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Money Today experts answer personal finance queries
Money Today experts answer your personal finance queries -
Your financial queries answered

Money Today experts answer your personal finance queries -

INSURANCE

Q. My daughter is getting married in June next year. The ceremony will be conducted in an outdoor space. I have heard about event insurance. Do you think I should consider buying this insurance? If so, how necessary is it? Can it be customised according to one's needs? -Edwin Toppo, via email

A. Yes, you should consider buying an event insurance policy as it provides extensive coverage including personal accident, postponement or cancellation of an event and damage to property. Yes, you can customise the cover as per the customer's needs. The policy can include risks such as an ailing relative, or food poisoning if the quality of food is suspect. The policy also offers to cover the bride and groom if either cannot make it on time due to an unforeseen event.

Q. I bought a car three years ago and am yet to claim any bonus on its insurance. I am buying another car soon and would like to claim a discount on its insurance. I wish to keep both the cars. Can I claim a discount on the insurance of the new car? -Prashant Singh, Noida

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A. The no-claim bonus can only be transferred on another vehicle on substitution of existing vehicle. In case the vehicle is not replaced immediately, the no-claim bonus can also be reserved for a period of three years and can be availed of within that period on any other vehicle. However, it cannot be swapped between vehicles nor would it be applicable on two vehicles together. In this case, the no-claim bonus cannot be transferred to another vehicle.

Q. I invest Rs 5,000 per month in bank RD and Rs 2,000 per month in HDFC Tax Saver. I got married recently and have zero debt. Although my employers have given me a life cover, I want to buy my own life cover. How should I calculate my cover? -Rahul Sharan, New Delhi

A. Buying a life cover should depend on your family's needs such as retirement, children education, marriage, etc. Although you have mentioned your investments, one cannot advise a cover based on that alone. You may not have any debt as of now, but this is likely to change once you consider buying a house, or a car, etc. Make sure you cover them too. You must consider at online term plans as they are the cheapest and are as safe as buying a cover through an agent.

HOUSING:

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Q. I am planning to sign a contract with a builder to build an apartment on my property. The flats will be distributed between us. Will this have any tax implications? -Rahul Verma, Chandigarh

A. Yes, there will be capital gain tax on the consideration/value received for the two apartments being transferred to builder. You can claim the exemption on capital gain under section 54 or 54F on the cost being incurred on the new apartment/floor being given to you by builder. The cost incurred by builder on new floor would be treated as investment for tax exemption.

LOANS:

Q. I had defaulted on repayment of a personal loan eight years ago with a bank, which has closed down now. Is there a possibility of my name featuring in the defaulter's list? Please explain. -Satyendra Shah, via email

A. Such defaults certainly have an impact on the credit worthiness of an individual. India has a positive data credit bureau which means that not just defaults, but also your 'on-time' payments are reported to the credit bureaus. Hence, if you have more recent loans on which you have a good repayment track record, it will certainly help the banks take a positive view on your application.

Q. My bank is offering me a home loan of Rs 32 lakh for a tenure of 25 years. What are the pitfalls of a longer duration loan? What factors should I consider before deciding the tenure of the loan?. -Anil Singh, Mumbai

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A. Decisions pertaining to the tenure of a home loan are primarily based on the excess cash flow that will be available after your monthly household expenses. Therefore, if you have excess cash flow available on a monthly basis you can increase your EMI outflow & reduce the tenure. The pitfall of a longer duration loan is that the interest payment rises with the increase in loan tenure. However, remember that the EMI difference between a 20-year and 25-year loan may not be very significant..

Q. I wish to buy a ready-to-move-in flat, but am a little short of the money required for down payment. Is it possible for the bank to give me 85% of flat price as loan instead of the ceiling of 80%, as mandated by the RBI?. -Hansal Patel, Mumbai

A. Banks decide the loan amount based on the location of the property & the reputation of the builder. However, it is unlikely that banks will provide loan equivalent to 85% of the total property value.

Q. I am 48. My wife, a homemaker, is 45 and I have two children aged 17 and 13. I have two endowment policies with a total life cover of Rs 13 lakh. My annual income is Rs 8 lakh. I am planning to raise my life cover to Rs 30 lakh Should I go for a term plan or buy more endowment plans?. -Mahendra Sinha, Mumbai

A. As per the thumb rule, you should have a cover which is at least 8- 10 times your annual income. So, you should raise your life cover through a term plan to take care of financial needs of your family in your absence.

Secondly, for optimum life cover go for term plan. For other life stage-based needs like children's marriage, higher education of your younger child and retirement planning for self and spouse you should consider endowment plans. Life insurance offers plans for children and retirement planning needs with customised features.

TAXATION:

Q. I received a sizeable amount as outstanding salary for the period between 1976 and 2006 in April 2014 after a court decision. I do not have my tax records for the earlier years. How do I adjust my tax burden? Do I need to show the entire amount as income for 2013-14? -N Gopala Krishnan

A. When salary arrears are paid under court orders, the employee is entitled to relief under Section 89 of the Income Tax Act. However, you need to compute the taxes on accrual basis : in case the tax is less than the tax in 2013-14, the relief for the same can be claimed. But if you are not able to compute the tax on accrual basis, then you won't be able to claim relief and you will have to show the entire amount as income for 2013-14.

Q. I had filed my returns for 2012-13 online much before the June 30 deadline. However, I forgot the send the copy to the I-T Department's Bangalore processing centre in time. Does this mean that my return will be rejected? If yes, what options do I have at this stage? Will I have to file the return again? -Shahid Shah, via email

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A. Yes, your return will be rejected due to non-receipt of ITR-V. You need to choose the revise return option and efile it before 31 March 2015. Don't forget to speed post the signed ITR-V to CPC within 120 days of filing the return.

Q. I had defaulted on repayment of a personal loan eight years ago with a bank, which has closed down now. Is there a possibility of my name featuring in the defaulter's list? Please explain. -Satyendra Shah, via email

A. Such defaults certainly have an impact on the credit worthiness of an individual. India has a positive data credit bureau which means that not just defaults, but also your 'on-time' payments are reported to the credit bureaus. Hence, if you have more recent loans on which you have a good repayment track record, it will certainly help the banks take a positive view on your application.

INVESTING:

Q. My mother is 60 years old and has no source of income other than the interest on a Rs 20 lakh in a bank FD. Should she diversify and invest in other assets like MFs or postoffice savings as well? If so, what are the options? -JHariharan, via email

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A. Since your mother is a senior citizen who has no other source of income other than the interest income from the bank FD, her basic exemption limit is Rs 2.5 lakh. Senior citizens enjoy an additional benefit on FD interest rates as compared to the regular individuals and so, it is advisable to stay invested and enjoy the returns from fixed deposits. Diversifying into other asset classes doesn't make any sense, given her age and needs. If she needs monthly income, she can consider the Post Office scheme.

Q. I have a bill of Rs 1 lakh on my credit card. In the last two months, I repaid Rs 40,000 and have Rs 60,000 left to repay. Will this affect my credit score? If I take a personal loan and repay the entire amount will that also negatively impact my credit score? I don't want my score to go down because I have heard that it can cause problems later on if I want to take a loan. Please advise. -Sudhir Bansal, Mumbai

A. If you have paid Rs 20,000 each in the last two months on a bill of Rs 1 lakh, your credit card will be treated as current and not delinquent. Since you are paying the minimum amount, you shall be categorised as current but interest paying cards customer, called a revolver in banking terminology. If you do repay the outstanding bill by taking a personal loan, in a general case, it shall not be seen adversely as long as you maintain a good repayment track on the personal loan. After the repayment of your outstanding bill, you shall no longer be viewed as interest paying revolver and this fact should positively impact your score.

 


Anil Rego, CEO, Right Horizons, has tackled financial planning; Rajesh Sud, CEO & MD, Max Life Insurance and KK Mishra, CEO, Tata AIG General Insurance, have answered insurance queries; Mohan Jayaraman, MD, Experian Credit Information Company and Country Manager, Experian India, has answered loan-related queries and Sudhir Kaushik, Co-founder and CFO, Taxspanner.com, has provided tax solutions.

 

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