I want to give a certain sum from my retirement benefits as an interest-free loan to my wife, who is a homemaker without any source of income. If my wife invests that money in a bank FD, will the interest be clubbed with my income? -Romit Bhattacharya, Bangalore
If you give the sum as loan, then it need not be clubbed with your income. However, your wife has to return the sum at a later date and if this is given with an interest, the interest has to be shown as income from other sources. According to the Income Tax Act if a loan is extended to one's spouse, and an asset is acquired by such means, then the income derived from such asset does not qualify for clubbing of income. A reasonable interest should be paid back in such a scenario and such repayment needs to be shown as interest from other sources in the income filing of the husband.
I have an insurance policy with LIC beginning 15 March 2004 and have no dependants. The term and premium paying term is as follows: 14-16 (16) and the sum assured is Rs 5 lakh. The instalment premium payable is Rs 32,237 per annum and final date of payment is 15 March 2019. It is an endowment assurance policy with profits and accrual benefits. I was 37 in 2004 and have paid the premium till this year but currently feel that it is too steep and the sum assured inadequate. If I surrender it, I will lose the tax benefits of previous years. Should I turn it into a paid-up-plan or go in for a pure term plan? How much should the sum assured be and how much premium will I have to pay per year? -Sajan A, e-mail
As you have paid premium for about 7 years, we suggest you continue paying into the endowment assurance plan. As stated by you, the life cover is grossly inadequate. On a thumbrule basis, one would have to avail a cover of 7-10 times one's earnings. You can go for a pure vanilla term cover or a plan that fits your retirement goals. If you intend to choose a policy with a plain vanilla term cover, you can choose the one that offers the lowest quote and the longest term. A cover of Rs 40 lakh would require a premium outflow of about Rs 17,000 per annum.
I had been living outside India for 26 years till September 2010. As an NRI, I had acquired shares from public issues on repatriation and non-repatriation basis, whose market value now exceeds Rs 1 crore. I want to demat and trade them. I have my PAN card and a resident 3-in-1 account (bank, demat and trading). Do I have to inform the income tax office of my return to India? Do I have to write to my bank to change my NRI account to a normal? Do I have to send my share certificates to the companies to change them to resident shares before trading them? -Abhijeet Sahay, Patna
You will have to inform your bank about the change in status, since you must have been filing income taxes in India, you will be mentioning your residential status therein. You can get the physical shares converted to demat and start trading the same - given that you will be changing the residential status with your bank, you can get the same updated in demat or trading account. For conversion of physical shares to demat, the process is standard irrespective of your residential status.
I had deposited Rs 69,000 each in my daughter and sons' name through and was debiting the same from mine and my wife's file for the last several years. Recently, the postal department returned the deposited amount and the interest amount on grounds that I had violated the law on PPF and had deposited more than Rs 70,000. Since I had deposited the amount from two different accounts, me and my wife (who are both income tax payers), is it legal for them to return it? -Vijay R, Gurgaon
If you have maintained two separate PPF accounts for yourself and your spouse, then you are allowed to deposit a maximum of Rs 70,000 in each of these accounts every year. If it is a single account in joint names, then they have a valid reason for rejecting the same. In fact, you can even open an account in your child's name directly.
My health insurance policy expired recently due to the negligence of my agent, who did not deposit the cheque for renewal of the policy on time. It is a 6-year-old policy and I haven't made any claims till date. Is there anyway I can maintain the continuity of the policy and save my noclaim bonus as well? -Sandeep Rai, e-mail
Quite often most insurers offer a grace period of 15 days after the expiry of the policy. If your policy is within the grace period, then you can still renew your policy and continue with the accrued benefits. Please contact the insurance company with supporting evidence regarding the cheque issuance to your agent. With appropriate documentation, the company would then be able to respond to your query positively.
My health insurance policy is expiring this July and I had planned to switch my insurer. But according to the recent news reports health insurance portability may not get implemented Insurance by then. Should I wait for it and then renew my policy or continue with the old plan? -Rohit Sharma, Mumbai
Introduction of portability is a change in the right direction and surely would bring in benefits for the customers in the long run. However, every policy is unique and is guided by an underwriting principle. Since the terms and conditions, as well as coverage for pre-existing diseases and waiting periods for various diseases are as per the applicable policy details of a particular company, standardisation of products across industry is relatively tough to achieve.
This is causing a little delay in the implementation of the proposed portability. However, we are confident that the regulator and the insurer will work together and facilitate the same very soon. As of now, the Insurance Regulatory and Development Authority (Irda) has issued final guidelines on health insurance portability, which would come into force from October 1, 2011.
However, you can switch your health insurance policy to another insurer only if you have held the policy for a minimum of one year. We suggest you talk to the insurer you are considering and clarify their stance on the matter before making a commitment.
I'm a 30-year-old non-smoker and looking for a health cover of Rs 5 lakh. I did a price comparison of few plans that suit my requirements on the Internet. The cheapest plan is of around Rs 5,500 but doesn't provide a life-long renewal benefit, which I think is necessary for retirement planning. Should I buy this plan or go for a costlier one that offers this benefit? Is it worth paying around Rs 2,000 more per year for this single feature alone? -Anil Pinto, Mangalore
As widely practiced in the industry, a majority of the health insurance policies offer a maximum coverage age where the policy would cease to exist after a certain age. A lifelong renewal clause brings with it the assurance that a person can remain insured for any illness or emergency and will not have to compromise on quality treatment in old age. We would recommend that you opt for a policy which offers lifelong renewal, no disease specific or expenditure specific sub-limits, etc. Such a policy may be marginally expensive in some cases, but you will hedge larger financial risk and have freedom for efficient treatment at the best healthcare provider even at an older age.
If my interest income from NRO FD investments is more than Rs 5 lakh (after TDS of 10%), need I pay income tax? -Shekar Gaur, Pune
No, you need not pay income tax as the TDS is more than the tax payable. The interest income from an NRO account is taxable and you have to pay tax above the basic exemption limit for NRIs, i.e. Rs 1,60,000 for the 2010-11. Hence the tax payable will be Rs 34000 plus education cess (from Rs 1,60,000 to Rs 5,00,000 tax rate is 10%).