LIC Plans Launched In 2017 & Should You Invest For Tax Saving?

LIC Plans are one of the most popular investment options in the name of saving tax. Every year LIC comes

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LIC Plans Launched In 2017 & Should You Invest For Tax Saving?

  • 5:53 am

LIC Plans are one of the most popular investment options in the name of saving tax. Every year LIC comes out with NEW insurance plans especially in the month of December to March for tax savers. But have you ever evaluated if these LIC plans are worthy investment especially for tax saving? We evaluate these plans for you and tell you if you should invest in them and if there are better alternatives.

In 2017 LIC has launched following tax saving plans:

  1. LIC Jeevan Shiromani
  2. LIC Jeevan Umang
  3. LIC Jeevan Utkarsh
  4. LIC Aadhaar Shila
  5. LIC Aadhaar Stambh

These plans can be classified as Endowment plans, Single Premium Traditional plan or Whole-life plan. We discuss the plans one by one.

LIC Jeevan Shiromani:

Launched in December 2017 LIC Jeevan Shiromani is Non-linked, Money back, Limited premium payment with guaranteed additions plan targeted for HNIs (High Net-worth Individuals)

Minimum Sum Assured: Rs 1 Crore

Age for Entry: 18 to 55 Years

Maturity Benefit: Sum Assured on Maturity + Guaranteed Additions + Loyalty Addition if any

Death Benefit: Sum Assured on Death + Guaranteed Additions + Loyalty Addition if any. In case death occurs before 5 years only Sum Assured on Death + Guaranteed Additions are paid to the nominees

Expected Returns: The returns could vary from 5% to 7% depending on loyalty bonus rates and your age at entry and premium paying term

Should you Invest? For 1 crore sum assured the annual premium would be more than Rs 7 lakhs depending on the age and term. So this is clearly for HNIs. The expected returns are may vary from 5% to 7% which is low as HNIs can take more risk in their investments. Also from tax saving angle investors would be much better-off with investment in ELSS funds and buying separate term insurance. Our recommendation is to stay away from LIC Jeevan Shiromani.

LIC Jeevan Utkarsh:

LIC Jeevan Utkarsh Review

Launched in September 2017, LIC Jeevan Utkarsh is single-premium traditional, non-linked, with-profits, savings cum protection plan. This plan would close for investment on March 31, 2018.

Minimum Sum Assured: Rs 75,000

Age for Entry: 6 to 47 Years

Maturity Benefit: Sum Assured on Maturity + Loyalty Addition if any

Death Benefit: Sum Assured on Death + Loyalty Addition if any. In case death occurs before 5 years only Sum Assured on Death is paid to the nominees

Expected Returns: The returns could vary from 5% to 7% depending on loyalty bonus rates and your age at entry

Should you Invest? Single premium life insurance plans are expensive form of insurance. As can be seen the expected returns are may vary from 5% to 7%. If buying for tax saving you would get better returns by investing in PPF and buying term insurance separately. Our recommendation is to stay away from LIC Jeevan Utkarsh.

LIC Jeevan Umang:

LIC Jeevan Umang - Review
LIC Jeevan Umang – Review

Launched in May 2017, LIC Jeevan Umang is a whole life insurance with limited premium payment option plan. It provides annual Survival Benefits after the premium paying term till maturity/death and also lump-sum amount at the time of maturity/death.

Minimum Sum Assured: Rs 2,00,000

Age for Entry: 90 days to 55 Years

Maturity Benefit: Basic Sum Assured + Simple Reversionary Bonuses + Final Additional Bonus (if any)

Death Benefit: Basic Sum Assured + Simple Reversionary Bonuses + Final Additional Bonus (if any) is paid to the nominees

Expected Returns: The returns could vary from 5% to 7% depending on bonus rates and your age at entry

Should you Invest? As can be seen the expected returns are may vary from 5% to 7%. If buying for tax saving you would get better returns by investing in PPF and buying term insurance separately. Our recommendation is to stay away from LIC Jeevan Umang.

LIC Aadhaar Stambh Plan:

LIC Aadhaar Stambh and LIC Aadhaar Shila Plan
LIC Aadhaar Stambh and LIC Aadhaar Shila Plan

Launched in April 2017, LIC Aadhaar Stambh is with profit, non-linked regular premium paying Endowment insurance plan for males with Aadhaar number.

Minimum Sum Assured: Rs 75,000

Age for Entry: 8 to 55 Years

Maturity Benefit: Sum Assured on Maturity + Loyalty Addition if any (if any)

Death Benefit: Sum Assured on Death + Loyalty Addition if any. In case death occurs before 5 years only Sum Assured on Death is paid to the nominees

Expected Returns: The returns could vary from 4% to 5% depending on bonus rates and your age at entry

Should you Invest? This is a regular endowment plan with no other USP. The plan is just riding on the Aadhaar popularity. The returns are may vary from 4% to 5%. If buying for tax saving you would get better returns by investing in PPF and buying term insurance separately. Our recommendation is to stay away from LIC Aadhaar Stambh Plan.

LIC Aadhaar Shila Plan:

Launched in April 2017, LIC Aadhaar Shila is with profit, non-linked regular premium paying Endowment insurance plan for females with Aadhaar number.

Minimum Sum Assured: Rs 75,000

Age for Entry: 8 to 55 Years

Maturity Benefit: Sum Assured on Maturity + Loyalty Addition if any (if any)

Death Benefit: Sum Assured on Death + Loyalty Addition if any. In case death occurs before 5 years only Sum Assured on Death is paid to the nominees

Expected Returns: The returns could vary from 4% to 5% depending on bonus rates and your age at entry

Should you Invest? This is a regular endowment plan with no other USP. The plan is just riding on the Aadhaar popularity. The returns are may vary from 4% to 5%. If buying for tax saving you would get better returns by investing in PPF and buying term insurance separately. Our recommendation is to stay away from LIC Aadhaar Stambh Plan.

Should you Invest in New LIC Plans for Tax Saving?
Should you Invest in New LIC Plans for Tax Saving?

LIC Plans for Tax Saving? My recommendations:

LIC stands for Life Insurance Corporation – which means it primarily is in insurance business and NOT investment.

Most insurance plans with investment component (like endowment plan, Money back plan, etc) offer low returns in the range of 4% to 7%.

Due to high premium, investors neither get adequate insurance nor good returns. Its good idea to buy pure term life insurance and invest rest in PPF (if you are conservative) or ELSS (if you are aggressive) to save tax.

Generally December to March is the time when LIC and other insurance companies launch new tax saving investment plans and insurance agents are out in full force to sell these as tax saving investments. Be cautious and select the right investment or you may regret later!

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5 Steps To Link Aadhaar To LIC Policies Online

Government has made mandatory for insurance policy holders to link their Aadhaar to their life insurance policies. The deadline to

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5 Steps To Link Aadhaar To LIC Policies Online

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Government has made mandatory for insurance policy holders to link their Aadhaar to their life insurance policies. The deadline to link Aadhaar has been extended to March 31, 2018. In case Supreme Court does not extend the deadlines further or nullify the order, you may face difficulties when the policy matures or when the nominees file claim. So if you have aadhaar and have no inhibitions to link it go ahead and do it well before the deadline.

The Aadhaar can be linked to insurance policies both offline and online (for some companies). For offline you’ll need to visit the insurance company office with your aadhaar card & insurance policies. In this post we tell you how to link Aadhaar to your insurance policies online.

Link your LIC policies online with Aadhaar:

Step 1: Click on the following link to go to LIC link Aadhaar and Pan to policy page.

Step 2: Fill up the form. The screenshot is sown below:

Link Aadhaar and Pan to LIC policy

Step 3: You will receive OTP from UADAI to your Aadhaar registered mobile number. In case you do not have right number updated on your Aadhaar you cannot proceed further. You’ll need to either update mobile number in Aadhaar or link it offline to your policies.

Step 4: On giving the right OTP, you’ll get the message regarding success of the registration for linkage.

Step 5: After LIC verifies the Aadhaar with UADAI, you’ll receive SMS/email confirmation for the same. This may take a few days.

Link LIC policies online with Aadhaar
Link LIC policies online with Aadhaar

I hope this post would help policy holders to link their Aadhaar to LIC Life insurance policies.

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What is a Consumer Credit Report?

Credit card users are pretty clear about their credit history and payments. To analyse their performance, the credit card processing

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What is a Consumer Credit Report?

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Credit card users are pretty clear about their credit history and payments. To analyse their performance, the credit card processing companies release an updated credit report every 3 months. A credit report is used by lenders in a lot of areas. Having a credit card and a good credit report helps the user a lot in many financial areas especially when trying to get financial aid.

A consumer credit report is a document that includes all credit or finance-related information of the user. A credit report is provided by a credit reporting body. The information used can be provided by credit providers or other sources in the market. A consumer credit report is introduced to you if you have received or applied for consumer credit.

Consumer Credit Report

Your consumer credit report includes all your information related to you from your name, date of birth, and address to your employer. The report also includes your credit history which revolves around all the loans or debt on your and how you have handled the repayments. Your spending payments and behaviour are also mentioned in the report. Along with this information, if you have defaulted on any payments, such cases are also mentioned or highlighted in the report.

You can get a free copy of your consumer credit report every 3 months to check the details and for any errors. Having a good credit score is also essential to obtain good terms and conditions on loans, credit cards, and other financial tools.

Mostly, people can have more than one credit report. Credit bureaus collect and store all your financial information provided by creditors, like lenders, credit card companies, and financial companies. Creditors do not report to every credit reporting company.

The consumer credit report is essential as it helps the lender to decide whether or not they should lend you the money. The credit report is also used by the lender to decide on your eligibility to meet the requirements of the credit account.

Significance of consumer credit report –

  • Credit report is important for the creditors to get a detailed view of your history of finance.
  • Having a good credit score can also help you get financial aid at a desired cost, meaning low-interest rates.
  • Credit reports create a sense of familiarity with the lenders and they get to know whether they should accept the request.
  • Sometimes insurance companies may use a credit report to decide on your insurance application and the rates to offer.

Who can access your credit details?

Without your permission no one except your creditors. Your creditors are the only ones who have access to all of your credit information. In case you are an applicant and are applying for financial aid, your creditor will also request a credit report to check the details and check your creditability.

Upon a written request from the borrower can help you access the credit report. In case of legal cases, your credit reports can also be provided by the credit bureaus on the court’s order.

What can affect a credit report?

Apart from personal information, credit reports are influenced by a range of factors, come of them are as follows –

  • Irregular payment history
  • Delayed payments
  • No payments
  • Outstanding amount
  • Partially settled payments
  • Errors in the report
  • Hard inquiries (by creditors)
  • Over-utilized credit ratio.

Creditworthiness is a word that determines whether the borrower is worthy of the credit or financial aid or not. Whether a person is worthy or not can be clearly stated in the credit report. The creditors will or will not give your loan, that depends on your report. Once a payment is missed, it will remain in your credit report for the next 7 years so borrowers have to be very careful in their repayments.

Read More: How to Remove Late Payments From Your Credit Report

Conclusion

The customer credit report is all about the credit history and finance study of the user. Lenders use this information to assess risk and check the creditworthiness of the borrower. These credit reports are generated by credit card processing companies on a timely basis to keep the borrower updated on their credit score and errors. The consumer credit report is basically a portfolio of the borrower in case they wish to avail any financial aid.

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How Debt Settlement Affects Your Credit Score?

Debts are inevitable if you are not responsible enough to take care of the repayments. Be it with credit cards

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How Debt Settlement Affects Your Credit Score?

  • 5:53 am

Debts are inevitable if you are not responsible enough to take care of the repayments. Be it with credit cards or with any other financial aid, you ought to return the amount regularly. This can happen due to irresponsibility and not just a huge debt but you also end up getting your Credit score taken a blow because of the same.

People, when the debt is overwhelming and is unable to pay for it at all, choose to go for “Debt Settlement”. This statement sometimes is confused with loan closure or debt closure, however, these two are different words. Loan or Debt Closure means closing the debt with the whole lump sum getting returned safely. But Debt Settlement means the debt has been settled by the bank.

What is Debt Settlement?

Debt Settlement or Loan Settlement are words that can be used as synonyms. Debt Settlement means that the bank and the borrower came to a conclusion to lower the amount of the loan and the borrower has paid a portion of the loan and then settled the loan.

In simpler terms, the bank and the borrower made a settlement because the borrower is unable to repay the whole loan and the bank has lost any hope of recovery. This settlement is made for a particular portion of the loan which will be paid by the borrower to the bank for the bank to close the loan and not to further persist the borrower for recovery. This is called “Debt Settlement” where the debt is settled not repaid in full or closed.

What are the impacts of “Debt Settlement” on your Credit Score?

Credit Scores are determined by your credit report. A credit report is the report card of your financial life. Which has every detail of your finances and your behavior towards your transactions and everything. From your Credit history to any repayment not made on time or anything else such as bad debt or delinquent amount which you were unable to pay to the bank or your lender.

The Credit Report somewhat determined your Credit Score. Higher delinquent or late payments can cause your Credit Score to fall into greater depths.  A single late payment, no payment, or any other type of delinquency remains in your credit report for 7 years at least. The same goes for the debt settlement status.

When you have paid the whole amount of the loan or debt, the status becomes closed such as “Loan Closure” or “Debt Closure”. With this statement, your credit score gets higher because you have been responsible for paying off the debt and repaying it fully.

So, since the status of a loan is “settled” rather than “closed” and the same will remain on the file for 7 years, the borrower might not be able to qualify for further financial aid. For example – A borrower with “debt settled” status on their credit report applies for a loan with any other financial institute or lender, they might get wary of the capability of the borrower to repay the whole loan. There also will be more possibilities of rejection than that approval of the loan.

How can a borrower deal with this situation?

In these cases, borrower thinks that loan write-off or debt settlements are the best measure they have which is wrong. Once it is recorded on the file, not only your credit score but your financial capability will also fall with the same and it will go on for 7 years.

Here the best one can do is to try and make the payments they can make first and ask for a longer time to make the payment. In case, you have any savings or investments, you can liquidate those as well to pay off the outstanding loan.

The Debt Settlement should be a last resort. But before thinking about that, it is important to try your best to make the payments and pay off the debt. You can also try to re-evaluate the monthly installment structure and reduce the interest rate with the help of the lender.

Also Read: How To Settle a Credit Card Debt – Pros and Cons

Conclusion

Debt is a word that can cause a person much more harm than expected. Not only financial but mental and physical distress can be caused due to the issues regarding debt. Debt Settlement should be the last resort of a person who is unable to make the payments for themselves.

Debt Settlement might get you relaxed but it is not necessarily a good thing for your financial health. There can still be ways where you can still keep your Credit Report clear of the “Debt Settlement” status. It is important to use any significant way to repay the debt you own before opting for the settlement as it does not have a good impact on your creditworthiness.

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IDFC First Private Credit Card vs HDFC Infinia Credit Card

IDFC First Bank launched the First Private credit card last year and it is the most premium offering by the

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IDFC First Private Credit Card vs HDFC Infinia Credit Card

  • 5:53 am

IDFC First Bank launched the First Private credit card last year and it is the most premium offering by the bank. It is an invite-only card and not everyone can apply for it. Also, it is exclusively for high net-worth individuals and charges a very high joining fee of Rs. 50,000 plus taxes. You get benefits across all major spend categories and the card has a high reward rate offering up to 10x reward points on your spends. Other than reward points, the card offers Karma Points on your spends that can be donated to any charity of your choice.

Likewise, the HDFC Bank Infinia is also an invite-only card and is a super-premium card that charges a joining fee of Rs. 12,500 from the cardholder. The bank invites only select individuals to apply for the card who have a high net worth and a healthy relationship with the bank. Again, this card is jam packed with high-quality privileges across travel, dining, lifestyle, shopping, etc. You also get 5 reward points per Rs. 150 spent with the card.

In this article, we will compare the IDFC First Private with the HDFC Bank Infinia credit card. Know more about the features and privileges, fees and charges, and other information about both these cards.

HDFC Bank Infinia Credit Card

The HDFC Infinia is one of the first choices for businessmen and wealthy individuals because of its elite level privileges. It is an invite-only card and not everyone can be eligible for it. The card offers a decent reward rate on almost all spends made with the card Let’s take a look at the main features and benefits of the HDFC Infinia credit card –

  • Bonus 12,500 reward points as a welcome benefit on paying the joining fee of the card
  • 5 reward points on every spend of Rs. 150 with the card, except on fuel
  • Accelerated 10x reward points on hotel booking, 5x reward points on bus/flight tickets, and 3x reward points on Flipkart spends made via the Smartbuy portal.
  • Reward points can be redeemed against a host of different options like products/vouchers, flight/hotel bookings, Airmiles, cashback, etc.
  • Complimentary domestic and international lounge access for primary and add-on cardholders with the Priority Pass membership.
  • Complimentary Club Marriott membership for one year
  • Complimentary 2+1 night stay at partner ITC hotels and 1+1 on buffet at weekends at participating ITC hotels
  • Up to 25% discount at more than 2000 restaurants with the Good Food Trail program
  • 24*7 global concierge service for the cardholder offering assistance with reservations, bookings, gifts, etc.
  • Comprehensive insurance privileges including medical cover, air accident death insurance, credit liability, and credit shield cover.
  • The joining fee of the Infinia credit card can be waived off on spending Rs. 10 Lakhs in the card anniversary year.
  • 1% fuel surcharge waiver with maximum benefit capped at Rs. 1000 per statement cycle
  • Low forex markup fee of 2% of the total transaction amount which is ideal for people who regularly make spends in foreign currency with their credit card. Also, the card does not charge any fee for cash advances.

Apply Now

IDFC First Private Credit Card

Just like the HDFC Infinia credit card, the IDFC First Private credit card is also a super-premium offering and is an invite-only card. The joining and annual fee of the card is quite high, Rs. 50,000, but the card backs the high fee up with exclusive privileges across all major categories. Another great thing about the card is that other than reward points, it also offers Karma Points on your spends that can be donated to any charity of your choice. Read on to know more about the offerings of the IDFC First Private credit card and how it stacks up against the Infinia credit card –

  • The card offers 6 reward points per Rs. 100 spent with the card and 3 reward points on offline spends. You get accelerated 10 reward points per Rs. 100 after reaching the monthly spend milestone of Rs. 30,000 and on birthdays. Also, you get bonus 25% reward points when you donate to a charity of your choice.
  • The reward points earned by you can be redeemed against a host of different options that include flight/hotel bookings, cashback, products/vouchers, and more. You have to pay a reward redemption fee of Rs. 99 whenever you redeem your points.
  • On spending more than Rs. 30,000 in the month, you then earn Karma Points for your spends with the credit card. You get 1 Karma Point per Rs. 100 spent but rent, insurance, EMI, cash advance, etc. are excluded from it. Once you collect at least 20,000 Karma Points, you can start donating the points to any charity of your choice, 1 Karma Point = Rs. 0.25.
  • The primary as well as add-on cardholders get 16 complimentary lounge access per year, 4 per quarter, along with 4 complimentary spa sessions per quarter. You also get Visa Infinite privileges like Meet & Greet, Affluent Dining, Airport Limousine Transfer, etc.
  • You can get a discount of Rs. 750 on both non-movie and movie ticket bookings and on food and beverages through the BookMyShow website. You can avail this benefit twice per month.
  • The card offers a complimentary golf round and a lesson per month. Also, the cardholder can get complimentary golf lessons on spends of Rs. 20,000 in a month.
  • The cardholder gets insurance privileges that include air accident cover, loss of baggage, passport, or other travel documents, delay in flight, or baggage, and other travel related insurance covers.
  • The card offers a 1% fuel surcharge waiver, with the maximum benefit capped at Rs. 400 every month.
  • For those who regularly make foreign currency spends, the card is perfect as it does not charge any forex markup fee. Also, the cash advance fee on the card is Rs. 250 per transaction, which is quite low.

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IDFC First Private vs. HDFC Infinia Credit Card – Quick Comparison

Category HDFC
Infinia Credit Card 		IDFC First
Private Credit Card
Joining/Annual
Fee 		Rs. 12,500
plus taxes 		Rs. 50,000
plus taxes
Welcome
Benefits 		Bonus 12,500
reward points and complimentary Club Marriott membership for one year 		NA
Reward
Earning 		5 RPs per Rs.
150 spent
Up to 10x RPs
on the Smartbuy portal 		3 RPs per Rs.
100 spent offline and 6 RPs on online spends.
Up to 10 RPs
on incremental spends above Rs. 30,000 and on birthdays
1 Karma Point
per Rs. 100 spent after reaching Rs. 30,000 monthly spends
Reward
Redemption 		RPs can be
redeemed against hotel/flight bookings, products and vouchers, Airmiles,
cashback 		RPs can be
redeemed against flight/hotel bookings, products/vouchers, etc.
Travel
Benefits 		Complimentary
domestic and international lounge access with Priority Pass membership
Complimentary
Club Marriott membership
Complimentary
2+1 night stay at ITC hotels 		16
Complimentary domestic and international lounge access, max 4 per quarter
Complimentary
spa sessions per year
Dining and
Movie Benefits 		Dining benefits
with Good Food Trail program
1+1
complimentary buffet at ITC hotels 		Rs. 750
discount on movie and non-movie bookings through BookMyShow
Golf
Benefits 		Complimentary
unlimited golf rounds at top courses in India and worldwide 		2
complimentary golf rounds per month
Renewal
Fee Waiver 		Renewal fee
waiver on spending Rs. 10 Lakhs or more in the card anniversary year 		NA
Forex
Markup Fee 		2% of the
transaction amount 		No Forex
Markup Fee

Bottom Line

Both the IDFC First Private and HDFC Infinia credit cards are great options in the Indian market when it comes to super-premium credit cards. Both the cards are invite-only and not available for everyone. Only those who are invited personally by the bank can apply for these cards. Both these cards are packed with elite-level benefits and features across dining, travel, shopping, and other categories. With the First Private card, you even earn Karma Points that can be donated to any charity of your choice.

Another nice feature of these cards is the forex markup fee. The Infinia credit card charges a low 2% forex markup fee while the First Private credit card does not charge any forex markup fee whatsoever. When it comes to choosing between the two cards, it is a difficult choice because both the cards are filled with top features and benefits. The reward rate is also great on both the cards and you can redeem reward points against a host of different choices.

Personally, we would recommend you to go with the HDFC Infinia credit card just because of its joining and annual fee. It has a Rs. 12,500 joining fee which is quite low as compared to the Rs. 50,000 annual fee of the First Private credit card. Before making your choice, make sure to thoroughly go through the terms and conditions and other offering of both the cards.

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Making Sense Of Tax Benefit On Health Insurance – 80D Section Of Income Tax

You might have heard stories where a serious medical condition in a family has drained them of their wealth. These

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Making Sense Of Tax Benefit On Health Insurance – 80D Section Of Income Tax

  • 5:53 am

You might have heard stories where a serious medical condition in a family has drained them of their wealth. These are not just stories but can happen to anyone. To guard against such issues – you must buy Health Insurance. The good part is you also get tax benefit on premium paid for Health insurance. In this post we resolve what’s and How’s of Tax Deduction on Health Insurance sec 80D!

How much Tax Benefit I get on Health Insurance?

Budget 2018 has enhanced the limit of Health Insurance premium eligible for tax deduction under section 80D for Senior citizens. The limit is Rs 25,000 for people with age less than 60 years and it’s Rs 50,000 for senior citizens. You can also claim Rs 5,000 for Preventive Health checkups. This is within the Rs 25,000/50,000 limit.

You can also claim additional tax benefit on Health insurance premiums paid for your parent.

What’s the Tax Benefit for Health Insurance of Parents?

You can claim additional tax deduction on the premium paid for Health Insurance of your parents. This can be up to Rs 25,000 in case your parents are below 60 years of age and Rs 50,000 in case any one of your parents is above 60 years of age.

But just paying premium is not enough. The policy should have been bought by you i.e. you should be the proposer of the policy. There are cases when people pay premium for an existing policy which was bought few years back by their parents and claim tax deduction u/s 80D. This can land you in trouble. So the best way is to either buy a new policy or write to the concerned insurance company to change the proposer at the time of renewal.

Health Insurance – Tax Benefit Available – FY 2018-19

Can premium be split between Husband and Wife for tax benefit?

Suppose you bought family floater Health insurance which has premium of Rs 35,000 which covers self, spouse and children. Now can you split this premium between husband and wife so that both can claim benefit? The answer is NO. The reason being there can only be one proposer for a policy and hence the tax benefit can only be claimed by one.

To get around this you may opt for two separate policies but keep in mind the overall premium might be higher. So do your calculations before deciding.

What’s the tax Benefit on preventive health checkup?

Tax exemption up to Rs 5,000 is allowed for preventive health checkup of Self, Spouse, dependent Children and Parents. This limit is within the Rs 25,000/Rs 50,000 deduction.

Tax Benefit on Medical Insurance under Section 80D
Tax Benefit on Medical Insurance under Section 80D

Important Points:

1. The maximum tax deduction u/s 80D can be Rs 1,00,000 in case you buy Health insurance for self and your parents and both you and your parents are senior citizens.

2. HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF

3. To avail deduction the premium should be paid in any mode other than cash. However the payment for Preventive Health checkup can be done in cash.

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How Healthy Is Your Mutual Fund Portfolio?

Do not put all your eggs in one basket. ~ Warren Buffet The one thing that the COVID-19 pandemic has

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How Healthy Is Your Mutual Fund Portfolio?

  • 5:51 am

Do not put all your eggs in one basket.

~ Warren Buffet

The one thing that the COVID-19 pandemic has taught everyone is that HEALTH IS WEALTH. Health is not simply the absence of disease, though it is the necessary condition, it is a holistic approach towards life and a state of overall well-being…

With that goal in mind, we cannot restrict health to just a physiological aspect. For a dignified and healthy lifestyle, you need to be healthy physically, mentally, emotionally, socially, and economically!

Like your body needs regular visits to the doctor and medical check-ups, so does your portfolio of investments. The most important component of most portfolios, at least in the past two decades, is Mutual funds as they give an opportunity to diversify, expand, and still keep things simple.

Also Check: Portfolio Safety: Is Your Portfolio Risky?

Similarities in Medical check-up and Ideal Mutual Funds portfolio Health check-up

There are many similarities between a medical and an Ideal Mutual Fund portfolio India 2022 check-up:

  • Both need access to experts with training, experience, and specialized tool to run tests.
  • Both are required periodically and at intervals of 6 to 24 months, depending on age and previous conditions.
  • In emergency situations, both need immediate attention, any delay can cause more damage to their condition.
  • In both cases, the expert may recommend adjustments, rebalancing, and a plan to recover from the bad situation. Sometimes extreme measures like surgery are also suggested.

The Diagnostics

Asking the right questions will get you the right answers. Detailed Mutual Fund portfolio analysis will have the answer to these questions with clarity and objectivity:

Read More – What are The Different Types of Mutual Funds in India?

Is your ideal Mutual fund portfolio in accordance with your risk profile?

People have a different risk profile that changes over time. The current risk profile is determined by an investor’s age, earnings, liabilities, investible surplus, and propensity to emotionally handle volatility.

As a thumb rule, for seniors above 50, it is better to have high-quality debt funds in their portfolio than more volatile equity funds. Even for a person in their 30s, a debt portfolio is recommended for a goal within a 2–3-year time horizon. Both cannot afford to lose to equity market fluctuations.

Is the Mutual fund portfolio en route to reach defined goals?

If you have equity MFs for a short-term goal, then you may very well see that you are about to reach the goal, and all of a sudden you may see a 30% drop in the fund NAV. This has happened very recently in March 2020. (and will happen every 3 years)

Or you may have a long-term goal with huge commitments, and you are taking the scooter of debt instead of taking the bullet train of equities to reach there. These and other anomalies can be found only by a periodic assessment.

Check –7 Things We All Hate About Mutual Funds

Does your portfolio protect you from the vagaries of the market?

Every asset class can be volatile or remain depressed for a prolonged period. Even the safest (perception) of the two asset classes – real estate and gold – have made movements in the range of ±10% and ±25%, respectively, in the past two decades. The yields on government debt have fluctuated like never before in the same period.

A risk-adjusted combination of multiple assets from different classes will make your overall portfolio less volatile and protect you against sudden losses.

Is my portfolio diversified or focused?

Diversification is your best bet against market volatility. But most of the schemes in a typical Mutual Fund portfolio may seem to be clones or at least twins of each other. One could not even call the portfolio focused; a focused portfolio should have not more than 20-25 securities. (when it comes to funds it should be 8-10 funds) Neither can it be called an index strategy – the high expense ratio does not allow that.

As you ‘collect’ MF schemes over the years, their sheer number may trick you into believing that it is fairly diversified when actually it is not.

Also Check: Risk in Mutual Fund that you may not Know

Incorrect way of diversifying

Having too many funds is not diversification, rather it means, when you start a new SIP or buy a fund, it should add sectors, asset classes, and securities to your portfolio that were earlier missing or underrepresented.

SEBI’s new categorization rules make this simple to understand. For long-term goals if you invest in a mid-cap fund, then their universe is fairly small – only 150. As all mid-cap funds must invest 65% of their AUM in these stocks, their portfolios will overlap. So multiple mid-cap funds will not likely add to your diversification.

If your asset mix is in-line with life?

Everything has a shelf-life, and the best Mutual Fund portfolio in India isn’t an exception. The portfolio of your 30s is most definitely not working in your favor now. A balanced asset mix will have real estate, gold, liquid assets, debt, and stocks.

If your portfolio does not adjust to changes in life, then what worked yesterday may not work tomorrow. Periodic rebalancing will also introduce you to Gold ETFs or SGB, and REITs, to give you the alpha with stability.

Must Read – Should I Invest in LIC IPO and Other IPOs

Is your Mutual Fund portfolio protected from elements?

Our bodies and portfolios both need constant protection from external elements. Financially, elements mean unpredictable external factors that have a bearing on our returns and sometimes on the capital.

COVID-19 pandemic was one such outlier and brought with it rounds of interest rate cuts. Senior citizens were found in a tight spot who had only their interest income to fall back upon. Financial frauds like those in DHFL, Sahara, or IL&FS could be catastrophic for their retail investors. And sudden stock market crash could wipe out your entire life savings.

Is your portfolio sitting on the landmine of hidden risks?

Warren Buffet famously said, “take care of your losers, the winners can take care of themselves.”

If your MF portfolio is secured against worst-case scenarios – a drop of 40% in equities, or a moratorium on interest payments on the debt you hold – then you have taken care of your losers. As time goes by, the risk-taking ability changes and requires periodic stress-testing. It’s like a treadmill test or TMT, to check endurance and stamina.

Investors may be color-blind towards some systemic risks for which financial advisors get special training. This happened again with Yes bank where almost 25% of its loan book consisted of toxic assets, according to reports. The biggest losers were the retail investors of debt MFs holding its AT1 bonds, which were (mis)sold to them as “superior FDs.”

Also Check: ESG Funds- The Change that is Going to Last

Is the fund churning for the sake of churning?

There are funds with churn ratio of 5% & there are few with even 100%.

If you have a well-researched list of securities to invest in beforehand with sufficient margins built into the price, then your portfolio churning is not needed. This is true for both retail investors and the largest MF houses. Buying into the fad, buying for the sake of it, and worst of all buying to justify added commissions and high expense ratios, are all the more reasons to avoid a fund.

Concluding Remarks and Rx

The common misconception about mutual funds is “fit-it, forget-it” – that once you buy or start investing in a scheme, there’s nothing more to be done. They will reach their financial goals in autopilot mode! But, if you continue to ignore your health – physical and financial – then it doesn’t matter, how well do you eat, there will be consequences.

If you want to discuss the health of your investment portfolio –talk to us.

Now you know about the healthy Mutual Fund portfolio. Next article we can discuss how to build an ideal Mutual Fund portfolio? If you have any questions – add them in the comment section.

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NSC Calculator 2020 ★ Tax Benefit On Interest Earned

NSC (National Saving Certificate) is popular tax saving investment under section 80C. It has maturity of 5 years and is

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NSC Calculator 2020 ★ Tax Benefit On Interest Earned

  • 5:51 am

NSC (National Saving Certificate) is popular tax saving investment under section 80C. It has maturity of 5 years and is guaranteed by Government of India. Additionally, the interest earned every year on NSC is also eligible for tax deduction u/s 80C. We have designed a simple excel based NSC calculator where you can input the investment amount, interest rate and it will calculate the interest earned every year eligible for tax exemption and maturity value.

NSC Calculator (National Saving Certificate)

The interest earned on NSC is compounded annually and can be calculated using the compound interest formula:

NSC Maturity Amount = Amount Invested * (1 + Interest Rate) ^ 5

Using above formula, if you buy NSC for Rs 1 Lakh paying 8% interest, the maturity amount after 5 years would be Rs 1,46,933.

NSC Calculator

Post Office NSC calculator

Earlier NSC was only available in Post offices but now you can buy it from most big banks.

NSC Investment Rules

NSC interest rates are market linked and are announced every quarter. As of 2020, NSC interest rates are 6.8% (Apr to Jun) (Click for latest interest rate for NSC)

The good thing about NSC is unlike PPF or Sukanya Samriddhi  once invested the interest rate remains unchanged over the tenure of the deposit.

The minimum investment should be Rs 100.

The maturity period is 5 years from the date of investment. 10 Year NSC has been discontinued since December 20, 2015.

There is NO maximum limit for investment in NSC. However the maximum tax exemption is Rs 1.5 Lakh u/s 80C.

NSC can be purchased in multiples of Rs 100.

If you do not redeem your NSC on maturity the amount would earn interest of just 4%. This is applicable for two years from maturity. After 2 years there would be no further interest paid.

TDS & Tax on NSC

There is NO TDS on NSC.

The interest earned is taxed according to marginal income tax rates applicable to tax payer.

Tax Benefit on NSC

You can claim tax deduction up to Rs 1.5 lakh for investment in NSC under Section 80C. Additionally the interest accrued every year on NSC is also considered for tax exemption u/s 80C.

Here is an example.

Date Event Interest Accrued Comments
1-Mar-17 1,50,000   (Investment Done)   Purchased to Save Tax
1-Mar-18   12,000 Interest Accrued eligible for tax deduction u/s 80C
1-Mar-19   12,960 Interest Accrued eligible for tax deduction u/s 80C
1-Mar-20   13,997 Interest Accrued eligible for tax deduction u/s 80C
1-Mar-21   15,117 Interest Accrued eligible for tax deduction u/s 80C
1-Mar-22 2,20,395   (Maturity Amount) 16,326 Redeem the Maturity Amount. Final Year interest is NOT eligible for tax benefit
NSC Tax Saving Calculation

The final year interest is not considered as reinvestment for tax benefit.

Who can invest in NSC?

Only resident individuals can invest in NSC. You can invest jointly with another adult or purchase it on behalf of a minor.

HUFs and Trusts are NOT eligible to invest in NSC.

How much Taxes you Need to Pay this Year? Download Our Income Tax Calculator to Know your Numbers

Do you know how much tax you need to pay for the year? Have you taken benefit of all tax saving rules and investments? Should you use the “NEW” tax regime or continue with the old one? In case you have all these questions just Download the Free Excel Income Tax Calculator for FY 2021-22 (AY 2022-23) and get your answers.

Can NRIs Invest in NSC?

NRIs cannot invest in NSC. However if NRI can hold NSC if they had purchased it before becoming NRI.

How to buy NSC?

NSC can be bought across counters of most post offices.

You just need to fill up a one page form and attach relevant KYC documents (self-attested ID and address proof).

The payment can be made in any of the following modes:

After due diligence and verification of KYC documents NSC is issued to the investor. The practice of giving NSC certificates have been discontinued since July 2016 and now investors are issued NSC Passbook (similar to bank account passbook) with the investment details.

You can also buy NSC online if you have net banking access of Post Office Savings Account!

NSC Calculator FAQs

✅ How to use NSC Calculator?

This is a simple excel based NSC calculator. You need to input the purchase amount and interest rate. The calculator computes the maturity amount and accrued interest every year.

✅ Which is better NSC or Fixed Deposit?

NSC is better choice than Tax Saving FD because of following reasons:
Higher Interest Rate: NSC offers higher interest rate than most banks
Safe: NSC is guaranteed by government of India is 100% safe
Additional Tax Benefit: The interest accrued on NSC also gives tax benefit u/s 80C which is not the case with Tax saving FDs.

✅ Is Interest received on NSC taxable?

The interest received on NSC is fully taxable as per you income tax slab.

✅ What is the compounding frequency of NSC interest?

The interest on NSC is compounded annually.

✅ What is full form of NSC?

NSC stands for National Saving Certificate. This is part of small saving schemes offered by Government of India for everyone to encourage savings.

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