such vehicle owners to buy a new two- wheeler as soon as possible, or at least get their lapsed licences, if any, renewed. " It would be wise to even get a lapsed policy renewed because third- party liability is unlimited
Third- party motor insurance is mandatory under the Indian law and one has to buy the cover at the time of buying a vehicle.
Third party liability claim in India has touched a peak of ₹ 20- 25 crore. The actual pay out is ₹ 13 crore. While renewing a lapsed policy is easier, it has its own set of disadvantages for all vehicles.
A lapsed policy means there was a break in insurance coverage.
The renewal is treated as a new policy, leading to another inspection of the vehicle. The insurance cover is based on whether the vehicle is roadworthy or not. If the vehicle inspection report comes up with damages or scratches and dents, it will be treated as a pre existing conditions. And, post- insurance renewal claims arising due to the pre-existing problems are not paid for. So, for the same vehicle, the insured declared value would fall drastically due to the policy lapse. Of course, till the new policy comes into effect, usually in seven days, you can't use the vehicle.
A policy has lapsed for more than 90 days, the customer is usually not allowed to carry forward unused no- claim bonuses ( NCBs), if any, from the previous policy. This is a big loss as NCBs can be adjusted against the renewal premium.
Then, insurance companies have a decline list of vehicles.
This list could change from time to time, as it is decided based on a the company's loss ratio in a particular car segment. If your vehicle falls in the decline list, you are most likely to be charged a higher premium for the renewed policy.
These days, it is easier to renew policies as most companies allow renewal online. But a lapsed policy in most cases cannot be renewed online, as it is required to be inspected. However, insurance aggregator PolicyBazaar. com, which has seen a surge in online renewal of two- wheeler policies over the past two months, claims some general insurance companies like HDFC Ergo are allowing online policy renewal even for policies lapsed for over 90 day. Another good idea is to opt for the long- term third- party liability covers — that are for two years — available with private companies these days For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
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 Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF      |
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