Business Today
Money Today experts answer your personal finance queries -
Money Today experts answer your personal finance queries -
Query Corner

Money Today experts answer your personal finance queries -

INVESTING

Q. I am 64 years old, retired and in the 10% tax bracket. I want to invest in gold funds or buy gold in my wife's name. What are the tax implications? Whose income will the returns be added to? What if I die before her or she dies before me, what are the implications? -Sameer Dagia, via email

A. As per Indian tax laws, there is no gift tax on any transfer of assets to a spouse or lineal ascendant or descendant. But, any income derived from these assets or investments is clubbed with the income of the individual making the investment. You can have the investment jointly, in both your names or you can be the nominee if you invest in your wife's name. If she dies before you, you would get the investment, while she can change the nominee if the reverse happens. Make wills to ensure there is no other claim for assets in either of your names.

Q. I have physical shares (certificates of the shares) that belong to my grandfather. He died a couple of years ago and left my father the shares. How do transfer these shares to my father? What legal steps should I take? -Karan Sharma, New Delhi

A. If there is a Nominee Since you have the physical certificates, you have to to send one or more of the following documents to the Registrar and Share Transfer Agent (RTA):

>> Original share certificates
>> Transmission request form (TRF)
>> An affidavit or declaration by the nominee declaring rights
>> Notarised copy of death certificate

If there is no Nomination One or more of the following documents will be required:

>> Original share certificates
>> Transmission request form (TRF)
>> Notarised copy of death certificate
>> Succession certificate
>> Probate or letter of administration duly attested by a Court Officer or Notary

After you transfer it to your father's name, you can demat the shares to sell it.

Q. I have a personal loan of Rs 4 lakh (13.99%) with monthly EMI of Rs 13,699 for three years. If I close the loan after the thirteenth month (March 2014), I have to pay a penalty of Rs 16,000 (4% on Rs 4 lakh) if I close the loan before three years. I was thinking that if I deposit the lump sum in an FD, I will earn an interest on it with no risk. Should I do this or prepay? -Purnima Unnikrishnan, Mumbai

A. Considering the interest rate (13.99%), repay the loan and start an SIP (systematic investment plan) to the extent of the EMI that you are saving. The lower loan will also lower risk for you. Further, there is no tax benefit on interest payments for personal loans, unless you are in business and the loan was taken by the business. The fixed deposit (FD) would be at a much lower interest rate. If you are in the higher tax brackets, you would also have to pay tax on your interest income from the FD.

Q. I am about to start a company. We have angel funding and would require only partial investment from my side. I'm 38 and have about Rs 20 lakh as personal savings. I want to invest about Rs 15 lakh. I already own large-cap equity funds and stocks worth Rs 20 lakh. My wife has a regular income and we own a house. Which funds should I invest? -Rakesh Yadav, Noida

A. You need to assess your financial ability to achieve your goals. Having your spouse's income and owning a house work well for you. Assuming you have no debt, part of the Rs 15 lakh can be invested in debt and balanced funds. You can also use dynamic asset allocation funds as part of a low-risk portfolio. In case you need regular income, use tax-free bonds. If not, choose short-term income funds or bonds. Since you have a lump sum to invest, any further investments in equities should be through a systematic transfer plan (STP). This means you can invest the amount in a debt fund and a certain amount will be transferred to an equity fund periodically. Go for a combination of large-cap, balanced and gold funds. Gold funds complement your equity portfolio as it tends to do well when markets fall. Also, evaluate your life cover needs when investing.

Q. I am 21. I have selected some funds in which I want to start SIPs: ICICI Prudential Focused Bluechip Equity (Rs 2,000), HDFC Top 200 Fund (Rs 2,000), Birla Sun Life Dividend Yield Plus Growth (Rs 1,000), IDFC Premier Equity (Rs 1,000), HDFC Prudence (Rs 1,000). Am I on the right track if I hope to make about Rs 20 lakh in about five years? -Surdeep Singh, via email

A. Considering that you will invest Rs 7,000 per month for 5 years and based on the current projections, assuming the investment yields about 12% yo-y (year-on-year), your corpus will only yield about Rs 5.75 lakh at the end of five years. This is just 25% of the corpus you expect to have. In order to make a corpus that could earn Rs 20 lakh in five years you need to invest Rs 25,000 per month (again assuming 12% y-o-y return).

The funds you have chosen have a good longterm track record, but do consider HDFC Balanced as an alternative to HDFC Prudence.

Q. I am 45 years old. I had an angioplasty five years back. Which insurer, or plan, is the best for someone with such a medical history? What is the cover I can expect to get and how much costlier, in percentage, would my premium payments be? -Alok Kumar, via email

A. The premium depends on several factors and each insurer is governed by its own underwriting principles. Given your medical history, you might be offered a cover with restrictions related to your condition. However, it is advisable to get yourself enrolled in a group health plan. Group plans are widely offered by employers as well as by associations to members. There are also banks that offer health plans for its account holders, which could suit you. Do disclose all facts to the insurer whose policy you wish to buy.


INSURANCE

Q. I am 40 years old and was diagnosed with Type 1 insulin-dependent diabetes some years back. However, I am quite healthy and exercise regularly. I've been living abroad and have just moved back. Can I buy a health insurance policy in India? -Naresh D'Sa, via email

A. Though most retail health insurance policies, as available in India today, offer cover only to people living with Type 2 diabetes. We advise you to enroll in a health plan offered as part of a group plan. Group plans are offered by employers and associations to members. There are also banks that offer health plans for its account holders, which could suit you. Evaluate features and benefits of the plan for the best claims experiences while choosing a cover.

Q. Do health insurance policies only cover the treatment done in hospitals? -Raj Ganguly, email

A. Health insurance policies most often cover inpatient treatment at hospitals, nursing homes, clinics and so on. However, there are some policies available that cover doctor's consultation, pharmacy expenses, health check-ups and such allied medical expenses as part of OPD cover. Naturopathy, homeopathy and ayurveda treatments are also covered by some insurers. As part of the domiciliary benefit, some policies also cover medical treatments at home if a patient is not fit enough to be shifted to a hospital or if there are no beds available at a hospital. Do review all features, benefits and exclusions carefully when buying a plan.


TAXATION

Q. My father gave me a plot in 2006 as a gift. It was sold in 2013 to pay off a loan and to pay father's medical expenses. It was sold for Rs 18 lakh. However, since it was a panic sale I got paid less than the market value. How do I calculate tax liabilities on this transaction? -SandeepSharma, via email

A. Capital gains on a gifted property is calculated on the basis of the cost to the previous owner (cost of acquisition), indexed to purchase year. If the property was bought prior to 1 April 1981, acquisition cost is the actual cost incurred or fair market value as on 1 April 1981, whichever is higher. You will have to pay long-term capital gain tax at 20%. You can save tax by buying a residential property costing over Rs 18 lakh or purchase capital gain tax saving bonds under as per Section 54 EC.

Q. I recently transferred Rs 50,000 to my father, who is 65 years old and retired. Is there any way this transaction can be made such that I get tax benefits? -Nandini P, Bangalore

A. If you are living in your father's home and getting HRA from your company, then it can be paid as rent for claiming HRA exemption. If you are doing your own business using your father's house or skills, then it could be claimed as business expense to compute taxable profit.

Q. I will be paying rent for house and also interest and repayment of a home loan. Am I eligible for tax deduction on these? What are the relevant rules and sections? -Louis Zach, Pune

A. You must be the owner of the house and should have gotten possession for claiming tax benefit on interest and repayment of home loan. If you have not got possession, interest is accumulated and deduction is allowed in five equal installments from the year you get possession. Repayment of home loan in financial year can be used for deduction up to Rs 1 lakh under section 80C.

Q. My mother and I own an apartment. However, she lives in my village, where she owns another house. Can I pay rent to my mother and get benefit of HRA? What would be my mother's tax liability? -Eliash Xavier, Kochi

A. Yes, you can pay rent for the share of ownership in her name for claiming HRA. Your mother will have to declare rental income and tax would be payable as per her tax slab. A 30% standard deduction from rental income is available for repairs and maintenance.

Q. If I make a payment to an employer for notice period not served, is there any way to gain a tax benefit from it? -Rajesh Sharma, Pune

A. No, as per tax laws, notice pay is not deductible from salary income for tax benefit.


Anil Rego, CEO, Right Horizons, has tackled financial planning; Antony Jacob, CEO, Apollo Munich Health Insurance, has answered insurance queries; and Sudhir Kaushik, Co-founder and CFO, Taxspanner.com, has provided tax solutions.

 

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