Life insurance – An Overview

Life insurance is a commercial contract between the insurance policy proposer and the insurance service provider. However, apart from customized plan of insurance policy and its coverage, there are wide ranges of insurance policies available in market under different flagship brands. Although the aim of all insurance policies are almost the same, which is providing best quality life coverage and return value of investments in the form of premium, it is extremely essential to learn the basic details about the life insurance plans and the coverage provided by these plans.

Depending on the major aim behind taking these policies, there are two basic variants:

§    Protection policies - are mostly known as term insurance, the benefit of these insurance policies involve a lump sum amount against the death of the proposers.

§    Investment policies – where the chief objective of the insurance policies is to assist the increase of capital by recurring/regular or single premium; whole life, variable life, and universal life policies are included in investment life insurance policies range.

The Inherent Policy of Life Insurance

Life insurance policy is meant for life coverage. Although in all sense human life is priceless, but when a bread earner of a family passes away all on a sudden it simply creates a catastrophe that is hard to withstand for rest of the family members. The coverage of life insurance cannot bring back the life but can protect the family with financial security and ensures safety of them. Hence availing life insurance policy is no doubt an extra protection for an individual and for his/her family in dire distress and in case of life penalty even.

Why to Buy Life Insurance Scheme

Security and safety are the two primary aims behind availing life insurance schemes. In some cases it is the initiative to protect kids and family in case there is any death or dire accident causing disability, etc. Insurance policy can help in two extreme conditions where an individual lives too long or dies too early. To prevent this kind of distress, life insurance policies are taken for ensuring extra protection.

§    A life insurance policy provides excellent financial support for a family where the bread earner or a significant earning member has suffered from death penalty

§    An apt children’s policy can finance child education and other financial needs of the family

§    Availing a life insurance savings plan helps in creating a consistent flow of income in post retirement period.

§    Creating extra income for improving life style

§    Managing finance portfolio better

§    Availing increased income tax deduction out of availing insurance policy

Life Insurance Cover: How much is Required

The actual level of cover that can be considered adequate is a highly fluid and dynamic figure as it changes from time to time and is also different for different individuals depending on their personal situations. However, the factors, which are to be taken in consideration, are,

§    The  number of dependants

§    The number of liability and responsibility of mortgage

§    The standard of living a family is leading

§    The plan for children education

§    General health of the family members

§    Detail analysis of the affordability

§    Detail analysis of the standing asset and asst liabilities

§    Forecast rates of inflation

§    Forecast cost of living to maintain the current standards.

Types of Life Insurance Available

Currently the public and private players in the life insurance industry of India are offering a array of life insurance products with a host of benefits for the policy buyers. Some of the basic types of policies available in the Markey are listed below.

§    Pure Term Insurance Policy: is a basic risk cover policy which protects the life insured for a pre-determined period of time as stated in the contract.

§    Whole Life Policy: is a basic risk policy that provides cover throughout the life of the insured irrespective of any time fame.

§    Endowment Policy: Is a policy that combines insurance cover along with savings for the insured.

§    Money Back Policy: is a policy in which periodic payments of certain sum assured are made to the policy holder. In case the policy holder survives the term then the balance of the sum assured is paid to the insured.

§    ULIP: is a market linked policy that provides basic life cover along with a host of investment options for creating better returns.

§    Annuities and Pension: are policies that provide the insurer with stipulated sums periodically to protect against financial risks and give pension at regular intervals.

Life insurance is an essential ingredient to any kind of personal financial planning as it caters to the basic issue of security for the dear ones. Seeking professional help while deciding on the type and amount of life insurance is a smart way for beginners as it will help them appreciate the various nuances of plans and policies available in the market currently. A little research on the internet will also provide detailed comparative studies from all desired angles regarding the various policies along with the associated benefits and pitfalls.

Aadhar to be treated as a valid address proof for investors

Aadhar cards seem to be gaining ground. The card issued along with 12 digit unique identification number by the government is a valid proof of address to operate accounts with brokerage firms, mutual funds, portfolio managers and capital market entities, India’s securities market regulator has said. [via]

This is another significant announcement from Government bodies hailing Aadhar as a valid address proof. Prior to this Chandigarh administration recognized Aadhar as a valid proof for various welfare schemes being run by departments, boards, corporations, public undertakings and agencies in July this year. Aadhaar cards can also be used to open bank accounts and avail gas connections.

The Securities and Exchange Board of India’s (SEBI) move to recognize unique identification (UID/ Aadhaar) card is certainly a good step for the Asset Management Companies (AMCs), and it will help them to streamline the Know Your Customer (KYC) process and reducing operational challenges.

Earlier in April this year, Government had initiated a project to integrate both Aadhar and PAN card database with the intention of doing away with fake PAN cards and ensuring an accurate biometric data. However, even after SEBI decision to recognize Aadhar as a valid address proof, it is merely an additional facility for KYC. PAN will still be required for KYC purpose because it is a SEBI and Finance Ministry guideline. It is worth noting that now PAN would work as a common financial market denominator and the Unique Identification Authority of India (UIDAI) will be a KYC enabler for investor’s accounts with Asset Management Companies.

Due Date for E-Filing Tax Returns Extended upto 31st August, 2012

New Delhi: The government on Tuesday extended the last date for e-filing of income tax returns till August 31 after power failure disrupted normal life in many parts of the country.

"On consideration of the reports of disturbance of general life caused due to failure of power and further in consideration of the fact that the e-filing of returns for a specified category of individuals and Hindu Undivided Family (HUF) has been made mandatory, CBDT has extended the 'due date' of filing of returns to August 31, 2012," an official release said.
This has been done in respect of assesses who are liable to file income tax returns by July 31, it said.

Two consecutive power failures due to technical snag hit many states of the country leading to disruption of various services, including Railways.

Northern, Eastern and North-Eastern grids tripped today, leading to power failure in several states affecting more than half of the population of the country. The Northern Grid collapsed for the second time in two days.

The Central Board of Direct Taxes (CBDT) has made e-filing of tax return mandatory for individuals with income over Rs 10 lakh.

E-filing for such assessees was optional till 2010-11. The Income Tax Department had received a record 1.64 crore e-Returns in 2011-12 financial year.

Currently, 'Business Houses' with receipts of Rs 60 lakh and professionals with income of Rs 15 lakh are required to e-file their return with digital signature.

As on March 31, 2012, there were 19,684,592 tax payers who had registered for e-filing.

NRI real estate investment norms simplified

The purchase and sale of immovable properties in India by a Non Resident Indian (NRI) or by a Person of Indian Origin (PIO) is really a very simple and easy affair with not much hassles and problems. For a detailed and authentic answer one should always refer to the Foreign Exchange Management (Acquisition and Transfer of Immovable Properties in India) Regulations, 2000 as amended from time to time.

The above regulations have been notified by the Reserve Bank of India vide Notification No. FEMA/21/200-RB dated 3rd May, 2000. Likewise, to get a latest update on the subject the readers may also very carefully go through the latest Master Circular on Acquisition and Transfer of Immoveable Property in India by Non Resident Indians/Persons of Indian Origin which has been issued by the Reserve Bank of India vide Master Circular No.4/2012-13 dated 2/7/2012. 

Before going further to analyse the different provisions of the law relating to acquisition and transfer of immovable properties in India by Non Resident Indians as well as by Persons of Indian Origin it would be worthwhile to know and understand the legal definition of these two entities as per the Foreign Exchange Management Act. 
As per Notification FEMA-5 /2000 dated 3.5.2000 as amended from time to time, a Non Resident Indian (NRI) is a person resident outside India who is citizen of India or is a person of Indian Origin. Likewise, the definition of Person of Indian Origin (PIO) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held Indian passport, or (ii) who or either of whose father or whose grandfather was a citizen of India by virtue of Constitution of India or the Citizen Act, 1995. 

With regard to acquisition and transfer of property in India by an Indian Citizen resident outside India it is specifically provided that a person resident outside India who is a citizen of India may - 

a) acquire any immovable property in India other than agricultural/plantation /farm house, and b) transfer any immovable property in India to a person resident in India. c) transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. 

As regards the Acquisition as well as transfer of Property in India by a Person of Indian Origin (PIO) the Regulation 4 of the above mentioned regulation specifically states that a person of Indian origin resident outside India may - 

(a) acquire any immovable property other than agricultural land/farm house/ plantation property in India by purchase, from out of (i) funds received in India by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act; (b) acquire any immovable property in India other than agricultural land / farm house / plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India; (c) acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India; (d) transfer any immovable property in India other than agricultural land/farm house/plantation property , by way of sale to a person resident in India; (e) transfer agricultural land/farm house/ plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India; (f) transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India. 

Health Insurance For Your New Born

When a family has a baby, everybody becomes busy in welcoming the newborn into the family and celebrating the occasion. Hardly any of us would give a thought about buying a health insurance cover for the child. But when a child is born, unfortunately, at least a few of them will suffer from complications that might involve extensive hospitalization, which can be very expensive.

In such cases apart from the trauma of having to deal with the child's ill health, the family will also be worried about the hospital bills. This is where farsighted people like my cousin should arm themselves to deal with the financial implications of such an eventuality.

Those all are working and have taken a health insurance policy (From employer) they can avail the facility very easily and quickly.

What to do?

Very first, Intimate your (spouse)’s pregnancy to your company HR / Admin Department who is dealing with employees Health Insurance before admitting into the hospital for delivery. Same time sent a intimation mail to the insurance company also from the safer side.

The moment you were blessed with the baby, intimate the same to your office and ask them to issue a health card for your baby. The Insurance Company will issue the health card for your baby by putting the name as “Baby of YourName”. Check the DOB and Sex of the baby in the health card properly. You can include your baby’s name later once the naming ceremony is done; else if you have planned some name before the birth then you can ask your employer to issue the health card on your baby’s name.

Then show the baby’s health card in the hospital for further medication.

Keep the insurance company informed. If there are any complications during your pregnancy and the doctor suspects a premature birth may occur, tell your insurance provider. Insurance providers are required to cover a newborn for the first 30 to 31 days of life under the parent's policy.

Get Your Income Tax Refunds Online

For the past few days, I have been fighting with finding the status of my Income Tax Refunds and checking status of TDS (Tax Deducted at Source). Actually, one of my clients’ deducted TDS and shut down his company without providing TDS certificates to us, so I was worried on the status of the tax deducted by them.

Thankfully, Tax Information Network website came handy.

So, now the question is, how do we check our Tax Statements?

Well, you need to register to get access to Annual Tax Statement (Form 26 AS) first. You can register by visiting this page. The registration process is manual. You will have to fill in required details, then within 5 days,  the authorized person will get in touch with you, their person will visit your place, verify the details and collect Rs. 100 + taxes as fees. And within 3 days your account will be activated.

Once the account is active, you need to login here with your details, once logged in, the site will give you access to Tax Statements of all the years. (From the year you have started filing tax). The statement will show the details of Tax Deducted at Source, Tax Collected at Source, (Advance) Tax Paid and Tax Refunds Paid. Next to each TDS entry, it displays the status of each entry, which basically says, the Tax amount was accepted by the government or not.

Okay, now, if you just want to check the status of your Tax Refunds, then you can directly check it here. Absolutely no need to register to check the status, you just need a PAN card number. If you are facing any difficulties there, you can call them up on the helpline: 1800 425 9760 or email them here.

Thanks to the IT Department for developing such a wonderful site, I can’t imagine myself calling or visiting the babus just to get this basic info.

I guess that’s about it, I hope this helps someone.

Understanding Fixed Maturity Plans

The markets have remained volatile over the past few months and there are no indications of a steady environment in the near future. Under these circumstances more and more people are opting to invest in safer avenues such as bank fixed deposits. In order to get a share of the money going into the FDs, mutual funs houses have come up with this unique concept of FMP which is can be considered as the mutual fund equivalent of bank FDs. The primary targets of these FMPs are conservative investors who look for safe and secure returns.

What are FMPs?

This is a relatively new concept as an instrument of investment about which the awareness is restricted. These primarily debt mutual funds which are close ended and have typical maturity periods of one to five years. These plans are created by fund managers who purchase debt instruments that are oriented with the maturity period of the plans.  By this method the investment is kept secured while market expectations are also met simultaneously.

Key Benefits of FMPs

There are several benefits of the FMPs which make them a lucrative option available in the market. The most important advantage of the FMPs is that for tax purpose they are treated at par with fixed deposits. Since they are basically debt funds they also enjoy all the benefits of the debt funds in terms of short terms capital gains as well as long term capital gains. For the short term capital gains, the income from FMDs as in the case of any debt oriented fund is added to the annual income and the taxation is done as income tax. In case of the long term capital gains, the income from FMPs, as in the case of all debt oriented funds, is taxed as the higher among the two – 10% without indexation and 20 per cent with indexation.

Comparing the FMPs with Bank Fixed Deposits

In order to understand the basic advantages of investing in fixed maturity plans as against conventional bank fixed deposits we will have to compare the returns from both these instruments both pre tax as well as post tax. Assuming an initial investment of Rs. 10000/-, let us study the variations in returns in different options.

Instrument	Bank Fixed Deposit	FMP (Dividend)	FMP (Growth < 1 year)	FMP (Growth > 1 year non indexed)	FMP (Growth > 1 year indexed)
Returns	10%	10%	10%	10%	10%
Tax	33%	14.2%	33%	10%	20%
Pre Tax returns	Rs.1000	Rs.1000	Rs.1000	Rs.1000	Rs.1000
Indexed Pre Tax returns	Rs.1000	Rs.1000	Rs.1000	Rs.1000	Rs.1000
Tax	Rs.330	Rs.142.40	Rs.330	Rs.100	Rs.87.48
Net Returns	Rs.670	Rs.857.60	Rs. 670	Rs.900	Rs.912.52

In this table the various tax implications in different schemes of FMPs as compared to the tax implication in a bank fixed deposit is illustrated on an initial investment of Rs. 10000/- with a interest rate of 10%. Important derivations from the above table of comparison are as follows:

§ The net returns from FMPs far exceed that by any bank fixed deposit.

§ The dividend option is better when buying FMPs for less than a year.

§ The growth option is better when buying FMP for more than a year.

§ Maximum double indexation benefit can be achieved by buying a FMP towards the very end of a financial year which is eligible for redemption at the commencement of a future financial year.

Area of Concern in FMPs

While the FMPs may appear to be the ultimate investment option when seeing the above the table, there are a few shortcomings that one needs to be aware of when investing in FMPs. There are a few assumptions in the above discussed table which require a closer look.

§ Firstly the above table assumes that the return from the FMPs and the bank FD is same. However this may not be true always. The actual return from a FMP is not secure or guaranteed.

§ Secondly the FMPs may invest in commercial papers of a variety of businesses. Thus an over ambitious FMP may make aggressive investment in businesses that have lower CRISIL/ ICRA ratings thereby exposing the investment to risks.