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Tax Saving Mutual Fund SIPs: 5 reasons to invest

As we are approaching the final quarter of the current financial year, tax planning will be one of the most important priorities for many tax payers. Section 80C of Income Tax Act 1961, allows investors to claim deductions from their taxable incomes by investing in certain eligible schemes. In this blog post, we will discuss 5 reasons why you should invest in tax saving mutual fund schemes referred to as Equity Linked Saving Schemes (ELSS), and the Systematic Investment Plan (SIPs)offered by them.

 

Reduce your tax obligations for the current financial year
The most obvious reason for making 80C investments is tax savings schemes. You can claim up to Rs. 150,000/- deduction from your gross taxable income by investing an equivalent amount in ELSS or other eligible 80C schemes; you can save up to Rs. 46,800/- in taxes (for investors in the highest tax bracket) every year. SIP is a disciplined way of making tax saving investments throughout the year to achieve maximum tax savings.

 

Create wealth over a long investment tenor
ELSS mutual funds are usually the best performing 80C investments in the long term. These schemes are essentially diversified equity mutual funds, which invest in equity and equity related securities. While ELSS investments are subject to market risks, historical data shows thatequity is the best performing asset classin the long term. Nifty 100, which is the index of 100 largest stocks by market capitalization (large cap stocks), has given 12.6% annualized returns in the last 5 years, much higher than other asset classes like fixed income and gold (source: Advisorkhoj Research). Further ELSS mutual funds are managed by professional and skilled fund managers. The table below shows the interest paid by different 80C investment schemes and historical returns of ELSS category.

 

Maximum Liquidity
ELSS offers the maximum liquidity amongst all 80C investment options. PPF has a tenor of 15 years with very limited liquidity in the interim. Minimum investment tenor of all non-ELSS 80C schemes is 5 years. ELSS mutual funds have alock-in period of only 3 years. Your money is not locked up for long periods of time in ELSS and you have the option of redeeming your investment partially or fully after the lock-in period. When investing in ELSS through the SIP route, investors should remember that each SIP instalment will be locked in for 3 years and should plan accordingly.

 

Tax Advantage
Investment proceeds of some 80C investments like PPF are tax free, but interest paid by some 80C investments are taxed as per the income tax rate of the investor. Till the beginning FY 2019, ELSS capital gains / profits were tax free but a change in taxation was introduced in this year’s Union Budget. Capital gains of up to Rs 1 Lakh in ELSS mutual funds will be tax exempt. Capital gains in excess of Rs 1 Lakh will be taxed at 10%. Incidence of tax in ELSS investments arises only at the time of redemption and not during the term of the investment. Even with the introduction of the capital gains tax, ELSS remains one of the most tax efficient 80C investment options.

 

Convenience and Flexibility
ELSS offers investors the convenience of investing through SIP mode in which you can invest fixed amounts every month (or any other frequency) for tax savings. SIP not only helps investors stay disciplined, it can also help them get higher returns through Rupee Cost Averaging. ELSS SIPs offers a lot of flexibility. Unlike PPF or life insurance plans, there are no penalties or policy suspensions, in the event of missed payments in ELSS SIPs. You can stop and restart your SIPs at any time. However, if you miss 3 consecutive SIP instalments due to insufficient funds in your bank, your SIP will be cancelled and you will have to make a fresh application to restart your SIP. Therefore, you should ensure that there is always sufficient balance in your bank account on SIP dates.

 

Conclusion
In this post, we discussed why ELSS investments through SIPs is one of the best tax saving investments. It not only helps you save taxes, but also creates wealth for investors with high risk appetite. ELSS is also the most liquid and convenient investment options under Section 80C considering the SIP route. Investors should consult with their financial advisors if ELSS schemes are suitable for their tax saving purposes.

 

Source: Edelweiss

Financial Resolutions for 2023 to control spending and save towards the future

As is the norm every year, it is yet again that time of year when I must draw up my new year resolutions. I start my list with the compulsory emphasis on my health and eating right with the right dose of regular exercise thrown in. Though the lure of making money has always been on everyone’s list, never before has it become more fashionable to talk and discuss finance and investments than in recent years.

 

My New Year resolution list too has this mandatory entry. On the basis of my mixed experiences on my ‘Do It Yourself’ solutions to financial security, I am super excited to draw up my list of New Financial Resolutions for 2023.

 

1. Responsible Investing: In the last few years, we have all heard about people discussing the best investment scheme that helped someone become wealthy. We have heard about quick fix solutions that would help us create wealth. Armed with knowledge gained from my best friend: ‘The internet’, I took to investing in the newer and fancier investment products that I understood very little but was certainly enchanted. Crypto currency, P2P lending, Futures & Options and many more; all came highly recommended as the shortest way to create wealth. They sure did come recommended but they also came with their inherent risk. As I lost money, I gained experience and lessons were learnt. In 2023 I resolve to be more responsible towards my money while investing.

 

2. Not all that Glitters is Gold: As everyone around me made money in the stock markets after the economy opened post Covid era, it felt natural to pull out from my other investments even at the cost of throwing my carefully planned asset allocation for a toss and joining the bandwagon. What followed was a slew of purchases based on ‘hot tips’ and NFO’s and IPO’s. The euphoria soon dissipated as these ‘hot tips’ got cold feet and many of the so-called ‘golden IPO’s” failed to make a dent on their listings. In 2023, I resolve to be more careful while I select my investments and not go by hot tips.

 

3. Winners take it All: While the indices in India made new heights, my stocks had a mind of their own as they continued to behave stubbornly like a belligerent child and refused to budge north. Call me a loyalist or someone who believes in long term relationships but I certainly had great faith in them (after all they had been purchased on hot tips by my more successful investor friend). My money remained blocked in these while I missed on valuable opportunities to use it to its full potential. In 2023, I resolve to sell my loser investments whose intrinsic value is unlikely to ever recover!

 

4. Bad news should not necessarily translate into staying away from stock markets: TheRussia-Ukraine war followed by high global inflation pushed many world economies to the brink of recession. As is usual in such circumstances, pessimism ruled the roost. Even while the world took steps to circumvent, the general consensus all of last year has been that we are heading for massive corrections. The Indian markets, however, seemed immune as they factored in these blips and continued their journey upwards. I booked profits and worse still stayed out of markets preferring the staid Fixed Deposits and sticking to cash. I kept waiting on the sidelines for the right time while the markets continued to make newer highs. In 2023, I resolve to not time the market but rather invest in a disciplined and staggered manner.

 

5. Future Perfect: “If you save after you spend you will be left with nothing to save at all.” So implied the Investment Guru; Mr. Warren Buffet. Post Covid, many of us took to random and luxurious purchases in the form of cars, laptops, eating out at fancy places and expensive vacations. This was a natural fall out of more than a year spent in captivity at home due to Covid restrictions. As spendings became more extravagant, our savings became thriftier. Each time I skipped a few investment months, my savings for the future got set back by a few years! In 2023, I resolve to be more in control of my spending and committed to save towards my future.

 

It is said that resolutions are made to be broken and possibly I will too! However, lessons learnt from mistakes serve as beacons for future prudence. Well begun is half done and I feel quite satisfied with my list of resolutions. As I put down my pen, I am confident that I have taken the first step towards smarter financial decisions! Have you?

 

Source: Financialexpress

Tax Benefits Of Health Insurance Plans

With increasing pollution, sedentary lifestyles, and little to no time being spent on wellness, health insurance has become an important component of all our lives. An adequate health insurance cover can be extremely helpful in times of emergencies. Not just financial freedom and better peace of mind, but health insurance also offers great tax* saving benefits.

 

Here’s some useful information that can help you save some tax from your health insurance.

 

Section 80D of the Income Tax Act

The Indian government offers benefits to citizens with health insurance. Here’s how you and your family can avail them:

 

• For yourself, spouse and dependent children: Under Section 80D of the Income Tax Act, 1961, insured citizens under the age of 60 can avail a deduction of up to ₹ 25,000 from taxable income in a financial year on health insurance premiums paid for self, spouse and dependent children. If the age of insured is 60 years or more, the deduction limit increases to up to ₹ 50,000 in a financial year

 

• For parents: You can claim an additional tax* benefit of up to ₹ 25,000 for the health insurance premium paid for your parents. The limit increases to ₹ 50,000 if your parents are 60 years or older

 

• For Hindu Undivided Family (HUF): HUFs can avail tax* deduction for all members of the family. However, the overall limit for the entire family cannot exceed ₹ 25,000

 

How to claim benefits under Income Tax Act on health insurance premium paid?

 

Here are some important things to note while claiming benefits:

 

• You will need a copy of your insurance policy and a payment receipt of the premiums paid in the financial year

• Both these documents should specify your name

• In case you are availing benefits for a spouse, child, or parent, make sure the documents specify their names

Important notes

 

• For cash payments: As per government rules, you can only avail tax* deduction for health insurance premiums that are paid via cheque, demand draft, credit card, and internet banking under Section 80D. If you pay your insurance premiums in cash, you will not be able to avail the deduction. However, cash payments for preventive check-ups can be done to avail deduction under Sector 80D

 

• For group health insurance: You cannot claim tax* deduction for group health insurance policies. Only individual health insurance policies are covered under Section 80D

 

Conclusion
Being insured is extremely important for ensuring your wellbeing as well as that of your loved ones. Make sure that you get one as soon as you can for all the members of your family. It not only offers tax* saving, but will also provide a financial stability in case of health emergencies.

 

Source: Iciciprulife

Income Tax Benefit on Life Insurance

Life insurance is one of the primary and essential requirements of ensuring a financially balanced and comfortable life for your loved ones. The capital benefits that come with life insurance help your family build a safe and safeguarded future, even in your absence. Moreover, under Section 80C and 10D of the Income Tax Act, there are income tax benefits on life insurance. Under section 80C, premiums that you pay towards a life insurance policy qualify for a deduction up to ₹1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium.

 

But if the sum assured is less than 10 times the premium – for instance you pay Rs.1 lakh as premium for a sum assured of Rs.5 lakh – you will get a deduction on the premium up to 10% of the sum assured. In the example, your deduction will be Rs.50,000 and not Rs.1 lakh.

 

Also, in case of death, the sum assured that’s paid to the nominee continues to be tax-free. But, on maturity, since the policy doesn’t meet the qualifying criterion for income tax benefit, the income will be taxed at the marginal tax rate.

 

As per Section 80C, the premium paid towards life insurance policies up to the maximum limit of Rs.1,50,000 is eligible for tax deduction and deductions are applicable if the amount of premium paid in a financial year is 20% of the sum assured amount of the policy. This is related only to the life insurance policies that have been issued before 31st March 2012.

 

For policies which were issued after 1st April 2012, the tax deductions are applicable of the amount of premium paid in a financial year is 10% of the sum assured.

 

Under section 80C(5) if the insurance policy holder voluntarily surrenders his policy or in case the policy is terminated before 2 years from the date of commencement of policy, then the insured will not receive any benefits on the premium paid, offered under section 80C of Income Tax Act.

 

Under Section 10(10D) of Income Tax Act, 196, the sum assured amount plus bonus (if any) paid on surrender or maturity of the policy or in case of death of the insured in entirely tax-free for the receiver. Some of the important points of section 10(10D) of tax deductions are:

 

Any amount payable to the insured under life insurance policies is applicable for tax deduction. The amount payable can maturity benefits and death benefits, allocated sum by way of bonus, surrender value and the survival benefit. Section 10(10D) deduction is also applicable to gains and proceeds from a ULIP and the benefit on maturity proceeds is offered when the premium paid towards the policy is not more than 10% of the sum assured amount.

 

Any maturity amount of life insurance policy or bonus amount received by the beneficiary of the policy in case of demise of the insured is totally exempted from tax deduction.

 

In fact, in order to ensure compliance, if the maturity proceeds exceed Rs.1 lakh, then a tax deduction at source (TDS) will apply and the insurer will deduct 1% as TDS (Tax Deducted at Source) if the PAN of the policyholder is available.

 

Source: Hdfclife

Time Is Always Right For Goal-Based Investing

The author of The Chronicles of Narnia famously said, “You are never too old to set another goal or to dream a new dream.” And this is true for everyone, both old and young. All of us have goals in life, and they range from short-term to very long-term. For instance, you may want to purchase the latest iPhone in the market – that is a short-term goal you may wish to accomplish over the next month or so. You may also want to retire at 45 and travel the world for the next five years. Based on your current age, this could be a medium or long-term goal. Others may want to purchase a car, or start farming or learn a new hobby – there is no limitation on the number of goals or dreams you can have. However, there is one thing that every goal requires – adequate time and surplus funding to help realise it. Suppose you wish to purchase an iPhone next month, child wedding after 10 years or a retirement monthly cash flow 20 years down the line. What is the one thing in common here? You need money to make this happen. And, in your investment journey towards realising your goals, asset allocation can be your best friend.

 

Setting your goals

 

Whichever phase of your life you may be in, you need to have a clear understanding of your goals, as well as the time frame you wish to achieve them in as per the time frame, the goals are classified as important or urgent. if you wish to purchase a house 10 years down the line, just thinking about the goal will not lead to its fruition. You also need to figure out how to accomplish that goal. You may plan to take a home loan, but you still have to put up a certain amount of corpus to qualify for the loan. This is where goal setting comes into play.

 

Asset allocation to the rescue

 

Asset allocation involves the practice of diversifying your portfolio in an attempt to secure the highest possible returns, at the lowest possible risk. Based on your investor profile, and the time frame for achieving your goals, you can allocate your corpus to a variety of assets. Suppose you wish to have a corpus of 1.50 crore (current value 75 lakh) rupees to purchase a house after 10 years. You can start working towards this goal by creating an investment portfolio featuring a mix of equity, debt, and other assets, in line with your risk appetite.

 

If you are young and do not mind facing higher risk in the quest for higher returns, you can allocate a larger portion of your portfolio to equities, and leave a small portion in the comparatively safer debt category. Alternatively, if you are saving and investing for a short-term goal, it is better to stick to debt funds, since these keep your money safe while offering stable returns. An important aspect to remember here is that, the closer you get to your goals, lower should be your portfolio risk. This is because the equity market is known for its volatility, and you may end up facing major losses in an unfavourable situation. With the goal nearby, you may not have enough time to recoup your losses. For instance, if you are 25 years old, and want to create a corpus of one crore over the next 10 years, you can allocate a larger part of your portfolio to equities. As you near the completion of the goal, you can shift your corpus from equity to debt funds or from more aggressive equity lesser aggressive equity , to keep it secure. This routine rebalancing is the key for Financial freedom journey as there can be change of goals with amount with time frame.

 

Selecting the optimal schemes

 

Based on your goals, and the time frame, you can choose from a wide variety of schemes, including equity, debt and hybrid funds. To zero in on the scheme most suitable for your needs, you must assess your personal attributes, risk appetite, return expectation and the time frame for realising the goal. As a means to make it easier for the investor, there are solution based schemes like multi-asset or balanced advantage category scheme that an investor can opt for. Here, the fund manager, depending on the relative attractiveness of the various asset classes, the fund manager will do the needful in terms of rebalancing. As a result, an investor need not worry about rebalancing.

 

To conclude, investors can make use of a variety of mutual funds to meet their financial goals. In this journey, with optimal asset allocation, you can ensure that nothing ever comes in the way of achieving your goals.

 

Source: Outlookmoney

Importance of declaration in marine insurance

Marine insurance is a type of insurance that protects against losses and damages associated with the maritime industry. This includes insuring ships, cargo, and other assets against risks such as accidents, theft, piracy, and natural disasters.

 

In India, the marine insurance market is regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI has issued guidelines on the types of insurance products that can be offered in the market, and also monitors compliance with these guidelines to ensure the integrity of the market.

 

Marine insurance policies in India can be divided into two main categories: hull insurance and cargo insurance.

 

Hull insurance provides coverage for the vessel itself, including its machinery, equipment, and any other property on board. This type of insurance is typically required by law and is necessary to protect the vessel and its owners against financial losses due to accidents, damage, or other unforeseen events.

 

Cargo insurance, on the other hand, provides coverage for the goods being transported by the vessel. This type of insurance protects the insured party against losses or damages to the cargo due to accidents, natural disasters, or other unforeseen events.

 

This is basically an open policy of 12 months duration and such policies are issued to Concerns having estimated annual turnover of Rs 2 crores or above. All transits upto the sum insured are covered without any exception and total value of goods in transit are required to be declared atleast once in a quarter in the form of a certified statement. Period of insurance for this policy is one year.

 

This Insurance covers

All Risks subject to Inland Transit ( Rail or Road) Clause –A

Inland transit ( Rail or Road) Clause (B) ( Basic Cover)

The policy may be extended to cover SRCC, subject to payment of additional premium.

 

The policy is not assignable or transferable. However where the interest in respect of goods in transit has passed on to the consignee, claims, if any, may be settled with such consignee, if so requested by the assured.

 

The sum insured under the policy shall be on the basis previous year’s annual turnover. In case of fresh proposal, the sum insured shall represent a fair estimate of annual dispatches. If the estimated annual turnover during the year is found to be inadequate due to increase in the Assured’s turnover, not envisaged at the inception of the policy, an increase in the Sum insured may be allowed on payment of the difference in premium involved. Such midterm increase should not be more than twice during the currency of the policy. Midterm increase in Sum insured may be allowed twice only during the currency of the policy. Final premium will be adjusted (downward only) on the basis of actual turnover of goods covered.

 

 

All you need to know about SIP top-up facility

Many investors top up SIPs in line with the respective increase in yearly income.

 

What does an SIP top-up facility mean?
SIP top-up is a facility wherein an investor who has enrolled for SIP has an option to increase the amount of her/his SIP instalment by a fixed amount or percentage at predefined intervals. This increase can be linked to future income and growth.

 

What is the difference between conventional sip and sip top-up?
In a normal or conventional SIP, investors cannot increase their contribution during their SIP tenure. If they want to increase it, they have to start a fresh SIP or make lump sum investments. Step-up SIPs allow investors to automate their SIP contribution and increase in line with their expected growth of income.

 

How does it work?
Using a top-up facility, an investor can increase monthly contribution in an ongoing SIP. For instance, if you invest `10,000 every month in an SIP and wish to add `1,000 every month, at the end of each fiscal/calendar year or financial year or every six months, you can use the top-up facility.

 

While some fund houses call it top-up, some others call it SIP Booster or SIP step-up facility. Most prominent fund houses offer this facility to investors.

 

Why do financial planners recommend a sip top-up?
Many retail investors run SIPs to meet their long-term financial goals such as buying a house, children’s education and marriage or retirement.

 

Financial planners suggest investors should opt for a top-up facility, as it automatically accounts for inflation and takes care of an increase in income like an annual salary hike. Most salaried individuals get an annual hike and hence they suggest investors could top up their SIPs annually. With the top-up facility, this is taken care of.

 

What challenge does a top-up face?
The basis of a top-up SIP assumes an investor’s income would increase year on year. There can be instances where expenses will rise and income fails to keep pace, or there is a job loss as we have seen in this pandemic, which make it difficult for an investor to top up.

 

Source: Economictimes

What is Underinsurance & The Dangers of Being Underinsured

It has been noticed that people in India do not understand the necessity of buying insurance policies. The insurance penetration in the country is noticeably lower as compared to the universal average. Even most of the insured people in India are grossly under-insured. If you are someone, who comes under this category, it is important that you understand the consequences of being under-insured and take action to secure the future of your family.

 

What is underinsurance?
To understand what is underinsurance, you have to know the goal of a life insurance cover. It is designed to provide financial cover to the family of the policyholder in case of their untimely demise. Under-insurance is the condition where the life insurance cover is not enough to take care of the financial needs of your loved ones. It means the sum insured by your policy is not adequate. Underinsurance can put your family in a financial crisis when you are not there to take care of them.

 

Example of underinsurance
Imagine if your current lifestyle requires ₹50 lakh as financial support for your family for the next five years, but your term insurance cover is ₹30 lakh. That means you are under-insured by ₹20 lakh.

 

Reasons for being under-insured
Now that you understand the underinsured meaning, you need to know what results in underinsurance. These are some of the most defining reasons:

 

Investing in insurance to save taxes
Most life insurance products come with huge tax benefits. So, many people buy insurance policies to save taxes and forget that the main purpose of life insurance is to offer death benefits. Hence, they end up settling for underinsurance.

 

Greedy agents
Most insurance agents try to sell you products that can ensure them a hefty commission. Hence, they do not prioritize the benefit that you require. This results in underinsurance.

 

Wrong product
There is a huge range of life insurance products available. However, not every product is designed to meet the needs of every single policyholder. If you end up buying the wrong product, you will either unnecessarily pay a higher premium or end up with an inadequate cover.

 

The risks of being under-insured
There are many disadvantages of being underinsured, and the biggest one is that your family will suffer financially when you cannot be there for them. They will receive less than the amount of money they need to meet their financial responsibilities. It also means what you invest as a premium will be wasted.

 

Underinsured Renovating Cost
Similarly, when you only insure your building’s market price and not the re-build cost, then you’ll lose the insurance amount you have put while re-building it or renovating it.

 

How to identify when you are under-insured
A term insurance plan can be a very fruitful investment if you are not underinsured. So, how do you even know when you are underinsured? Firstly, you have to calculate your yearly household expenses, which must include rent, bills, groceries, and repairs. Add to that the loans that you need to repay and the investments that you hold. Also, do not forget to include the expenses for your children’s education and marriage.

 

Once you have an idea about the yearly average expense, multiply it by 15, and that number is the required sum assured to make sure that your family will be financially covered for a long time.

 

You can consider buying online term insurance, as that way you can easily compare different products and their specifications. This will ensure that you buy a suitable life insurance plan for the family.

 

What happens when you are underinsured?
The most serious risk of under-insurance is that it produces a false sense of security in the mind of the individual acquiring the life insurance policy, which is actually worse than not having any protection at all. Only after an unexpected incident does the family realise that the quantity of insurance is insufficient to pay off obligations, let alone develop a corpus for the children’s education and a replacement income stream, etc.

 

This is covered in underinsurance

Term insurance
It is much better to keep investments and insurance separate than to combine them, and term insurance allows you to acquire a lot larger cover at a fraction of the cost.

 

Furthermore, in a growing economy like India, where inflation is causing prices to rise on a daily basis (especially medical and educational inflation, which is in the double digits), 10 lacs today will not have the same value as it will ten years from now and will certainly not provide you with the same purchasing power. As a result, treating insurance purchases as a one-time “fill it, close it, forget it” activity is insufficient.

 

Underinsurance vs over insurance
Underinsurance generally means that your out-of-pocket healthcare costs exceed 10% of your family income or that your deductible exceeds 5% of your income.Underinsurance can lead to people going without medical care or incurring debt.Insurance add-ons can help fill coverage gaps, but they are not cheap.There are free and low-cost healthcare services available for the uninsured and underinsured.

 

Source: Kotaklife

What Is Coinsurance In Health Insurance?

How Does Coinsurance Work?
Coinsurance is the percentage of the treatment cost that you have to bear before the insurer starts covering the medical expenses. It is a form of cost-sharing between you and the insurance provider. The coinsurance is usually a fixed percentage of the treatment cost. However, the coinsurance terms only apply after you (the policyholder) have surpassed the deductible amount applicable under your plan. Let’s understand how coinsurance works with an example.

 

Understanding Coinsurance With an Example
Let us assume that the coinsurance term of your health insurance plan is in the 80/20 ratio and that your plan has an annual out-of-pocket deductible of ₹2,000. Now, say that you suddenly require an urgent surgery early in the year that will cost you ₹50,000. Since you may not have met your deductible amount this early in the policy period, you will first pay the ₹2,000 of the total bill.

 

After meeting the deductible of ₹2,000, you will then be responsible only for the coinsurance payment i.e., 20% of the remaining bill amount, which will be ₹9,600 (20% of ₹48,000). Your health insurance provider will cover the remaining 80% of the treatment cost. Later in the year, if you need to undergo another medical treatment, your coinsurance clause will come into effect immediately as you have already met your annual deductible.

 

How Does Coinsurance Benefit the Policyholder?
If you are considering buying a health insurance plan with coinsurance, the main benefit it offers you is lower premiums. If you opt for coinsurance in health insurance, where you pay a fixed percentage of your medical costs, your insurance premiums towards the policy will be lower. But it is recommended to consider the out-of-pocket expenses that you might have to bear every time you raise an insurance claim while opting for a plan with coinsurance.

 

How to Calculate Coinsurance Payments?
To calculate the coinsurance payment that you must bear, you need to understand the coinsurance rate applicable under your health plan. If the coinsurance is 20% of the medical costs, then you can first convert the percentage into a decimal. Hence, coinsurance of 20% would become 0.20 and coinsurance of 15% would become 0.15. Then, you can estimate the coinsurance payment in the following way:

 

Coinsurance Rate x (Total Cost of Bill – Deductible) = Amount to be Paid

 

Let’s take the example discussed above, with a coinsurance of 20%, a deductible of ₹2,000 and a total medical cost of ₹50,000.

 

0.20 x (₹50,000 – ₹2,000) = ₹9,600

 

Thus, the amount you are required to pay after covering the deductible is ₹9,600. However, you must remember that you need not consider the health insurance deductible component after you have cleared it during the policy term.

 

Wrapping Up
Even though opting for coinsurance offers you lower health insurance premiums, your out-of-pocket expenses during medical treatments will go up with such a cost-sharing clause. This can lead to an unnecessary financial burden during medical emergencies. Hence, you must compare health insurance plans available in the market before buying a policy, read all the terms of the health insurance plan you are opting for, and make an informed decision.

 

Source: Bajajfinserv

Four smart ways to save on taxes

Proper tax planning can not only help you save on taxes, but also increase your income. We all want to know how and where to invest to maximise our return on the investments, but make some obvious mistakes such as keeping tax planning for the last minute. Experts say people make impulsive investment decisions last-minute. Here are a few smart strategies that help you maximise your investment returns.

 

Start tax planning at beginning of the financial year
This is a very crucial step to maximise the returns on your investment. Anup Bansal, chief investment officer, Scripbox says, “Tax planning is a crucial aspect when it comes to saving on returns. If one starts at the beginning of the financial year it provides more time to select instruments as per one’s goals and preferences.” Also, it helps you avoid last-minute impulsive investment decisions.

 

Additionally, if you are planning to make investments in tax-saving instruments like ELSS and PPF, experts say it is best to do it at the beginning of the year to give more time for growth. If there are changes in your personal situation, such as rental agreement changes (HRA) then take these into consideration and intimate your employer for accurate TDS.

 

Financial gifts to parents
To avoid income clubbing, you can make financial gifts to your parents, or even your grandparents. Bansal says, “If a parents are over the age of 65 and do not have a taxable income, the taxpayer can invest in their name to earn tax-free interest.” Senior citizens over the age of 60 are entitled to a Rs 3 lakh baseline exemption. And if you wish to take the help of a senior citizen above the age of 80, the exemption is even higher at Rs 5 lakh.

 

Investing in the name of your kids
Investing in the name of your kids is a great idea as they help you save tax like your parents and grandparents.

 

“After becoming an adult, the kid will be treated as a separate individual, for tax purposes and would even be eligible to open a Demat account and invest in stocks and mutual funds, with money gifted by the parent,” says Bansal.

 

Long-term capital gains of up to Rs 1 lakh will be tax-free every year, while short-term capital gains would be tax-free up to the standard exemption of Rs 2.5 lakh per year.

 

Invest in NPS for tax benefits
India has low annuity rates, and the scary thought of putting away your retirement money forever, has led to NPS being considered an unattractive investment option. However, Bansal points out that NPS’s withdrawal regulations have seen recent reforms which have reversed this to some extent, making the pension scheme more appealing to those in their 50s. “The new rule opens a few different tax-saving options for investors,” he says.

 

Benefit from the available tax deductions. It is important to know where you can benefit from the available tax deductions. You can claim certain deductions up to Rs 1.5 lakh under Section 80C. Even for investing in NPS, you get a deduction up to Rs 50,000 under Section 80CCD(1b).

 

Source: financialexpres