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From where can I buy infrastructure and Nabard bonds in order to save tax? What are the benefits and tax implications of purchasing these bonds?

TAX
(Queries answered by taxspanner.com)

From where can I buy infrastructure and Nabard bonds in order to save tax? What are the benefits and tax implications of purchasing these bonds?
-Sandeep Kumar, Amritsar
Infrastructure bonds, the new tax-saving option introduced this year, are available in the market through brokerage houses. The tax benefit is an enhancement of Rs 20,000 over and above the limit of Rs 1 lakh under Section 80C. For those in the 30% tax slab, it is beneficial when compared with other investments. However, you need to have a demat account to be able to buy these bonds because they are available only in the dematerialised form.

Nabard Capital Gains bonds can be bought through any financial products broker and from most banks. If you have earned capital gains, you can avoid the capital gains tax by investing the profit in these bonds. The lock-in period is three or five years (higher interest rate for higher period). However, the interest is taxable. It is better to pay the tax and invest the balance in higher growth instruments.

In the past two years, I have bought several mutual fund units through an SIP. If I sell these, how can I classify the capital gains (short term or long term) for tax purposes? -Gowri, Bengaluru
All SIP investments are treated individually for tax purposes. If you sell now, profits from equity investments that are more than a year old are treated as long-term capital gains and are exempt from tax. However, gains from SIPs made in the past 11 months will be taxed at 15%.

If you have invested in a debt scheme or a balanced fund, which have less than 65% of their corpus invested in equities, the tax treatment will be different. Profits from SIPs made over a year ago will be taxed at 10% (or 20% after indexation) and short-term profits will be added to your annual income and taxed at the applicable rate.

Renu Karnad, MD, HDFC
I am managing the finances for my uncle, who is an NRI and has fixed deposits in Indian banks. His wife has a US citizenship. Is it possible to include her name as the second person in the 'either or survivor' clause? Can she apply for a PAN card as it is often required for bank transactions? -Shivaji Patil, Hyderabad
Your aunt can take a PAN card as she is a PIO (person of Indian origin). She can also be nominated as the second person in the 'either or survivor' clause for your uncle due to her rights as a spouse. However, financial transactions by her (or by you for her through a power of attorney) will require the approval of the RBI in most cases. It is best to appoint a bank relationship manager or a chartered accountant to handle the matter.

I had invested Rs 90,000 in a Bajaj Allianz Ulip. Currently, its value is Rs 98,700. The lock-in period of three years ended in May 2009 and the plan will continue for another two years. Will it be safe to keep it for six more months as the Sensex has already crossed the 20,000 mark? -Satya Shankar, Bhubaneswar
You don't have to withdraw the money from the Ulip. All you need to do is to shift the money from the equity fund option to the debt fund option. This is a seamless transaction and can be done by filling up and submitting a transaction slip with your signature. This will ensure that you don't have any equity exposure and, even if the market crashes, your money will remain safe.

I am a student and want to start investing. Should I invest for the short term or long term? -Mrinmoy Roy, e-mail
As any investment planner will tell you, equities give the best returns when held for the long term. Do not have a short term perspective of 6-8 months as you will be disappointed by the results. On the other hand, holding on to a good share for the long term will suitably reward your patience. If you don't know which stocks to buy, go for a diversified equity mutual fund with a good track record.


INSURANCE
(Queries answered by Antony Jacob, CEO, Apollo Munich)

If a 55-year-old wants to buy health insurance, which medical tests does he need to carry out? Which diseases and ailments are excluded at this age? -Rakesh Kota, Hyderabad
If you are 55 years or older, most health insurance policies require basic medical tests, including those for blood and urine sugar levels, blood pressure, echo cardiogram, eye check-up, physical examination, etc. It is advisable to have these tests conducted as it will assure transparency between you and the insurance company, and the latter will be aware of the risk it is covering.

Every policy is unique and is guided by an underwriting principle. Exclusions will be dependent on your pre-policy check-up results and the waiting period for various diseases will be applicable as per the policy terms and conditions.

I am 45 years old and have a Rs 2.5 lakh family floater plan. Now, I want to increase the health cover for my family to Rs 5 lakh. What kind of plan would you suggest? -Abhijeet Chobe, Nashik
You can enhance your health cover in two ways. The first option is to increase the sum assured at the time of renewing your policy. This will, of course, be subject to the underwriting principles followed by your insurance company.

Alternatively, you could consider moving to a new plan. This will be a better option if your existing plan does not have transparent benefits. It is advisable to choose a health insurance plan that has no disease-specific or expenditure-specific sub-limits. This cover may be marginally expensive in some cases, but remember that you will be hedging a bigger financial risk and also have the assurance of treatment through the best healthcare provider.


HOME LOANS
(queries answered by Reny Karnad, MD, HDFC)

My son is an NRI and wants to buy property in India in my name. Is it possible for him to take a loan here? Will the terms and conditions be different? -Heman Tripathi, Lucknow
Your son can certainly take a loan in India. He will have to apply jointly with you and it will qualify as an NRI loan. The terms and conditions will not be too different, except for the tenure, which will be shorter. The interest rates will differ depending on the lender. The tenure could be extended for certain professionals.

What is a dual rate home loan? Can an existing loan be converted to this scheme? -Vimla Gupta, Mumbai
A dual rate home loan is one where the rate of interest is fixed for the first few years and a floating rate is applicable for the remaining period. It could also be a lower interest followed by a higher one. Of course, customers should know what they are paying over the entire loan tenure, not just in the first few years. A loan taken under a regular scheme cannot be shifted to dual rate.

I took a loan at a floating interest rate. The payments were to end in January 2011, but due to the rise in rates, the tenure has been extended beyond my retirement in 2012. Should I repay the loan with my retirement benefits? -Surili Narang, Delhi
It is prudent to dispose of all your liabilities before you retire. So, you should try to close the loan if you have surplus cash on retiring. Alternatively, you can evaluate the possibility of increasing your EMI so that the loan is repaid before you stop working.