Letters talk back

Money Today        Print Edition: November 2010

The story on reverse mortgage (Locked Treasure, October 2010) was interesting. It's a pragmatic choice for ensuring a steady flow of income during retirement years, especially if the children are settled elsewhere. However, if a person outlives the loan period, what are the options available to him?
If a borrower outlives the loan tenure, he will continue to be the owner of the house and the property. He need not service the loan during his lifetime as long as the property is being used as primary residence. The payments under reverse mortgage will cease after the end of the loan tenure. Of course, the interest on the loan will accrue till repayment. If the borrower dies or moves out of the house permanently, the loan will be repaid from the sale proceeds of the mortgaged house.

What happens to the investment in the National Pension System (Choose the Right Option, September 2010) if the investor dies before retirement? What is the amount due on retirement? Is there a nodal agency I can approach to clarify my doubts?
The NPS works like a mutual fund and you get the amount you have accumulated over the years, along with the growth the fund registers. There are two types of accounts-Tier I and Tier II. The former offers tax benefits, but you cannot withdraw the investment till you are 60 years of age. Tier II investments don't provide tax benefits but can be withdrawn any time. On death, the proceeds go to the nominee. For more information, check the PFRDA Website (www.pfrda.org.in).

The story on flexible payment plans and customised houses (Flexi Bargains, October 2010) was highly instructive. In a market that is seeing a dip in property sales, the builders will need to devise such attractive schemes if they want to lure in more customers.

The concept of seed funding (Winners in the Crowd, October 2010) is new and unique and, as such, is bound to pull in several aspiring entrepreneurs in India. In fact, it is also of interest to the small investor as it can help spread risk by taking a chance on profitable enterprises in other parts of the world.

The special story on the Direct Taxes Code (The Good, the Bad and the Ugly, October 2010) termed as positive the move to remove tax deduction for policies that have an annual premium less than 20 times the cover. However, will it not be a deterrent for people who had planned to take small covers just to save tax?
We have repeatedly stated that life insurance should not be bought for tax savings. It is meant to cover the risk of death and replace the income of the insured. If this is not the objective, the insurance policy is unwarranted. The premium can be invested in avenues that offer better returns.

Increasing the wealth tax (Tax the Super Rich, October 2010) is a people-friendly move. It's good that the middle class will get a reprieve from this form of taxation.

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