Always Check Settlement Record Before Purchasing A Cover

The majority people ask over concerning returns, premiums, guaranteed or otherwise, tax breaks before purchasing a life insurance policy. Because for most of the people, the main reason of purchasing life insurance policy during the first 3 months yearly is an exercise in planning of the tax, it fits the bill in that perspective.

Hardly ever, do people really bother to inquire whether the insurance firm can be trusted to make a claim. Sarcastically, this is the most significant feature of an insurance company’s products. However, that is the main role of a life insurance plan - providing financial safety to the dependents of the policy owner on, if the policy owner dies.

Know The Claim Track Record 

To be reasonable, very few know the parameter to be used to determine the insurance company's reliability when it comes to approving claims. Furthermore, it is very improbable that your agent will help you by sharing these details, except his insurance company has a stupendous track record of settling claims.

Hence, how do you attain your hands about this key parameter? Well, for starters, you can consult with the annual report of Insurance Regulatory and Development Authority (IRDA) for the tenure of 2010-11, which was released recently. The IRDA has also put the annual report of 2010-11 on its website. So, you can also browse the details from IRDA website. The report lists claim repudiation, pending ratios and settlement for all life insurers, every year.

Though a systematic research would require studying these ratios for a longer time-period, yet data of a year, is not bad to start with. The statistics sheet may look complex, but all you need to do is concentrate on the mentioned, percentages in brackets, for every company. For example, Life Insurance Corporation's claim settlement ratio is more than 97%.

Life Insurance Corporation's track record can be said to be very excellent, especially because the public sector giant processed more than 7 Lakh claims in a particular year. Several private sector firms, in comparison, have a dismal ratio of around 50 percent, in spite of managing just a few hundred claims.

The Sole Criterion

The easiest way to select a plan seems to be to purchase one from the firm that has the best, or at least sky-scraping, claim settlement ratio. Though, it may not be completely accurate to go blindly by this statistics point alone.

Go Deeper Than Mere Numbers 

Subsequently, of course, there are additional parameters that relate to the policy owner themselves that are to be considered. Let us illustrate through an example, comprehensiveness of the insurance policy cover, its cost-effectiveness and, if it features an investment element, the returns track record too.

An 'Acceptable' Ratio 

These days, it is rather feasible that upon analysis, you discover that the firm with the best claim settlement track record does not provide a product that suits your requirements. Otherwise, it is also possible, that the premiums charged merely do not fit into your financial plan.

In this situation, can an insurance seeker search for an insurance firm with a claim settlement ratio of more than 80%? Or can 90% be the least amount threshold intensity for the purpose? The solution, then, may be to hit a balance and search for the best possible option.

Factor In Claims Pending Ratio 

In addition to the repudiation ratios and claim settlement, claim pending ratio is also to be taken into consideration. The statistic comes as an outcome after deducting settled claims, written back as well as discarded from the overall claims filed.

Moreover, the firms age could be more relevant here than on the claim dismissal. In short, you would do well to implement a holistic approach and analyze all criteria before taking a final resolution.

The Best Way to Get a Personal Loan In India

Are you are interested in availing a "personal loan" ? Personal loans are easy to get. Moreover, they are offered at a highly competitive rate, and you can use these loans for almost any purpose like traveling, going for a vacation, wedding, gifting etc. Here, you will find the basic guidelines regarding personal loans.

First thing you need to decide is the amount of money that you will require to fulfill your needs. That is, you need to plan your budget. The loan can be availed in two ways. It can be an availed as an “Unsecured Loan” or as a 'Secured Loan”.

Secured loan is highly recommended because it offers you the best deal on a reasonable rate of interest. If you have some precious asset, you can put it as mortgage and go for a secured loan. If you are sure that you can pay the loan extremely easily, it would be wise to keep some asset as a mortgage and avail a secured loan.

However, if you are going to opt for an unsecured loan, rate of interest can be higher than a secured loan. This type of loan is best suited for people who do not have anything to keep as a mortgage. The other situation where this type of loan is the best for you is when you do not require an unusually large amount.

If you want a fast processing, you should find the lenders online. Many related websites like www.dialabank.com provide useful information regarding personal loans. On the internet, you can get the best deal due to high competition in the market and it saves your money and time, as well.

To conclude, whatever type of loan you decide to go for, try to do a market survey before taking the final decision. Shopping for rates is essential and will help you in taking an intelligent decision.

Tax-Saving Season-Choose The Best Infrastructure Bonds

Infrastructure bonds are making a splash these days just in time before the end of the tax-saving season in March. At present, issues are opened for subscription from Infrastructure Finance Corporation of India (IFCI), Rural Electrification Corporation (REC), PTC India Financial Services and SREI Infrastructure Finance. IDFC has already lifted up Rs. 533 Crore through its issue of infrastructure bonds that stopped up for subscription in Dec, 2011.

The company is expected to come up with its next tranche of these bonds soon. You can put in up to Rs 20,000 in these bonds and claim deduction in tax under Section-80CCF. You can save as much as Rs. 6,180 by making investment in these bonds, if you are in the uppermost tax bracket.

"The Rs. 20,000 limit for investment in infrastructure bonds is in addition to the 1 Lakh tax deduction limit available under Section-80C and hence, merits investment. You can choose an issuer of these bonds based on the credit rating, interest rates offered and the financial credentials of the company", says K. Ramalingam, Director and Chief financial planner at Holistic Investment Planners.

The General Essentials

All issues have time-period of 10 to 15 years. There is an alternative of buy-back, at the end of 5 years from the date of allocation, and liquidity will also be accessible by listing the bonds on the stock exchange once the obligatory lock-in time-period of five years is over. Though the buy-back option for the 10 year bonds is after 5 years, for the 15-year facility, it comes after a period of 7 years. All of them offer yearly and growing options of interest payment for both maturity periods.

You can select to apply for only the 10 year bonds or only the 15 year bonds or a blend of the two. You can apply in the demat mode, if you have a demat account, besides you can even prefer for physical certificates. You should offer information of your demat account all along with a photocopy of your Permanent Account Number (PAN) card and a cheque, If you are applying in the demat mode. But, if you are going to invest in physical form, you should affix a photocopy of your residence proof, as well.

The face value of a single bond is Rs. 5,000 and an individual have to make an application of one bond and in multiple of one bond afterward. There is no upper-limit on the sum of the amount that you can invest. The face value is Rs. 1,000, only in the case of SREI Infra and an individual can apply for at least one bond.

Selecting One Over The Other

The issues on proposal vary in rates of interest, ratings and buy-back alternatives subsequent to the lock-in period. IFCI pays the maximum interest among all of them. For a period of 10 years, IFCI pays 9.09 percent whereas REC pays 8.95 percent, PTC India Financial pays 8.93 percent and SREI Infra Finance pays 8.9 percent. For the period of 15 years, IFCI pays 9.16 percent whereas all others pay 9.15 percent. Although REC and IFCI are possessed by the government, PTC India Financial Services parent - PTC, is a government supported public private enterprise and SREI Infra is a private player.

In terms of rankings, REC scores as it has an AAA rating that shows maximum degree of protection in terms of timely refund of principal and interest. IFCI, PTC India Financial Services and SREI Infra have a lesser rating as compared to REC.

IFCI bonds benefits from 'CARE A+' by CARE, 'LA' by Icra and 'BWR AA-' by Brickwork Ratings. PTC India Financial Services has been given an 'A+' ranking by CARE and ICRA. SREI infra bonds benefits from a ranking of CARE 'AA'.

Since REC and IFCI are owned by the government, the margin of safety is high. Investors could choose from either of the two. For individuals who are all set to divide the amount in 2 issues, there is a different approach. "If you want the best of high rates as well as high rating, invest Rs. 10,000 in the 10 year option of IFCI at 9.09 percent, and Rs. 10,000 in the 15 year option of REC at 9.15 percent.

Though, not all monetary planners would recommend you to divide investments as the amount of Rs. 20,000 is small and would make it hard to track over a five year time-period.

Finally, even if you are going through a shortage of finances and cannot invest at this time, do not lose optimism as you can also invest in any of the multiple issues till the end of the financial year.

Rise and Fall of Insurance In India

Many in India believe that the insurance sector is a secure sector but the collapse in the premium income of private and public life coverage plans and general insurance companies clears this myth. The statistics came out in the light, concerning the premium income of the insurance industry noticeably represents that Insurance India is not recession proof.

Demise initiated from the life insurance segment of India where the chief and mainly trusted companies have not recorded enormously inspiring premium income. To begin with Life Insurance Corporation of India (LIC) has recorded the expansion rate of 4.45 percent in 2009 collecting total Rs.1.56 trillion as its premium income. The downfall is also seen in the 2009 first quarter as the private life insurance competitor like ICICI Prudential Life has revealed the demise of 49 percent in its expansion, in June quarter. In the meantime SBI Life, the life insurance PSU has also reported the premium income of Rs.1, 072.72 Cr in the same quarter besides the 2008 year’s same quarter premium income of Rs.1,148.64 Cr.

The insurance sector of India is not only witnessing this downfall in life insurance segment but is also looking south with its general insurance biz. The data represent the deliberate pessimistic expansion of the general insurance sector in India with both public and private firms giving out combined outcomes. In the first quarter of the 2008-2009 financial year, where the public segment general insurance firms, like United India, Oriental Insurance and New India Assurance have reported the expansion of 14 percent, 7 percent and 10 percent correspondingly, one more PSU National Insurance has reported in the pessimistic expansion of 2 percent.
 

Speaking of private general insurance firms a number of giant competitors like Tata AIG General Insurance and Reliance General Insurance have reported the pessimistic expansion. The additional competitors in the similar group like ICICI Lombard Insurance and Bajaj Allianz General have recorded the southward expansion of 13% and 21% correspondingly in the June quarter. Though there are a number of private firms present which have reported the superior expansion rate against all predictions, this comprises Royal Sundaram, which has developed by 10 percent, whereas Cholamandalam has recorded the positive expansion of 17 percent. Amusingly, HDFC General insurance products provider division, HDFC Ergo has also reported an expansion of 246 percent in its premium segment.

The instability of the insurance segment in India can be calculated in the expansion figures of past five years where the motor insurance business is developed by 16 percent while the health insurance industry has recorded the expansion of 37 percent in the similar period.

The negative expansion of Bajaj Allianz General and ICICI Lombard Insurance against HDFC General Insurance and Cholamandalam is seen, by experts, as the outcome of meager reach in the cities whereas the poor show of life insurance is observed as the outcome of shortage of skilled insurance consultants.

Understanding Why Term Life Insurance Is A Better Option

Term life insurance offers us with a cheaper alternative than other life insurance plans. Therefore, term life insurance in India has turned out to be immensely popular. Term life insurances are availed only for a predetermined period of time. Therefore, the premiums necessary to be paid are less. It is easy to purchase them using the worldwide web by getting online and searching on term life insurance quotes.


There are leading websites like www.dialabank.com that help you compare and buy the right term insurance plan. Because of the less price and flexible nature of term life insurance, term life plans have turn out to be gradually more popular in India. In India, Term life insurance has also become comparatively cheaper in premium providing greater coverage because of the increase in competition among various insurance plan companies.

The given below are a few key points that one must keep in mind prior to purchasing a term life insurance:

Amount of sum insured: It is supposed to be perfect to make investment 15 times the yearly income of a person, if the individual’s age is less than 40 years, 10 times if the person’s age is between 40-45 years, and 5 times if person’s age is 45 years or more.

Term of plan: The younger is the age of the person, the longer must be the term of the policy invested in. The period of the term must roughly be the difference between the ages at which, the person’s monetary liabilities, would decrease (retirement) and a person’s current age.

Who and where to purchase from: It is fundamental that one does a methodical study as a substitute of hastening to a decision over the insurance plan. This is for the reason that it is a tremendously important and vital investment and, it is totally essential that it pays off.

When to purchase: It is pretty obvious that the most excellent instance to acquire a term life insurance is this moment. This is essentially due to the fact that the agreement of a term policy becomes extremely risky if the client contracts a definite disease. This reduces the life expectancy of the person and would lead to a major increase in premium.

This makes entry into the term plan terribly unsafe. Therefore, to guarantee the future for you and your loved ones, it is required that you take some steps now. Generally, people go through a lot of difficulty in searching the right term insurance plan. The individuals involve searching the various life insurance quotes from different companies, and this needs a lot of money. Though, all this fuss, could be avoided by getting free Term life insurance quotes online from the internet. This may save your precious time and money too.

Life Insurance Provides Financial Protection

Life insurance offers monetary protection for your family and dependents in case of any unpredicted event or your unfortunate death. To cover you under a life insurance plan an insurance firm will charge you a definite amount of money called the premium. The premium paid helps cover the risk that the life insurance firm takes by insuring your life and in turn enables your family to get a predetermined lump sum.

The premium you give for the life insurance based on a variety of factors that include health, age, and the sum of life insurance plan you want, etc. Though, life insurance premiums are considerably lesser for healthier, younger people who starts early i.e. taking a life insurance plan early is constantly advantageous for you.

Types of Life Insurance Plans:

•       Term Plan: A term insurance policy is a wholesome risk cover for a particular time- period. This means that the amount secured is payable only if the policy-holder dies within the term of the policy.

•      ULIP: ULIP is investment plan for those who understand the value of hard-earned money. These policies assist you see your savings capitulate affluent benefits and aid you save tax even if you don't have reliable income.

•      Pension Plan: The idea of this policy is to guard against risk and give money in the form of pension at usual time-intervals.

•   Child Protection Plans: These plans are intended to provide amount necessary for expected expenditures (education, marriage, etc.) over a definite time-period.

•       Endowment Plan: An Endowment is a blend of risk cover along with savings. These plans are specially planned to collect capital and to cover your life.

Life Insurance is necessary Due To The Following Reasons:

•        Life insurance offers monetary safety to your family in case of any unexpected happening or your unfortunate death.

•        After retirement, there is no assurance of your capability to earn constantly for rest of your life.

•        The expenditures you may gain in future will keep growing due to inflation. Therefore, even a variation in your earnings may lead to a compromised way of life

.

•        Restricted access to data and the time limits you have may lead to ineffective organization of your investments consequential in severe returns.

•        Your restricted enthusiasm to take risk may hamper you from parking your investments into wholesome equity options.

Life Insurance in India

Life Insurance policy offers either a lump sum or a return on the unfortunate death of a person. Therefore, any person whose death would make a monetary loss to another person has a requirement for life insurance plan. 

This must include the following:

• Mortgage Life Insurance Plan

• Any person with dependents

• Key Individuals.

It means any condition where financial loss would be incurred could probably have a requirement for life insurance plan. 

Different Types of Cover:

Term Life Insurance:

As the name suggests, “term life insurance” pays a death benefit only during a definite term period of coverage which generally varies between 10-30 years. Term life insurance is the economical and most monetarily efficient type of life insurance for the majority of young and middle-aged people. The premiums on term insurance plans are considerably small as the possibility that they will die during the period of the plan is low.

In addition, term insurance is suitable for the majority of people since they can choose a term or time-period that will cover them during their time of the utmost financial requirement.

Whole Life Insurance:

Comparing with term insurance a Whole life insurance plan pays a death benefit no matter when you die. Obviously, you frequently have to give premiums for your whole lifetime, as well. For the majority of people, whole life insurance plan gives coverage that is truly unnecessary. Insurance agent often tries to influence clients to purchase whole life insurance plan because of its investment element. A part of your premiums go into a savings fund which grows at a varying rate, based on the stock market’s performance. This generates a couple of supposed profits. However, the premiums you give may be decreased in the future if the savings fund performs well.

Which Insurance Plan To Take?

There are excellent opinions for both types of plans. We would propose that the following could make up the most important considerations:

Cost: Whole Life insurance plan is a more expensive product

Time-Period that cover is necessary: If cover is necessary for a definite time-period i.e. a Mortgage, then Term life insurance plan could be more suitable

Future Plans: If, for example a family is planned, then whole life insurance can provide the flexibility to enhance cover for this or other like situations.

Term Life Insurance Vs Whole Life Insurance

Are you wondering which insurance product is better - term or whole life insurance? This is a question that many people ask themselves when they want to find something that will provide for their loved ones in case of their untimely death. These same people may or may not have funds readily available to pay large premiums now. Others may have the financial means to pay a little more and at the same time want to end up with not only a death benefit, but also something with a cash value.

The following are the key points that you must know before purchasing these two kinds of insurance products:

Term life insurance pays only a death benefit whereas whole life insurance pays a death benefit and has a cash value.

Term life is quite easy to purchase and can be purchased for 10, 20 or more years. Most companies offer you several ways to pay your premiums, ranging from increased value for each year to remaining the same for a specific number of years. However, most companies do have the option of raising your premiums if the company's expenses increase.

Underwriters for term policies determine your rates based on your current age and health conditions. It is essential to remember that most term insurance policies can be converted to whole life policies at any time.

Whole life insurance is more risky as compared to term life insurance because the rate of return on the savings segment is never guaranteed. While it also provides a specific death benefit, it does have cash value and can be borrowed against during the life of the policy.

Traditional whole life policies guarantee the annual premium, cash values and death benefits. These are the best investments for conservative individuals. Universal life policies are a flexible type of insurance because their premiums vary each year. They carry with them maximum guaranteed premiums and minimum guaranteed cash values and death benefits.

Variable, whole life policies are meant for people willing to take some risk. This type of insurance has extremely few guarantees but has the best chance of resulting in higher cash values.

As a wise consumer, it is undoubtedly to your advantage to decide on a term or whole life insurance as a way to protect your loved ones. Both insurances let you breathe a little easier knowing that your family will be looked after in the event of your death. You can look forward to having a little extra money to enjoy later, if you outlive the life of the policy.

Tax Deductions on Home Loan – Section 24(B) and 80(C) Income Tax Act

A good tax professional or loan officer will be able to give you a good idea of what tax benefits to take advantage of taking your choice of home loan.

Are you planning to buy a home to enjoy tax exemptions? Buying a home has not only become a guarantee for a better life, but for tax purposes, home ownership gives the owner more options and benefits than renting. There is no "golden rule "that will determine deductions. But there are ways to overcome this tax problem. Your solution to this would be to buy a home and save on tax too. For this, you must apply for a home loan in order to enjoy tax benefits. Income tax Act covers these under two different sections that are section 24(b) and section 80(c) of the 1961 income tax act.

Loans will be considered under tax exemption only in the following circumstances. You must have taken a loan from a registered bank or financial institution. Remember that any money borrowed from private agencies, chit funds, friends and family will not qualify for tax benefits.

The different types of home-loans required for the interest deduction that includes home loan for property acquisition, property construction and home loan for property repair. If you pay interest on a new loan that you lend to pay your existing loan, then that interest is also applicable for tax sops. But, if you take another loan, which is your third loan in order to pay your second loan, then tax refund is not allowed on your interest payments. The interest that you pay on home loans allows to be deducted from the total annual property value of your home. Total annual home value is calculated when you deduct municipal taxes paid from the gross annual home property’s value.

This will allow you a deduction of up to 1 lakh rupees on the principal amount repaid. Section 24(b) covers the interest payment made to your lender on the borrowed funds. You can qualify for such tax benefits if you have taken a housing loan for construction of house, purchase of house, renovation or repairs of your house are also covered. With the help of these types of borrowed funds you can make use of the loan documents and win a deduction of up to Rs.1, 50,000 of your total liability of tax. If your liability is around 40,000, then you save the whole amount.

Carry out your repairs and renovations by availing a small amount of borrowed funds. Refurbish your house and increase the equity value of your house. While you do this, you can make use of these loan papers to save your tax at office. It serves the dual benefits. ULIP funds, insurance policies and tax saver funds can also help you for the same purpose. Learn more about these funds in order to invest carefully.

Any tax professional will tell you there are many variables that will influence the amount of interest you pay. A good tax professional or loan officer will be able to give you a good idea of what tax benefits to take advantage of taking your choice of home loan. No matter what type of scenario you face, home loan is more affordable than ever.

Tax Planning & Saving Options

Tax is a word or must say a phenomenon which at one time or the other has given shock waves to all. However, a proper planning of the same can land you in a rich soup of esteemed self financial satisfaction. As we all have to pay income tax to the government on various things, there are various tax planning strategies that one can use. 

Firstly, you have to learn what the word “tax” actually means. The word tax has been derived from the Latin word, tax which means to impose a financial charge in the physical form of money or other levy upon a tax payer by a state or the functional equivalent of a state such that the failure to pay the same is punishable as per the prescribed law.

Types of Taxes In India

• Income Tax
• Sales Tax
• VAT

• Income tax: An income tax is a charge levied on the income of individual or institutions. Different kind of income taxes exists and can be progressive, proportional and regressive.

• Sales Tax: A sales tax is a tax charged at the point of purchase for definite goods and services.

• VAT: VAT is a similar tax like sales tax, the only difference being it's a tax on the estimated market value added to a material or product at each of its manufacture or logistics, ultimately passed on to the customers. A 12% VAT is presently calculated in India

Tax Planning of the year

It has been seen that numerous people end up reacting to tax at the end of a financial year rather than looking at as an investment which must be considered throughout the year around. There are some key points that are mentioned below to help you in planning your income tax:

Insurance: Have you considered insurance as they are covered under section 80C? Taking insurance would profit you at the end of a year as they are exempted from tax clutches.

Mutual funds and equity: Mutual funds and equity plans are very popular way to plan up your tax mode nowadays as they are offered by insurance companies and the same offers a tax benefit under the preferred section of 80C. To be specific, investing in the equity will automatically double up as mutual funds and life insurance.

Look-at the post tax returns: One must list out the goals one is saving for. Doing this would mean giving you an insight of better perception of how much you need and when and how much risk would be taken. Once you are done with doing this crucial step, you can easily plan your tax planning for the year.

The trick to invest sharply and smartly or boosting for good returns lies in a combination of debt, equity and real estate. These are also applicable, if you want to make the most of post-tax income.

Investment in the global market: The way the stocks are moving internationally and investors making hay at the perspective shining markets of China, Brazil & India, the term, emerging market looks understated. Thus, buying mutual funds from these countries saw inflows of USD 4.9 billion during 2009 & 2010, so invest in these and avail higher yielding results at the end of a financial year. Here, are the three steps that guide you to the fruitful forest of investment in the global market:

• Determine the right amount of foreign exposure
• Spread your money around the globe
• Boost potential gains by spicing up the mix of investments

Last but, not the least; one must also keep a track record of the stock exchange every now and then and not to forget the very investment in all of the above mentioned financial weapons. One must make investment in the global market, which will help you reap returns and plan your tax benefits, for longer terms.

Tax-Saving Schemes For Investors

Your lump-sump investments may not necessarily stand you in a sweet spot if your investments are made arbitrarily during the year-end. They need to be planned well in advance throughout the year.

Lessons:

1. Plan your tax-saving instruments – don’t leave it for the last hour.
2. Even tax-saving investments can be routed through systematic plans.
3. Most of the tax-saving investments are for a minimum of 3 years.
4. Determine which investment option to save taxes suits you the best.
5. Investments with mere intention of saving taxes might backfire on you.

It’s that time of the year when most of the individuals are found scrambling to invest in tax-saving instruments just before the financial year-end. Currently, Section 80C of the Income Tax Act allows a deduction of up to Rs.1 lakh from the gross total income. Plus another Rs. 20,000 for investments in infrastructure bonds if this Rs.1 lakh limit is exhausted.

Let’s have a look at some of the tax-saving options available for individuals:

1) Public Provident Fund (PPF)

Public Provident Fund is a long-term statutory scheme of the Central GOI. Currently, the interest rate offered through government-backed small savings scheme is around 8%, which is compounded annually. On maturity, you pay no tax under Section 80C.

This long-term scheme is for 15 years; hence if your investment horizon is short-term in nature, PPF is not meant for you as it locks your liquidity for a relatively long period of time. In this scheme, you need to invest a minimum deposit of Rs.500 and up to a maximum of Rs.70,000 in a financial.

2) Unit-linked Insurance Plans

Unit-linked Insurance Plans (ULIPs), which are eligible for Section 80C tax rebate, are investment products that provide dual benefits of life insurance and savings element as a one stop solution for an individual’s financial goal. However, if you don’t need insurance, going with ULIP is not the best investment bet on the horizon.

Few corrective measures are initiated by Insurance Regulatory and Development Authority as it hikes the threshold limit for ULIPs from lock-in period of 3-5 years. IRDA also mandated a minimum assurance of such plans. Now, the policyholders can also opt for premature exit without any penalty.

3) Equity-linked Savings Scheme

Equity-linked Savings Scheme (ELSS) is mutual funds that help you save taxes under Section 80C as well as generate decent long-term returns from the equity markets. Such schemes are typically characterized by a three-year lock-in period.

However, the tax benefits of ELSS will be phased out with the Direct Tax Code (DTC) starting from 1^st April, 2011. But, the revised code mandates that existing ELSS funds will be able to claim tax-exemptions. So, this might just be your last opportunity to put money is lucrative tax-saving mutual funds.

4) 5-Yr Bank Fixed Deposits

Since 2006, Bank Term Deposits which are of over 5 years tenure and upto Rs.1 lakh are allowed exemption under Section 80C of the Income Tax Act, 1961. You must have deposits necessarily in the list of scheduled banks mentioned by RBI.

Most of such tax-saving fixed deposit avenues are of fixed tenure and do not allow premature withdrawal facility. Further, such term deposits cannot be pledged to secure a loan. Most importantly, the biggest drawback of this scheme is that the interest for the amount deposited is taxable.

5) Employee’s Provident Fund

It is mandatory for the salaried individuals to contribute 12% of the sum of basic pay and dearness allowance to Employee’s Provident Fund (also known as EPF). The employers deduct this sum from the monthly payroll of their employees under a social security scheme akin to a forced-saving towards retirement planning.

EPF provides benefits like fixed-income instrument that allows tax benefits under Section 80C at the time of investment. As the EPF returns are tax free on maturity, the employer must make a similar contribution to the EPF.

6) National Savings Certificate

The 8% returns from National Savings Certificate (NSC) are not only assured and tax exempted under Section 80C, but also government guaranteed. Moreover, there is no upper limit in NSCs on the maximum amount that you can invest in a fiscal year.

This small saving scheme offers tax-free initial deposit for 6 years. However, interest in NSC is taxable. As NSC is a cumulative scheme, the interest for the first 5 years is eligible for a deduction in which the interest is reinvested and qualified under NSC fresh deduction.

7) Infrastructure Bonds

In Union Budget 2010, Finance Minister Pranab Mukherjee proposed the deduction for funds flowing in long-term infrastructure bonds in India up to Rs.20, 000 under Section 80 CCF of the IT Act, 1961.

These bonds issued by RBI-notified entities carry long tenures of 5-10 years for facilitating investment in infrastructure projects within the country. The interest earned can vary from 7.5% to 8.5% depending upon the issuer and investment option chosen. For the investors at the highest tax bracket, such investments can bring in savings of up to around Rs. 6000.

8) Insurance, Health Premiums and Tuition Fees

You can claim tax benefits for the health insurance premiums to the extent of Rs. 15000 under Section 80D. Moreover, you can also claim an equal amount of deduction for buying medical policies for your parents. Any amount that you pay to life insurance premium to secure yourself and your family is allowed to have a tax break under Section 80C.

If you’re paying tuition fees for your children’s full-time education, you are eligible for tax deduction under Section 80C. Mind you, the said tax benefit is not for the donations paid to such institutions.

What Is An Income Tax Return?

A tax return is a form or set of forms used to file income taxes. It is used to report taxable income, if any or any kind of capital gain.

Many people just wonder what tax return is. A tax return is a form or set of forms used to file income taxes. It is used to report taxable income, if any or any kind of capital gain. The income figures are filled in the form to calculate the tax liability.

Section 139 of Income Tax Act, 1961 says that if the total income of a company or a person other than a company during the previous year exceeded the maximum amount which is not chargeable to tax, shall furnish a return of his income on or before the due date. Precisely, the same section declares that a person must file his taxation assessments in the event that all his earnings are more than the absolute maximum exempted sum prior to any kind of deductions should be utilized under several sections.

To understand it better, let us consider some statistics. In the financial year 2010-2011, the absolute maximum income was Rs. 1,60,000 for men and Rs. 1,90,000 for women. No tax can be charged on this income.

Considering an example, if a person’s total earning before applying any kind of discounts is Rs1,60,000, he is not legally liable to log a tax return. On the other hand, if the total income of a person exceeds Rs. 1,60,000 and he tries for a deduction like saving some amount in PPF , he is still legally liable to log an income tax return.

It is also specified in the same section 139 that a person will have to log an income tax return under some specific conditions, even if the total income is not greater that the exemption limit.

These conditions are as below:

• If someone has incurred an expenditure of more than fifty thousand towards the use of electricity during the previous year.

• If someone is in an occupation of immovable property exceeding the specified floor area.

• If someone is an owner of an automobile other than a two-wheeler.

• If someone has spent money on himself or any other person for travel to a foreign country.

• If someone holds a credit card other than any kind of add-on card issued by a bank.

• If someone is a member of a club with a membership fees of more than twenty-five thousand.

Anyone who fits into the above mentioned criteria is legally liable to file a return. In case, a person does not file his income tax return he is accountable for penalties or criminal prosecution under the Income Tax Act.

Benefits of Filing Income Tax Return

• You are a contributor to the National Income.

• It is easy to get home loan, vehicle loan etc.

• It shows your financial worth.

• It is easy to get immovable properties registered.

Tax Planning 2012

Taxation has become one of the most cumbersome topics of discussion because of the ever changing policies and norms. However, one can plan efficiently using some perfect tools and factors and earn the maximum benefit from tax saving investments. 

The tax planning season is about to start and people are looking around to make investments to minimize their tax liability. Tax planning is an ongoing process and should not be considered as an annual process. There is a lack of awareness among people about the different incentives, allowances and rebates they can avail under the Income Tax Act.

Strategic Tax Planning

Taxation has become one of the most cumbersome topics of discussion because of the ever changing policies and norms. However, one can plan efficiently using some perfect tools and factors and earn the maximum benefit from tax saving investments. There is a need of devoting adequate time and effort to plan and be aware of the benefits that can be availed.

Tax Planning Tools

Public Provident Fund is still the unbeaten and the first option in tax saving options. Apart from PPF, there are some more options which are becoming popular. Some of the prominent ones are listed below:

Public Provident Fund

Public Provident Fund often abbreviated as PPF falls under Section 80C deductions. It has been an all time-favorite. The maximum deduction amount can be Rs. 1,00,000 and no tax is to be paid on maturity. Also,the amount invested in this scheme is returned without any interest.

• Minimum Investment range - Rs. 500 p.a

Maximum Investment range - Rs. 70,000 p.a

• Yield rate - 8.5 percent p.a compounded annually
• 
  

The amount cannot be withdrawn till 15 years, however partial withdrawal is possible after 5 years.

Insurance

One can avail tax rebates by investing in various insurance options. There are some government owned schemes like Life Insurance Corporation of India. Many private insurance companies are also present in the market like Bharti AXA Life Insurance, Bajaj Allianz, AVIVA, ICICI Prudential to name a few.

Post Office Deposits

Post Offices also provide with some excellent schemes which are covered under Section 80C of the IT act. These are generally short term schemes with tenure ranging from 1-5 years. The most common post office based tax saving tools are listed below:

• Post Office Time Deposit
• Post Office Recurring Deposit

• National Savings Scheme [NSS]

• National Savings Certificate [NSC]

• Kisan Vikas Patra - [KVP]

• Public Provident Fund [PPF]

Equity Linked Savings Scheme (ELSS)

This is a relatively a new tool and has some risks involved. ELSS investments are popular not only because of its effectiveness in controlling tax liability but also for tax free assured returns which it offers.

Save Tax In India

There are different methods by which you can save your tax and valuable money. There are various types of plans that help you to save your tax. You can save the tax by making investment in various kinds of investment products. There are several types of mutual funds that are available in the market that includes Govt. and Private Mutual Funds like SBI Mutual Funds, Franklin Templeton, Kotak Mahindra and ICICI. Remember that tax waiver applies to mutual funds having a lock-in period. Tax waivers do not applies to funds that are not having a lock-in period.

 

You can save tax by taking home loan. If you take home loan and buy a property, then a tax waiver is applicable on it. Another method to save income tax is through house rent. You must attach the tax receipt while you file your income tax.You can get tax benefits on various types of Insurance plans like life insurance and health care covers. Remember that you do not get tax benefit on general insurance plans.

All this will provide you benefit, only if you attach the above mentioned documents receipt when you file your income-tax. Also, you must file your income tax by the due date. You will also get tax reductions according to some sections defined by income tax department of India. Under Section 80C of the Income Tax Act, certain investments and expenditures are allowed up to a maximum of Rs. 1 Lakh which can be a combination of the following:

• Contribution to Provident Fund or Public Provident Fund. This is a long term investment. The return percentage of PPF compounded annually is 8.5 percent. The complete withdrawal is possible after 15 years; however partial withdrawal can be made after 5 years.
• Payment of Life Insurance premium.
• Investment in Equity Linked Savings schemes (ELSS) of mutual funds.
• Investment in Pension plans. One can save money for post retirement in the National Pension Scheme.

Similarly, you can get tax deductions in Section 80CCF. In addition to the deduction of Rs. 1 Lakh under Section 80C, one can also invest in Infrastructure bonds. The maximum amount deductible is Rs 20,000.

If you take the help of a tax consultant, you will be able to save your time and your useful efforts will not get wasted. The tax consultant provides you financial advices to save your tax. If you take right steps in the beginning of the year, it will become possible for you to save your tax.

You can save a larger amount of money, if you plan and implement properly. Browsing the sites that provide the best information about the various tax saving schemes is one of the best method to get updated on various tax saving schemes. If there is an internet facility available at your home, then there is no need to go anywhere for the required information about tax schemes.

PAN – Permanent Account Number

PAN card is necessary for any financial transaction. The main reason behind making PAN card mandatory was to check the flow of unaccounted money in the Indian economy.

PAN refers to Permanent Account Number. It is a ten digit alphanumeric number issued in the form of a card by the Income Tax Department of India. The alphanumeric number is unique to each card. The PAN card is issued under the directions of Central Board of Direct Taxes (CBDT). From 2005 onwards, it has been made compulsory for all those file their income tax returns to have a PAN number.

It has been made compulsory to quote PAN in all documents related to financial transactions like sale and purchase of a motor vehicle or immovable property or travel to a foreign country.

PAN Card as an Identity Proof

PAN card serves as an authentic piece of evidence that you are the person in the card. PAN card is necessary for any financial transaction. The main reason behind making PAN card mandatory was to check the flow of unaccounted money in the Indian economy.

Today, even to open a bank account the first necessity is to have a PAN number and there is a reason behind it. Earlier, people used to open accounts in two or three banks with different names and different address proofs. Money for large transactions like for buying a property was made from a bank in some other city to evade taxes but now with the introduction of PAN card, each and every financial transaction is under scanner.

No one can open a fake account as the PAN number has to be mentioned and one person cannot have more than one PAN number.

Unique 10 Digits Alphanumeric Number

The PAN number is made of five alphabets, followed by four numerical characters and the last one again is an alphabet.

The PAN card has proved to be a boon for the income tax authorities as they can easily keep track of the financial transactions made by anyone. It has also helped in tracking criminals as it is impossible to live and make financial transactions without PAN number.

How to Apply for a PAN Number?

Applying for a PAN card has been made very simple and convenient by the Income Tax Department. One has to fill Form No. 94. The PAN application can be downloaded from the website of the National Securities Depository Ltd or form the website of UTI Investor services Ltd.

The necessary things you would require are a recent color photograph (stamp size: 3.5 cm x 2.5 cm) to attach on the form. The designation and code of the concerned Assessing Officer of the Income Tax department has to be mentioned in Form 49A. A proof of identity as well as a proof of residence is also required.

Need of Paying Income Tax

The major requirement for the development and growth of a country is money. Without capital, a country cannot grow and hence cannot move forward at all. A shortage of money will hamper the growth of a country. This is why each and every individual is accountable to pay their Income Tax Return.

The inhabitants of a country contribute a major part towards the progress of a country and each and every citizen should feel a sense of responsibility and should file his/ her ITR.

Types of Income Tax Returns

Income Tax Return is generally classified into two main categories:

1. Individual Income Tax Return
2. Professional Income Tax

The taxes should be paid within specified time in order to avert any fine or late payment. It helps to avail any kind of loan and also helps to create a good impression among the IT authorities.

Heads of Income

The total income of a person is divided into five heads:

Income from Salary

All income received as salary under employee-employer relationship is taxed under this head. The employer must provide their employees with a form 16 which clearly shows the net income and all the tax deductions. The employers must deduct the tax if the income is above the maximum exemption as Tax Deducted at Source (TDS). Form 16 also contains any other kind of deductions made like conveyance allowance, house rent allowance etc.

Income from House Property

The annual value of the house is taken into account to calculate the income from house property. The annual value in case of a let out property is the maximum of the following:

• Rent received
• Municipal valuation
• Fair rent

Annual value in case of a self occupied house is nil. However, if some someone occupies two houses the annual value of the other house is taxable.

Income from Business or Profession

The income earned by a professional is computed under this head. For example: an architect earns some charges some fees from all his clients and in this way he earns a certain amount in a year. However there would be some expenses which are deducted from his professional fees in order to calculate the total taxable income. These expenses could include

• the electricity bills he pays for the use of equipments in his office premises
• the fuel expenses for his car to visit various sites
• society maintenance bills
• amount spent to purchase some material of professional practice

Income from Capital Gains

Transfer of capital assets results in capital gains. Under Section 2(14) of the Income Tax Act, 1961 a capital asset is defined as a property of any kind held by an assesse, whether or not connected with his business or profession, but does not include any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession.

There are two types of capital assets that are considered for tax purposes. They are : long term and short term.

Long term assets are those which are held by a person for at least three years. Shares and mutual funds are the only exception which becomes long term after one year of holding.

All capital gains that are not long term gains are short term gains.

Income from Other Sources

Income which does not meet any of the criteria listed above come under this head. There are some specific incomes that can be taxed under this head. Some examples are listed below:

• Income from horse races.
• Income by way of dividends.
• Income from shares.

Key Factors To Save Income Tax In India

It is mandatory to pay income tax in India as per the law of Indian Government. Every person that generates profit, whether it is from job or own business is eligible to pay income tax.

It is mandatory to pay income tax in India as per the law of Indian Government. Every person that generates profit, whether it is from job or own business is eligible to pay income tax. In companies like public or private limited company, the tax will not be exempted on individual basis as there are shareholders in those companies. Hence, the income tax is calculated on the net annual profit that a company generates.  

Assessment of tax takes place in March of every year. There is several numbers of benefits that Govt. provides to the tax payers.   The income tax department of India has defined various Tax Slabs for both males and females. The tax deducts on the basis of annual salary.  The various tax slabs defined by the IT department are described in a table given below:

Amount Earned By Male(In Rupees)	Tax Rate
0-1,80,000	No Tax (0%)
160,001-500,000	10%
500,000-800,000	20%
Above 800,000	30%

Amount Earned By Female(In Rupees)	Tax Rate
0-1,90,000	No Tax (0%)
190,001-500,000	10%
500,000-800,000	20%
Above 800,000	30%

Similarly, there are tax slabs defined for Senior Citizen and Very Senior Citizen. Therefore, you have to show the investment proof, if you would like to get the tax benefit. If you invest in the products that are given below, then tax waiver applies. Thereby, you should make investment in these products: 

• Mutual Funds:

There are several types of mutual funds that are available in the market that includes Govt. and Private Mutual Funds like SBI Mutual Funds, Franklin Templeton, Kotak Mahindra and ICICI. Remember that tax waiver applies to mutual funds having a lock-in period. Tax waiver do not applies to funds that are not having a lock-in period. 

• Home Loan: If you take home loan and buy a property, then a tax waiver is applicable on it.

• House Rent:  It is another method to save income tax. You must attach the tax receipt while you file your income tax.

• Insurance Policy: You can get tax benefits on various types of Insurance plans like life insurance and health care covers. Remember that you do not get tax benefit on general insurance plans.

All this will provide you benefit, only if you attach the above mentioned documents receipt when you file your income-tax.

NRI Home Loans

If you are an NRI or Non-Resident Indian and would like to take home loan for your house in India, then you can consult with the Banks and Housing Finance companies in India.  

According to RBI, NRI refers to “an Indian citizen which holds valid documents like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad”. If you are an NRI or Non-Resident Indian and would like to take home loan for your house in India, then you can consult with the Banks and Housing Finance companies in India.  

To apply for a home loan, you must know the basic criteria that the Indian Banks and Finance Companies require to sanction your loan.  Below are the points that mention the eligibility criteria for home loan:

• Your age must be at least 21 years old.
• If you are a salaried applicant, your minimum period in abroad should be of 1 year.
• If you are a self-employed applicant or businessmen, your minimum period in abroad should be of 3 years.
• The maximum age limit for a salaried applicant is 60 years or retirement age whichever is earlier. Note that it is the age of the applicant at loan maturity.
• The maximum age limit for a self-employed applicant is 65years. Note that it is the age of the applicant at loan maturity.
• The NRI loan applicant’s minimum qualification requires that an applicant must be a graduate.
• The minimum monthly income of the NRI home loan applicant must be $2000. However, it may vary, in case of the Housing Finance Companies.

Similarly, there are some credentials that an applicant needs to submit to apply for a home loan. These credentials include:

• An applicant’s valid passport.
• Copies of Visa.
• An applicant needs to submit the work permit document that supports the NRI status before the proposed borrower.
• Power Of Attorney that an applicant owns.
• The applicant also needs to show the present employment status details to the concerned bank or agency.

Now, you are wondering about the “Processing Fee”. The Processing Fee charged by any bank includes 0.5% fee with service tax of loan amount.

There are different types of NRI home loans that are available for NRIs. These forms include:

• POA: In this, the NRI clients appoint an Indian citizen as a POA or Power of Attorney to act on behalf of them.
• NRIs can make repayments either through Post Dated Cheques or Electronic Clearing Services.
• NRIs cannot claim tax benefits on Home Loans in India However, if they pay tax in India for income earned in India, they can claim, for tax rebate, for the Home Loan.

Importance Of Loan

Loan proves to be very useful for individuals to fulfill their urgent needs. It is important to consider options and exercise the right one. 

Every human has his own dreams and desires which he wishes to fulfill. These dreams are not limited and cannot be controlled. For fulfilling his dreams, he needs monetary assistance. Money plays a vital role in the life of humans. It has become more than a necessity in today’s world. No work is possible without the aid of money. It is not really possible for every individual to have the sufficient amount of money to accomplish his wishes. Thus to get the required sum of money he borrows money which he later pays off. This activity of borrowing money is an important feature of loan.

 

In technical terms, loan can be referred to as a debt or a liability. Whereas, in simple or literal sense loan means the understanding between the lender and the borrower in which the lender provides a sum of money or money’s worth to the borrower which he agrees to pay back in the stipulated time with interest. The amount that is borrowed is called the principal which is to be paid along with interest. Thus the person, who is at risk in the whole procedure, is the lender. 

The rate of interest is decided by the lender. Different methods are used for calculating the rate of interest. The lender of a loan can be an individual, a bank or any financial institution. It is not necessary that the rate of interest is same. Also the time to pay back the loan is decided by the mutual consent of the lender and the borrower. The rate of interest is decided on the basis of the amount of the loan that is given and the period that is granted for the repayment.

The money that is borrowed is to be paid back in installments. The installments may be monthly or quarterly depending on the amount of loan. In certain situations, the lender asks for a security from the borrower against the loan that is given by him. This security is nothing but a guarantee. It may be equipment or land or anything that the borrower is in possession of. By doing this, the lender reduces his risk on the loan that he grants. The borrower holds the title on the land or property or the asset that he gives as a security, but would end up losing it if he is unable to pay back the debt.

If not a security, a contract is made while the loan is given. Contract is another way in which the lender is not at a risk. The contract works as evidence that the loan was given. The borrower cannot deny the fact that he had not taken the loan. This contract is to be signed by both the parties and in case any of them fails to fulfill the requirements, he can be sued. But still it is voidable at the option of the aggrieved party.

Thus loan proves to be very useful for individuals to catch their dreams. So, if you wish to buy something and you are short of money, loan is the solution for your problem. The person applying for loans should be well informed and well aware of the policies of the company and the requirements that are to be fulfilled by him. It is also necessary that he pays the installments on time. The applicant should be well educated to understand the terms and conditions of the agreement. Also he must consider all the various options and then come to a conclusion as to which suits him the most and then take a wise decision.