Query Corner

Money Today experts answer personal finance queries on tax, banking, investment and more.
     Print Edition: September 2013
Query Corner

Money Today experts answer personal finance queries on tax, banking, investment and more.

INVESTING

Q. I wish to invest in a US equity fund. Is this a good idea? I've read reports that recovery, even partial recovery, in the US will help such funds. Which are the best funds to invest in right now? -Charu Dhingra, Noida

A. Emerging markets, including India, are expected to deliver superior returns in the long term. Even so, there are a few advantages of investing in international markets. It will provide greater geographical diversification and give exposure to many different sectors. However, there are two major factors at play when investing in an international market-currency movement and economic performance of the country.

The US has showed signs of recovery, but the rupee has depreciated heavily, which makes it risky to invest in international funds at this time.

Q. How will currency movement affect investments in global funds, such as China-focussed Mirae Asset China Advantage or JP Morgan JF Greater China Equity Off-Shore funds or US-focussed JP Morgan US Equity fund? -Narendra Patel , Gurgaon

A. Volatility in currency adds an element of uncertainty for investments in foreign asset classes. Foreign investments add currency risk to your portfolio.

A fall in the value of the rupee, as denominated by the currency of the country where the investment has been made, will add to the returns earned by investing in foreign assets. However, a rising rupee can have a negative impact and can reduce returns on foreign investments.

For example, your investment in a US-based mutual fund scheme has yielded 10% returns, while the rupee has depreciated 5%. In this case, you benefit from both. Currency fluctuation has increased returns. However, if your investment in the fund has yielded negative returns of 5% and currency has appreciated by 10%, that's a double blow to your portfolio.

Q. I have a few doubts about my PPF, or Public Provident Fund, account. I had contributed for 15 years and want to extend the account after no contribution for five years. Can I now start contributing to my PPF account after inactivity for five years? -Abraham Allapatt, Kochi

A. In order to keep your Public Provident Fund account active, it is mandatory to contribute a minimum of Rs 500 each year. If this has not been done, your account would have been discontinued, but the balance in your PPF account would have continued to accrue interest at the normal rate.

You do have the option of re-initiating contributions to the same provident fund account. You can regularise your PPF account by paying the prescribed default fee along with the subscription arrears for five years.

Q. checked my CIBIL report and found that a settled consumer loan was part of my credit history. However, I had received an NOC from the bank for this loan. How can I correct my credit score? How much will my credit score improve if the error is corrected? -Bharat Kumar Lal, New Delhi

A. CIBIL calculates your credit score based on data available from financial institutions, including your bank. This means that your bank has to update CIBIL on the loan that was settled. Contact your bank and request that CIBIL be notified about the loan. Of course, even settling a loan can affect your CIR, or Credit Information Report, based on how it was done.

CIBIL considers various factors in assigning a credit score. The extent to which it will change cannot be determined by an outside agency.

INSURANCE


Q. My new rented room has already been insured by the owner. Does this mean the contents of the house will also be insured under the same policy or will I have to take a separate policy? If so, which policy would be best for me? Bijoy Negi, Delhi

A. The rented room would be covered against fire and allied perils, such as earthquakes, flooding, inundation, storms and like, as part of the home policy. If the contents belong to the house owner, it would be insured under the same policy. But, since you wish to insure your possessions, you will have to take a separate home policy in your name. It cannot be clubbed with the house owner's policy as he does not have an 'insurable interest' on the contents belonging to the tenant, meaning you.

Q. I had to travel for work to Singapore. I lost the laptop the company had issued while I was there. The company had insured the laptop and had also paid for my travel insurance policy. Which plan would cover the loss of the laptop? -Akshay Karnik, Pune

A.
Unfortunately, any kind of software or hardware is an exclusion under a travel policy. Therefore, laptops are not covered. If your company has an asset policy, and if laptops are covered under this plan, it can be claimed.

Q. I'm starting a small business from my house in Bengaluru. I've been informed that this will result in my home insurance plan becoming invalid? What are my best options to cover my house and my business? -Soumya Bhatt, Bengaluru

A.
A home insurance policy is an insurance plan for a residential property. If there is a commercial activity being run from the residence, the owner's home policy will become invalid. For example, consider a two-storey house covered under a home policy. If the owner starts a small business on the ground floor of the property and lives on the first floor, then the ground floor will not be covered under the home policy. He will need a separate commercial policy (commercial property insurance) to cover the ground floor. Meet your insurer and figure out what your best options are to cover both your house and business.

Q. I know that CIBIL credit reports also consider credit card payments. However, does it mention what sort of credit has been availed, say a home loan, personal loan or credit card? Further, what about the sum that has been taken on loan? Aren't these also factors in a credit history? -Supratim Sharma, Gaziabad

A.
All details regarding a loan, whether personal or home, is part of your CIBIL report. A few banks also provide details such as EMI paid and outstanding loan amount. When it comes to credit card, details such as highest credit limit, current balance and late payments are included

Q. I'm an NRI. I don't have any financial holdings in India, including a bank account or even a PAN number. But, I want to invest in Indian stocks. Is this possible?

A.
Non-resident Indian's can invest in Indian equities through the RBI's Portfolio Investment Scheme (PIS). You will need an NRE/NRO account with an RBI-authorised bank as well as demat and trading accounts with a SEBI-registered brokerage firm. However, there is a cap on investment. It cannot be more than 10% of the paid-up capital in an Indian company. For documentation, your passport or a valid visa or work permit will suffice.

TAXATION

Q. What is the penalty for delaying or not filing a tax return? I was hospitalised for the whole of March and might have to continue for a couple of more weeks while recovering from illness. I've missed the deadline. Can the penalty be waived in special situations? -Pratham Gulati,Lucknow

A. You can file returns for the financial year 2012-13 without any penalties till 31 March 2014, if you have already paid all taxes due. If you had to file returns for 2011-12, you should have paid by 31 March 2013. This means you are liable to pay a penalty of Rs 5,000. However, your income tax officer has the discretion in imposing a penalty. He could waive the fine if it is a genuine medical emergency. If you have not paid all taxes by 31 March of the corresponding financial year, you will have to pay a monthly interest on the taxes due.

Q. I am an NRI. I bought two properties in India, both registered in my father's name. The first is an apartment in New Delhi, the payment for which is linked to construction. The second is a plot worth Rs 30 lakh, which was bought using my savings. I've never filed returns in India. Should I do so this financial year? -Bimal Sengupta, email

A.
Since you are not the owner of properties purchased, income from the property will not be taxable for you. However, your father has to file income and wealth tax returns in case his income exceeds Rs 2 lakh and net wealth exceeds Rs 30 lakh.

Q. I have additional income from agriculture that is being shared by my father and I. How should I show it when I'm filing my returns? Which ITR, income tax return, form should I use? -Vijay Rattan, Amritsar

A.
Legally, the income from agriculture should be declared in your returns. You have to use ITR 1 in case exempt income is below Rs 5,000, else ITR 2. If you have business or professional income apart from this, then ITR 4 has to be used.

Q. I travel a lot as part of my work. I'm given a daily stipend while I'm on these trips, both in India and abroad, and my travel expenses are reimbursed. How will this income be calculated while filing my returns? My employer has not added this income while deducting tax at source. -Nikhil Sahay, Gurgaon

A.
The reimbursements for travel expenses and the stipend are not to be treated as income. This is why your employer has not deducted tax on the amount you receive while you're travelling for the company. You are not required to add this to your income tax return.

Q. I financed the purchase of a house for my parents. Now, they're planning to rent out the top floor. Who will have to pay tax on this income? The house is registered in my father's name. Are the rules different if it was my spouse? -Tarun Narula, Meerut

A.
The rental income belongs to the owner of property, your father. This means your father has to pay tax on it as per his income slab. The rules are different if it was your spouse in the same situation. The rental income will be added to your income and tax should be paid as per your tax slab.


Anil Rego, CEO, Right Horizons, has tackled financial planning; KK Mishra, CEO, Tata AIG General Insurance, has answered insurance queries; and Sudhir Kaushik, Co-founder and CFO, Taxspanner.com, has provided tax solutions.


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