Heirs must know what you own to claim wealth

 Heirs must know what you own to claim wealth

Appoint nominees and write a will to make the transfer hassle-free

The Reserve Bank of India recently announced that it will start a new portal that will provide information on unclaimed bank deposits to facilitate the search for untraceable money.

Not just unclaimed bank deposits, there are thousands of crores locked in unclaimed shares and insurance policies lying with many institution across India. While  policymakers  and regulators will do their best to ensure that this money reaches the right person. It is better to ensure such a situation never arises.

Make a list of investments

The starting point for smooth wealth transfer is to make a list of all your investments. “When the owner of an asset dies, the spouse of family members often doesn’t know what assets the deceased owned. Even if they have the list of asset, they don’t’ know where their document is kept to support their claim. It is imperative to maintain detailed information on assets (immovable and movable) and to share this information with the spouse and other information with the spouse and other direct family member.

Mutual Fund (MF) investors can avail the consolidated account statement offered by registrar and transfer agents (RTAs) showing all MF holdings.   

Share password with caution

Since many assets are held in digital format, sharing access details can be considered. “You can use password vaults to share access to your email. You may even share access to your mobile phone with loved ones, if privacy concerns allow.

However, in the event of death of the investor, the passwords should be used by the near ones only to know about the investments details. They should not be used to carry out transactions. “Sharing of password with the family with the objective of wealth retrieval by selling or monetising securities –held solely or jointly with a deceased owner- amount to impersonation and invites criminal charges. If the nominee or joint holder operates the account digitally for market transactions or for off-market transactions, it is an office, ”warns Dutta.

Seed your contact details

In many cases, people lose track of investments because the concerned financial institutions fail to reach them. Not only must you should also provide your latest email ID and mobile number in all your investment accounts. “Consolidate your relationship and digitise them as far as possible. Make sure your phone number and email are updated on each one. It is also advisable to hold investments in joint from with your spouse

Specify nominee

While making investments, don’t leave the nomination section blank. You can appoint more than one person as nominee and specify the share of each one. “Ensure that all investments have a nomination so that he transmission or succession process becomes relatively easy,  “founder and chief executive officer, plan Ahead Wealth Advisors.

You can change the nominee as many times as you want in your lifetime. “Remember that a nominee is merely a caretaker, custodian, or trustee representing the legitimate heirs.

An overriding Will

All those who have accumulated lifetime must write a Will. It helps transmit your assets to the persons whom you choose to transfer them to. “A Will overrides a nomination, and hence is critical. Make sure the executors are aware where the latest Will is stored, “says Dhawan.

A will not only specifies the inheritors but also the proportion in which the assets should be distributed among the legal heirs. “A valid will enable distribution of assets to beneficiaries, whereas a nomination merely helps in naming a custodian or trustee representing the heirs of future beneficiaries, “says Dutta.

Be prudent while writing a Will. Involve professionals if you need to and get it registered. As in the case of nomination, a will can also be changed as many times as you like.

While you do not need to inform your loved ones about the exact details of your Will, they should know where and with whom the document is kept.

HNIs SHOULD OPT FOR TRUSTS

A Will is adequate for a family with limited assets, where the sole intent is to distribute the property to individuals.

For HNIs and wealthy business persons, a trust is a better option as it provides the flexibility to allocate money for host of different purposes.

For business owners, an additional benefit is that lenders and creditors can’t ask a court to liquidate the assets of a trust in the event of business failure.

The formation of a trust is, however, more expensive than drafting a Will.

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VECHICLE FINANCING

 Missed EMIs? Know the fallout

Talk to the lender for a loan moratorium for a few months

BUYING YOUR CAR is like a dream come true, but this dream can turn into a nightmare if you fail to repay or delay in paying back the loan. There are many repercussions for delaying and defaulting on a car loan.

One of the worst consequences could be that your vehicle can be taken back. A car loan is secured loan, and your vehicle is used as collateral against the funds you borrow. The lender can take the car back from you if you fail to pay back the loan as per the agreement.

It is important to go through the loan document carefully and understand the liabilities before you sign the papers and accept the terms and conditions of the loan. Once the loan is disbursed, you must repay the amount in EMIs. Here are some consequences you may face when you delay or default on your car loan.

Negative impact on credit score: If you miss your car loan EMI payment, you will likely be charged a late payment fee by the lender. Missing car loan EMI payments can have a negative impact on your credit score, as payment history is a significant factor in determining your creditworthiness for future loans.

Accumulated interest: Missing EMI payments can lead to the accumulation of interest, which means that you will end up paying more interest over the life of the loan. If you miss multiple EMI payments, you may be charged penalty charges by the lender, which can significantly increase the cost of the loan.

Legal action: In some case, if you miss EMI payments for an extended period, the lender may take legal action against you to recover the outstanding amount. Missed EMI payments can negatively impact your chances of getting approved for future loans, as lenders may view you as a risky borrower.

Repossession of the car: if you miss multiple EMI payments and fail to reach an agreement with the lender, the lender may repossess your car as collateral. Missing EMI payments can result in collection calls and letters from the lender or their collection agency, which can be stressful and disruptive.

Damage to your relationship with the lender: Missing EMI payments can damage your relationship with the lender, making it more difficult to negotiate payments terms or seek assistance in the future. Financial stress and anxiety can arise from missed car loan EMI payments as you may worry about the impact on your credit score, and the possibility for a legal action.

“If you default on your car loan, the lender may response your car as collateral.” This means that you will lose you car and may still owe money on the loan. Yu may be charged late fees, penalty interest rates, and collection fees if you miss payments or default.”

It is, therefore, advisable to borrow only as much as you can comfortably pay back. In case you are finding it difficult to repay the loan, you can always sell your car or arrange money to partially prepay your loan or talk to your lender for a short-term moratorium.

LOAN  DEFAULT

Borrow only as much as can comfortably pay back.

You may be charged late fees, penalty interest, and collection fees if you default.

If needed, sell the car or arrange money to partially prepay loan.

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Maintain documents proving source of funds remitted abroad

 Maintain documents proving source of funds remitted abroad

To avoid scrutiny, have reasons for each transfer and use reputable service providers

According to a recent media report, 89 foreign remittances are under the taxman’s lens for suspected tax evasion. With Indians increasingly remitting money abroad under the liberalized remittance scheme (LRS) for various purposes –including children’s education, purchase of property , and medical treatment –many transactions now come under scrutiny for potential tax fraud.

“Technological advancements allow the tax authorities to quickly and efficiently process large volumes of data and indentify suspicious transactions that may point towards tax evasion or fraud.”

The government can capture data at various points, such as from banks, financial institutions and even the forms 15CA/CB uploaded by the remitters themselves. “Taxpayers must stay complaint with Indian tax laws and the Foreign Exchange Management Act (FEMA) regulations.

Next, let us turn to the circumstances under which people usually come under the taxman’s lens.

Income –remittance mismatch: A person can come under the taxman’s lens if a tax return is not filed or if there is a mismatch between the income declared and the amount remitted. “If an individual’s declares a very low income but remits a substantial amount abroad, it may raise red flags and lead to scrutiny.”

Non-disclosure of offshore assets/ income: Non =-disclosure of foreign assets in tax return can result in stringent measures under the Black Money Law, along with income-tax proceedings. Indians are increasingly acquiring offshore assets without fully understanding the reporting obligations that come with such purchases

“Tax authorities are receiving a lot of information from various countries under automatic exchange of information. They are sending notices to people who have made large foreign remittances or acquired foreign assets but failed to report the overseas income or offshore assets.

Tax deducted at source (TDS): Sometimes the transaction is investigated because the resident Indian who participated in the transactions did not deduct the appropriate TDS or did not submit the appropriate documentation. Jain says, “While buying a property from a non-resident Indian, one is supposed to deduct a higher amount of tax than the 1 percent applicable to domestic sellers. If the buyer remits the money without deducting the higher amount of tax, the taxman will ask him to pay the shortfall.

Documentation issues: Sometimes remittance certificate are an issue. Mangal says, “Taxpayer are required to get a certificate for foreign remittances. At times, the description provided in these certificates is not paper or complete.

Crypto transactions: Expect the taxman to investigate transactions related to croptos with greater vigour in the future. Jain says “If money is remitted to cropto exchanges outside India, the taxman can knock on the door at a later date to see if appropriate tax is being paid on such income.”

Precautions you should exercise

People remitting money should exercise a number of precautions to avoid coming under scrutiny. Adhere to the limits on foreign remittances and provide a transparent reason for remitting the funds.

Stick to a reputable financial institutions or money transfer service provider, which is likely to be compliant with the relevant law and regulations. Naveen Wadhwa, deputy general manager, Taxmann, advises individuals to ensure that remittances happen through legitimate channels, due taxes are deducted, an equalizations levy is paid, and proper documents are maintained and reported to the relevant authorities.

Use the right forms. “Submit Form 15CA or 15CB wherever required.”

If asked to, you should be able to demonstrate the source from which the remitted amount was obtained. “To avoid questions and possible penal action by the tax authorities, maintain proper documentation regarding the source of funds, if not the nature of the nominee And to prevent exceeding the annual LRS limit or being subjected to TCS (tax collection at source), avoid remitting money on behalf of relatives.

Finally, Bajaj suggests that to ensure compliance and avoid penalties and criminal charges, one should conduct through due diligence and seek professional advice if necessary.

DEMYSTIFYING THE FORMS

FORM 15CA

Form 15CA has to be filled by all persons remitting money outside India.

It has to be filled when remitting money for purpose such as travel, education medical treatment, or other expenses.

It has to be filled each time money is remitted, before it is remitted.

 It can be submitted in online and offline mode.

Registered users can file Form 15CA through the e-filing portal.

FORM 15CB

Form 15CB is a certificate issued by a chartered accountant stating that the remittance made is in compliance with Indian tax laws and regulations.

The taxpayers must provide Form 15CA to the chartered accountant for the latter to certify the details in Form 15CB.

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LIFE INSURANCE

 Disclose true health status when buying a 

term plan

You may get lower sum assured but your claim will not get rejected later

WHICH INSURES HAVE the best claim settlement record? Apparently, all insures are doing well as they settle more than 98% of claims. Collectively, insures have a reputation rate of 0.87% in terms of policies and 3.06% in terms of claim amount repudiated, its range between 5% and 10% for many leading insurers. LIC has an acceptable repudiation ratio at 1.45% in terms of benefits. But, this should also be somewhat less.

Among the death claims, more than 85% are non-early in nature, i.e., and the claims that arise three years after buying the policies. Under revised Section 45 of Insurance Act, no policy can be called in question if three years have elapsed since taking the policy.

Claims settlement

While the average claim amount under reputable cases is bound to be higher than the average claim amount of the settled cases, if the ratio of average claim amount paid is too high , that is certainly a matter of concern, “There can be two reasons why the claim amount repudiated per policy is high for so many private insurers.  As bank employee are under severe pressure to bring business, they tend to sell high value policies (e.g. term plans) to all and sundry. When some of these policies result in early claims and investigation made by insurers reveal non-disclosure of material facts, claims are summarily repudiated.

The way out

What then is the way out? I would suggest to check the ratios of the insures being talked about here. Many financial experts suggest that young people buy high-value term plans. But many people do not know that the underwriting process for terms plans needs to very stringent. Terms plans are not allowed to people with one or two serious health issues. Bancassurance channel is generally not aware of the basic nuances of selecting lives for term plans. Some agents are also poor in domain knowledge.

What is the problem in disclosing history of diabetes or heart diseases? If you disclose these health conditions, you will not get the coverage under the term plan or coverage may be restricted to, say, RS 25 Lakh instead of Rs 1Crore. But, when you disclose your disclose your medical history, you know that there will be at least protection of Rs 25 Lakh for the family.

Select an insurer who does not repudiate high value claims under one pretext or the other. Disclose full medical history even if the insurance intermediary suggests otherwise. By disclosing your real state of health, at the most you will be covered by a lower sum assured /different product or some extra premium will be charged or some exclusion clause will be imposed for a few months. But that is much better than the entire claim getting repudiated later.

COVER FOR LIFE

Underwriting process for term plans needs to be very stringent

Select an insurer who does not repudiate high value claims under one pretext or the other

Term plans are not allowed if you have serious health issues.

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HOME LOAN REFINANCE

 Four reasons to opt for loan transfer

Refinancing early in your loan tenure ensures maximum benefit

HOME LOAN REFINANCING is the process of transferring your existing home loan to take advantage of better terms or rates. Refinancing your home loan can be a good option if you are looking to lower your monthly payments, reduce your interest rate or change the terms of your loan.

When you refinance your home loan, your new lender will pay off your existing home loan, and you will then make payments on the new loan. Refinancing can also help you switch variable-rate loan to a fixed-rate loan or vice versa. Refinancing can be done either by your current lender or a new one.

“A loan of Rs 50 lakh at 8% for 20 years attracts interest of Rs 50.37 lakh. If this loan is refinanced at 7% the interest falls to Rs 43.03 lakh. This provides savings of over Rs 7 lakh , which can be used for investments and for achieving various aspirations. There are situations when refinancing helps. There are situations when it does not.” Here are four scenarios for choosing home loan balance transfer.

High interest rate

If you have taken a home loan at a high interest rate, you may consider transferring your balance to another lender who is offering a lower interest rate. This could help you save a significant at of money in interest payments over the life of the loan.

“Refinancing early in your loan tenure- typically in the first half-makes the maximum sense. Similarly, when more than half your loan balance is left, it makes more sense. During such periods, your EMIs focus mostly on interest payments. Therefore, a refinanced loan at a lower interest rate when most of your loan is still left will lead to heavy savings. Refinancing late makes little difference, since most of your interest is already paid off.”

Better loan terms

If you are not satisfied with the terms and conditions of your existing home loan, such as prepayments charges, processing fees, or foreclosure charges, then a home loan balance transfer can help you get better loan terms that suit your needs.

Unhappy with services

If you are unhappy with the services provided by your current blank, such as late response to queries, poor customer service or delay in loan disbursement, then a home loan balance transfer can help you switch to a bank that provides better services.

Need to consolidate debt

If you have multiple loans, such as personal loans, credit card debt, or car loans with high interest rates, then a home loan balance transfer can help consolidate all your debt into one loan with a lower interest rate. This can help you save money on interest and simplify your debt payments.

Besides these, some people can choose refinancing when their older loans are linked to previous bench maker. Bank loans after April 1, 2016 are linked to the marginal costs of fund-based lending rate (MCLR). Loans before that date are benchmarked to the base rate. Bank loans issued after October 2019 are linked to the repo rate. Repo rate-linked loans are now the cheapest. So if you still on old bench markers, it is me to shift to the new one.

It is advisable to go through the loan agreement carefully and get clarity in case of confusion about the terms and conditions of the loan. You must do the calculation to ensure it is saving you money, otherwise the entire effort can go in vain.

SMALLER DEBT

One of the best ways to reduce your interest burden is by refinancing.

When you refinance your home loan, your new lender will pay off your existing home loan, and you will then pay EMIs on the new loan.

You can switch from a variable –rate loan to a fixed-rate loan when you go for a loan transfer.

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Ways to improve your credit score

 Ways to improve your credit score

Loan history & payment habits help determine your creditworthiness.

CREDIT SCORES DEPICT the creditworthiness of a person, and lenders generally prefer customers with a score of 750 and above. However, the time to reach a credit score of 750 will depend on several factors, including your current credit score, credit history, payment habits, and overall credit utilization.

If your score is between 650 and 700, you have consistent payment history and low credit utilization; it may take only a few months to reach a score of 750. However, if you have a poor credit score, missed payments, high credit utilization, and derogatory marks on your credit report, it could take several years. Improving your credit score requires a consistent effort to pay your bills on time, reduce credit utilization, and address any negative marks on your credit report. However, with disciplined credit habits and a focus on building good credit, you can gradually raise your credit score.

“The widely acceptable benchmark of a good credit score is 750. If you score beyond that, lenders will like you. They will reserve the best loan offers, ones with the lowest interest rates, for you. If your score is low, you will pay a higher rate of interest. If your score is very low, your credit application may be rejected and you may not be able to take a new loan or credit card” 

How a high credit score help

Loan approval: Banks and credit card companies use your credit score to evaluate your creditworthiness. A high credit score can increase your chances of getting a loan.

Lower interest rates: A high credit score can help you qualify for loans with lower interest rates. Often, those with higher credit score of 750 and above are considered less risky and find it easy to get loans.

Steps to reach a score of 750

It does not happen overnight. It is a process and you must follow financial discipline to reach a score of 750. Delays and defaults are big no if you want to achieve a good credit score.

Check your credit report : Obtain a copy of your credit report from one of the four credit bureasus CIBIL, Experian, Equifax, or CRIF High Mark. Review the report for any errors and take them up with the bureau.

Pay your bills on time: Payment history is the most important factor in your credit score. Make sure you pay your bills on time, every time. Set automatic payments or reminders to help you stay on track.

Reduce your credit utilization: Credit utilization ratio (CUR) is the amount of credit you are using compared to your credit limit. Keep your credit utilization below 30% to avoid negative impact on your credit score.

Maintain a mix of credit: Having a mix of credit such as a credit card, personal loan or home loan can improve your credit score.

Avoid applying for too much credit: Applying for multiple loans or credit cards within a short period of time can hurt your credit score.

Don’t close old credit accounts: closing old credit card accounts can lower your credit score, especially if they have a long credit history. Keep your old accounts open and active, even if you don’t use them often.

Avoid defaulting on loans: Defaulting or a loan or credit card can severely damage your credit score. If you’re struggling to make your payment, talk to your lender about your options, such as a payment plan or debt consolidation.

REACHING 750

The widely acceptable benchmark of a good credit score is 750.

People with this score are considered to be more credit worthy.

Payment history is the most important factor. Delays and defaults in payments are a big no.

Closing old credit card accounts can lower your credit score.

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Not liable to pay income tax? Submit Form 15G/H right away

 Not liable to pay income tax? Submit Form 15G/H right away
If your income exceeds limit but qualifies for tax dedication at lower rate, use form 13

April is the ideal time to play your tax strategy for the new financial year. Taxpayers can, for instance, avoid tax deducted at source (TDS) on interest income from fixed deposits (FDs) using Form 15G or 15H. You can also claim exemption from filling an income tax return (ITR) by submitting Form 12BBA.

Forms 15G and 15H

The Income-Tax (I-T) law allows taxpayers to receive certain income (interest, dividends, rent, and insurance commissions) without TDS deduction. Forms 15G and 15H are self-declaration forms that can be submitted by individuals to banks and other financial institutions to avoid TDS on certain types of income.

“Individuals who are not liable to pay income tax can submit these forms.”These are individuals whose incomes are below the basic exemption limit in the new fiscal year and hence have nil tax liability.

Such taxpayers need to furnish a declaration in Form 15G or 15H is an authorized document that will ensure there is no TDS deduction on the interest you earn from employees Provident Fund (EPF), recurring deposit, or FD in a given year. This declaration is mandatory for all individuals below 60 Years of age and for Hindu Undivided Families (HUFs).

Individual senior citizens need to submit Form 15H., “Form 15H is important for retired individuals who earn interest income on their savings bank accounts and FDs,”

These forms must be submitted to the payer, either in paper format or electronically after verification. “This form will need to be submitted at each bank branch from which the individuals earn interest me.” Once these forms are submitted to the prayer of income along with PAN, the latter will not deduct TDS.

Non-Resident Indians (NRIs) t avail the benefit of these forms. Those who fail to submit these forms can claim the amount when filling their ITR and seek a refund.

The penalty for a wrong declaration under Form 15G or 15H includes a fine and imprisonment. “The individuals may also be liable to pay tax on the interest income earned during the year,”

If your income increases unexpectedly after you have submitted Form 15G or 15H, then you should withdraw the application. “The bank will deduct TDS from the next interest payment.

Lower deduction under Section 197

Section 197 of the I-T Act, 1961, allows individuals to apply for a lower or nil TDS on their income. “To avail of this, you need to apply to the I-T Department. Include a statement of your estimated income for the relevant financial year and details of the deductions you are eligible for,”

Submit Form 13 for this purpose. Once the application is approved, TDS will be deducted at a lower rate.

“This option is better suited for those with higher income that the Form 15G/15H limits who want to reduce their TDS deduction.”

It may take longer to process this request than when you submit Form15G or 15H.

Valid reasons for seeking lower TDS must be provided. “The reason could be a business loss, low taxable income, or tax exemptions and deductions. “The assessing office (AO) may reject the application if he is not satisfied with the reason offered or the documents submitted.

Apply before the deduction of TDS begins, “The AO’s order is for one financial year only. The individuals need to apply again for lower TDS n the subsequent year.”It takes around 30 to 45 days to process the application and issue the order.

There is one crucial difference between Section 197 and 197A.

Section 197 permits are TDS exemption or a lower rate of deduction for individuals earning income through dividends, insurance commissions, rent, etc.

“The exemption under Section 197A (15 G and H)only applies to individuals deriving interest income from deposits.”

CONDITIONS THAT NEED TO BE FULFILLED TO CLAIM SEC 194P BENEFITS

This section exempts resident senior citizens aged 75 and above from filling ITR.

The senior citizen’s income should include only pension and interest income

The interest should be received from any account maintained by the deducted in a specified bank (as specified by the central government)

The pension income should be received in the same bank

The dedicatee needs to furnish a declaration in Form 12BBA to the bank containing particulars related to pension income.

 

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HOME LOAN

 Ways to manage a longer- tenure loan

You can try to pay off the loan faster by making partial payments.

HOME LOAN REPAYMENT tenures have become longer owing to reporate hikes in the last one year, and for many borrowers they have now even stretched beyond their retirement age. Many borrowers are reeling under acute pressure owing to longer tenure of their loans after the announcements of back-to-back hikes in the interest rates.

One of the main disadvantages of longer loan tenure is that it can result in paying more in interest over time. This can ultimately lead to higher total cost of the loan. If you have a long-term loan, it can limit your ability to make other financial decisions and investments.

While managing a longer tenure loan is challenging, here are some steps you can take to make it more manageable.Review your financial situation: Check your finances to determine how much extra money you have each month to pay off your loan.Negotiate with the lender: Talk to your lender and see if they can restructure your loan or offer you a lower interest rate.Partial payment of a loan: You can make a partial payment towards the outstanding principal amount of the loan. This can be done at any point during the loan tenure, and can help you reduce your debt burden. There are some advantages to making partial payments on your loan.

First, it can help you reduce the total amount of interest you pay over time. Second, making partial payments can help you to pay off the loan faster.”If you pay 5% of the loan balance every year, you can pay off your 20- year loan in 12 years. Prepaying one additional EMI every year can close your loan in just 17 years, and if you increase your EMI by 5% every year, you can finish your loan in less than 13 years.” Look for additional income sources: Consider getting a part time job or starting a side business to increase your income. You can use this additional income to pay off your loan.

Prioritise your expenses: Make a list of your expenses and priortise them. Cut back on unnecessary expenses and focus on paying off your loan. You can avoid going out for food too often, buying non-essential items, etc.  Use your retirement savings: Consider using your retirement savings to pay off your loan. However, this should be done as the last resort. Seek financial advice: Consult a financial advisor to help you make informed decisions about your loan and retirement.

Refinance your loan: Refinancing your loan may help you get a lower interest rate and reduce your monthly payments. Refinancing involves replacing your current loan with a new loan that has different terms, and conditions, usually with the goal of obtaining a lower interest rate, reducing monthly payments, or changing the loan’s duration.Consolidate your debt: Consider consolidating your debt to make it easier to manage your payments. If you have multiple loans, you must close your loans and focus on only serving one big loan rather than paying EMIs for several loans separately.

Sell some of your assets: Consider selling assets such as a second home or car to pay off your loan. This can help you reduce your monthly expenses and make it easier to manage your finances.

DEBT BURDEN

Back to Back hikes in interest rates have led to longer repayment tenures for home loans.

Using your retirement savings to pay off your loan should only be done as the last resort.

Refinancing your loan may help get a lower interest rate and reduce your monthly payments.

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Flexi health covers makes insurance affordable

 Flexi health covers makes insurance affordable

People can customise policy by fixing tenure and the sum assured

RISING HEALTHCARE COSTS make it difficult for many people to afford adequate healthcare coverage. However, OPD and flexi health covers offered by health insurance companies can help individuals get affordable insurance to manage their healthcare expenses effectively.

A flexi cover offers greater flexibility in terms of coverage and premiums, which can help individuals tailor or their needs and budget, which can be a game-changer for many people who may not have been able to afford traditional health insurance policies.

Through a flexi-cover, an individual can decide the tenure of a policy, the sum assured and the premium to pay. A flexi-cover, which is a form of indemnity health insurance, gives individuals more control over their healthcare, including the choice of facilities and doctor.

Outpatient services

Even technological advancements are making it easier to provide healthcare services outside traditional hospital settings. This has led to an increase in outpatient services, making the OPD cover more relevant. Increased competition with new players entering the market has helped disrupt traditional insurance models. An OPD cover can help reduce cost for the policyholders for routine checkups or minor illnesses and encourage customers to seek prompt medical attention.

In fact, OPD and flexi health covers are part of this trend towards more innovative and consumer –centric insurance products. The insurance regulator too has introduced several measures to bring transparency and encourage competition in the insurance market. The measures have led to more innovative insurance products being introduced, including the OPD and flexi health covers.

Future looks promising

The future of OPD and flexi health covers in the insurance market looks promising as more consumers seek flexible and personalised healthcare coverage. An OPD cover provides coverage for outpatient expenses such as doctor consultations, diagnostic tests and medications. This type of coverage has become more relevant in recent years as healthcare services have expanded beyond traditional hospital settings. With rising healthcare costs and increasing demand for outpatient services, an OPD cover is likely to become an essential component of healthcare coverage.

As consumers demand for personalised healthcare coverage continues to grow, we can expect to see continued growth and innovation in this insurance market segment. OPD and flexi health covers are definitely going to disrupt the insurance market with more innovative products offering more flexibility, choice and affordability.

WHY CHOOSE IT

A flexi cover offers flexibility in terms of coverage and premiums.

People can tailor their insurance coverage to their needs and budget.

Gives individuals more control over choice of facilities and doctor.

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Make part-prepayments to cut home loan tenor or EMI

 Make part-prepayments to cut home loan tenor or EMI

Interest rages on home loans linked to the repo rate have risen by 250 basis points since May 2022, putting borrowers under pressure. The number of outstanding equated monthly installments (EMI) has increased. In many cases, EMIs have also gone through the roof. As the accompanying table shows, a 250 basis points hike in interest rates from 7 percent of 9.5 percent on a Rs 50 lakh loan for a 20 year tenure can mean an increase in EMI from Rs 38,765 to Rs 46,607, a different of Rs 7,842. The total interest burden over the loan tenor shoots up by Rs 18.8 Lakh.

With another rate hike of 25 basis points expected, borrowers are worried. “Due to the steep increase in interest rates, 20 year tenors have gone up to an incredible 55 year in some cases. Since lenders don’t allow the tenors to be extended beyond the retirement age, increase in EMI is now a given. Borrower options it is beneficial to opt for an increase in EMI rather than an increase in the tenor. Stressed borrowers may, however, approach their lenders. “Discuss your financial situation with the lender and make a formal request to either extend the tenor or increase the EMI. The lender will assess your situation and decide whether or not to grant your request CEO & co-founder, Basic Home Loan.

If you wish to reduce the EMI or the tenor, be prepared to part-prepay the home loan. Plan you part-prepayments according to your finances. “You could voluntarily increase your EMI. Or you could make lump-sum prepayments every year. Prepaying 5% of your outstanding principal each year can bring down a 20 year loan by almost nine years. Even prepaying a single additional EMI every year can bring down your tenor by 45 months (3 years and 9 months).

Heed prepayments rules

Keep in mind a few things before deciding to prepay.”Prepayment may not result in significant savings if you are approaching the end of your tenor. Moreover, if you have investment opportunities that can generate higher returns than the interest rate on your home loan, then invest your additional funds instead of prepaying, founder & managing director (MD)

Avoid liquidating your emergency corpus and retirement funds to prepay. “Take into account your future financial goals, liquidity, planned expenses, and income. Draw up a plant that will not affect your savings towards other financial goals, and prepay accordingly.

He say that most lenders have conditions regarding how many prepayments customers can make in a year, and the minimum amount they must prepay each time.

Time to switch

Refinancing your loan at a lower rate by switching to another lender can also reduce your burden. A one-time fee will have to be paid. Explore this option if it results in a meaningful amount savings. “Switch to a lender who offers flexible repayment options and is ready to waive the processing fee. After exploring loan options from different lenders, you may even be able to negotiate better terms with your current lender.

Do the due diligence before switching. “Compare the offers from various lenders to ensure you are receiving the best deal available. Factor in costs such as administrative fees and processing fees and processing fees when considering a balance transfer and compare the total amount you will pay over the loan’s lifespan.

If you are not able to adopt any of the above strategies, continue to pay your current EMIs on time. The interest-rate cycle could turn early next year. If your loan is linked to an external benchmark, you will get immediate relief. Finally, paying your EMIs on the time will boost your credit score, allowing you to refinance your loan at a lower rate in the future.

 

 For More Details: Pooja Manoj Gupta, visit www.giia26.com

 Email: pmgiia26.com Mobile 9868944340

Balance risks & returns with optimal mix of equity & debt

 Balance risks & returns with optimal mix of 
equity & debt

Align your fixed income strategy with your risk profile & financial goals.

THERE HAS BEEN much discussion on whether it makes sense to allocate more to fixed-income investment in India, given that returns on such investments are marginally above the inflation rate. There are several factors to consider when making this decision, including the outlook for interest rates, the performance of fixed- income investment in recent years, and the impact of recent tax changes on debt mutual funds.

Bank FD rates

Since May last year, the Reserve Bank of India has been increasing interest rates. Bank FD rates are now in the 5.50%-7% range, depending on the bank and whether it’s a PSU bank or private or neo bank/ NBFC. This has made bank FDs attractive for investors looking to get stable returns. Senior citizens can also look at an increased interest rate of 8% in SSC, where the limit also has been increased to Rs 30 Lakh

Similarly, as rate increase, the yield of long-term bonds becomes attractive, with the yield on 10 years bonds at 7.31% in February 2023, up from 6.43% in February 2022. This can be a good opportunity to invest in long- terms bonds, including gilt funds, which have an average return of 7.5% to 8.00%.

Scrapping of LTCG tax benefits on debt funds

Apart from FDs and bonds, another debt investment option is debt mutual funds. On average, debt fund returns are 6% -8% and are popular among investors, especially HNIs and UHNIs. Till this financial year, any debt funds beyond a three year period were taxed at 20% LTCG after indexation benefits. For debt funds held for less than three years, tax implication was a per tax slab.

However, as announced in the Finance Bill 2023, from FY24, there will be no LTCG or indexation benefits on debt funds. While this amendment will be a blessing in disguise for FDs and bonds with increased investor participation to leverage tax-saving, debt funds are likely to take a significant hit.

What should investors do?

The answer to whether investors should allocate more funds to debt instruments in the new financial year depends on their individual requirement. While inflation-beating returns are attractive, one should approach fixed-income investments by analysing ones shorts-and long term financial goals and risk profile.

Instead of skewing more towards debt instruments with slightly higher real return potentials, constructing a diversified portfolio consisting of both equity and debt is crucial to balance out the risks and returns. Also, investors should undertake portfolio creation and alternation with a 360- degree perspective, considering current micro and macroeconomic conditions in the nation and globally, and after consultations with an expert.

FIXED INCOME

With interest rates rising, it can be a good opportunity to invest in long- term bonds.

Senior citizens can now invest up to Rs 30 Lakh in Senior Citizens Savings Scheme offering 8% interest.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 9868944340