SEEK CONSISTENCY ACROSS ASSET CLASSES

 

Choosing NPS manager? Seek consistency across asset classes

Switch fund manager only if long-term performance lags the category average

 

Higher equity exposure

NPS offers the comfort of being a government-backed scheme.

While other retirement-oriented instruments like Employee’s Provident Fund (EPF) and Public Provident Fund (PPF) invest primarily in fixed-income instrument, and hence offer fixed-income like returns, NPS can offer higher exposure to equities (up to 75 per cent in the tier I account). Hence, investors can potentially enjoy higher returns over the long term.

Investors under the old tax regime get a tax benefit of up to Rs 1.5 lakh under Section 80C and an additional exclusive benefit of up to Rs 50,000 under Section 80CCD (1B).

The fund management charge is very low in NPS.

At maturity, 60 per cent of the money can be withdrawn as a lump sum while 40 per cent must be invested in annuities, which give a lifelong cash flow. An annuity plan allows the investor to lock in the existing rate of interest for her lifetime. No other investment product in India offers this benefit. Professional fund management and portability between jobs and to its appeal.

Money invested in NPS cannot be withdrawn easily before 60. The money therefore, does not get used up for other purposes. Investors get the benefit of long-term compounding and receive 60 per cent of the corpus tax-free at maturity. 

If you are in the auto-choice option, your funds get automatically rebalanced on your birthday. If you are in the active choice option, you can rebalance on your own without any tax incidence.

Compulsory annuitisation

If the corpus size exceeds Rs 5 lakh at superannuation and Rs 2.5 lakh in the case of premature exit, at least 40 per cent of the accumulated corpus must be used to purchase an annuity. This mandatory annuity purchase requirement might not align with the preferences of those who desire greater control over their retirement’s funds.

Withdrawal rules in NPS are stringent. If you withdraw the money before truing 60, 80 per cent of the corpus must be use to purchase an annuity and only 20 per cent is paid as a lump sum.

The pension funds are actively managed, which means some could underperform their benchmarks.

Ready to forgo liquidity ?

It is a suitable product for anyone who wants to build a retirement corpus. Investors must, however, make sure they have a diversified portfolio outside NPS that will offer them liquidity. Given the stringent lock-in rule, people who could need the money before 60 should avoid NPS.

 

 

Active or auto choice ?

Active choice allows investors to decide their allocation to various asset classes.

It is suited for risk-tolerant individuals who are comfortable with market volatility, as it enables them to allocate a larger portion of their contributions to equity assets.

Market savvy individuals who desire a customised asset allocation, or who wish to have the freedom to adapt their portfolio to market conditions, should go for the active choice option.

This option offers greater flexibility vis-a-vis asset allocation.

The auto-choice option allows investors to choose from one of three life cycle funds. Investors who are not market savvy or don’t want the burden of making active choices should go for this option.

 Look for consistency

When choosing a PFM, use long-term performance data to weed out underperformers.

Thereafter, if you are left with a group whose returns vary within a narrow band, select a PFM belonging to a group well known within the fund management business, which you believe will still be around 50-70 years hence. Look for a consistent performer across asset classes.

Finally, you can change your PFM once a year. Do so only if long-term performance lags the category average by a considerable margin.

 

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

FILE UPDATED ITR TO REDUCE RISK OF SCRUTINY, PENALTIES

 

FILE UPDATED ITR TO REDUCE RISK OF SCRUTINY, PENALTIES

Remember, ITR-U can’t be used to lower tax liability by claiming missed refunds

 

The deadline to file an updated income-tax return (ITR-U) is March 31, 2024, for the assessment year 2021-2022 (FY21). The option to file an ITR-U gives taxpayers an opportunity to amend their past returns and ensure compliance with the tax laws.

In the past few weeks, some taxpayers have received notices due to discrepancies between the returns filed by them and the information available with the Income-Tax (I-T) Department.

Go through these notices carefully. If you discover any missed tax payments, definitely opt for filling an ITR-U by including such income in it. Otherwise, you might receive further notices from the I-T Department for income that has escaped assessment.

ITR-U is defined under Section 139(8A) of the I-T Act. There is a time limit for filling ITR-U. The taxpayer is allowed to file ITR-U within two years or 24 months from the end of the relevant assessment year (AY). Therefore, the due date for filling ITR-U for AY2021-22 (FY21) is March 31, 2024. ITR-U can be filed only once in a year.

 

When can an ITR-U be filed?

An ITR-U can be filed under specific conditions: if the original return was missed, including the deadlines for belated and revised returns; to correct undeclared income; when the taxpayer chose the wrong head of income; to rectify taxes paid at incorrect rates; and to reduce carried forward losses, unabsorbed depreciation, or tax credits under Section 115JB/115JC.

 

Better than undergoing audit

Filing an ITR-U allows individuals to correct errors, thereby, reducing the tax liabilities and penalties taxpayers would incur if they were to undergo scrutiny and audit. It is also an opportunity for individuals to declare any income that might have been missed due to oversight. In short, it helps avoid any further tax notices and disputes.

 

Can’t lower tax liability  

ITR-U also comes with a few disadvantages. ITR-U cannot be used to lower tax liability by claiming missed refunds or increasing reported losses. Additionally, a late filing fee applies to ITR-U submissions.

Failure to submit tax returns by the end of the relevant AY can result in a fine of up to

Rs 10,000. Taxpayers who use this provision may miss out on certain tax benefits. They may, for instance, not be able to write off their charitable contributions to some organisations.

 

 

Things to keep in mind

Experts recommend disclosing all financial information upfront instead of opting for the ITR-U route. Taking this route could bring you under the I-T Department’s scanner.

Only if you miss the date or are not able to file your return within the financial year should you file ITR-U and that too within 12 months of the end of the financial year.

When filing it, mention all necessary details, including your Aadhaar number, Pan number, and assessment year, among others. Also ensure the accuracy and completeness of all submitted information, including income, deductions, and personal details, gathering documentation to substantiate any changes you make.

Finally, be prepared for additional tax liability. Avoid delaying the ITR-U filing until the final deadline, two years from the relevant assessment year, as it leads to additional penalties or taxes under Section 140B of the I-T Act.

Filing within 12 months of the relevant AY leads to an additional 25 per cent on the tax and interest due. But if you file within 24 months, it goes up to an additional 50 per cent. Therefore, minimise penalties by filing ITR-U at the earliest, preferably within the first year.

 

ADDITIONAL TAX LIABILITY ON FILING ITR-U

§  To the income-tax payable, add the interest and fee payable for non-filing

§  Next, consider the additional tax payable

§  This will equal 25 per cent of tax if the return is filed within a period of 12 months of the end of the relevant assessment year

§  It will be 50 per cent if the return is filed within 24 months of the end of the relevant assessment year

 

 

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

BUYING HOUSE IN SENIOR’S PROJECT? FACTOR IN HEFTY MONTHLY CHARGES

 

BUYING HOUSE IN SENIOR’S PROJECT?

FACTOR IN HEFTY MONTHLY CHARGES

Seek residents’ feedback as poor management could impact quality of life and even resale value

A growing number of senior citizens are choosing to buy a house in real estate projects that cater to their needs.

 

Growing demand, limited supply

One factor driving the demand for such homes is demography. India’s elderly population is expected to reach over 20 percent of the population by 2050. Ashiana Housing points out that today’s affluent seniors present an economic opportunity, and hence investments are flowing into projects tailor-made from them. The Covid-19 pandemic, during which many senior citizens without families struggled, has also intensified the demand for housing that comes with specialised care.

Currently, there were only 62 senior living projects (developed or ongoing) across the country. At least five new projects are under construction: two in Bengaluru, and one each in Chennai, Kolkata and Coimbatore.

 

Promise of hassle-free living

These projects allow seniors to live independently. Daily chores like food, dishwashing, laundry, etc. Are taken care of and service providers like electricians, plumbers, etc. are easily available.

These projects and dwelling units are designed keeping in mind the needs of seniors. They feature wheelchair-accessible layouts and are equipped with several safety-enhancing elements. Access to healthcare is readily available.

Seniors get the company of peers belonging to the same age group. These communities prioritise social engagement through activities, outings, and communal events. These projects also come equipped with enhanced security measures. Such housing could offer potential financial benefits. Given rising demand, such properties could fetch and attractive resale value.

 

Premium pricing

The overall cost of such housing, depends on the type of facilities offered, the level of care required by the inhabitants (independent or assisted living), project location, grade of builder, and so on. Since they are equipped with several services and facilities, they are priced at a premium compared to standard homes. The price difference ranges from 10 to 30 per cent.

 

Be aware of restrictions

Many of these properties are located at the periphery of the city, which could make access to relatives and friends, and even the city’s top hospitals, difficult. There could be restrictions on the duration for which younger family members can stay. Owners wanting to rent their houses will have to find a tenant in the senior age bracket.

If the management quality deteriorates, the dwellers’ experience will take a nosedive. Resale value could plummet if the society is not well maintained. Since they can only be sold to other seniors, selling and exiting would be more difficult than imagined.

On the owner’s demise, the property will pass on to the heirs. But they may not be able to use it unless they are senior citizens.

Switching houses entails a cost. Selling one house and buying another could mean a transaction cost of around 7 per cent.

 

Checks you should run

Before making a purchase doing through research, including feedback from current residents, on the project’s reputation. Seniors must ensure the project can cater to their changing needs. Once they enter the 70’s they may need assisted living facilities. They should check whether the project provides such facilities. Sodi advises doing a deep dive into the medical facilities, equipment and critical services available within the campus. Understanding the terms and conditions of the society’s by law before making a commitment. Potential buyers must evaluate the monthly maintenance fees and service charges, which can be hefty. Seniors should, if possible, live in such a community on rent before making a commitment. This move should not deplete their retirement corpus to dangerously low levels.  

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

Suffering from cardiac ailment? Apply for a customized plan

 

Suffering from cardiac ailment? Apply for a customized plan

 

September 29, is World Heat Day. According to a report by the American College of Cardiology, non-communicable diseases accounted for 65 per cent of total deaths in India in 2019. More than 25 per cent could be attributed to cardio-vascular diseases and related risk factors. Reliance General Insurance recently conducted a study on coronary angiography (CAG) procedures performed on 19-35 and 36-45 age groups between 2018 and 2023. While the number of procedures increased by 160.9 per cent in the 19-35 age bands between 2018-19 and 2022-23, it rose by 102.9 per cent in the 36-45 age band over the same period.

Given the severe financial implications, having a health insurance cover becomes critical. However, people who have survived a cardiac event find it difficult to obtain coverage. They should consider applying for a cardiac-specific indemnity plan.

 

Cover for a higher-risk group

Cardiac patients whose proposals for a regular health insurance plan get turned down should apply for a cardiac-specific plan.

Their uniqueness is that they cover people who have already had a heart-related procedure.

Their features are similar to those of a regular hospitalization policy.

They cover hospitalization, pre-and post-hospitalization, ambulance expenses and also offer a comprehensive health check-up.

Waiting periods usually apply before pre-existing heart conditions get covered. The customer also gets covered for non-cardiac ailments. These plans may also offer benefits like outpatient department coverage, restoration, and no claim bonus.

 

Limited coverage, higher premiums

These plans usually have a limited sum insured and may also have a co-payment requirement. They are also costlier than regular hospitalization covers. They could be 30-40 per cent more expensive. The timing of the cardiac event matters. They are sold to people who had a heart attack two to seven years earlier. If it is a very recent case, or if seven years have elapsed since the event, the customer may get this policy but cardiac ailments may be permanently excluded.

 

Who should go for them?

People who have undergone a cardiac event should buy these plans. People with an existing heart condition should immediately buy this product if they do not have a cover already or if they feel their existing cover may not suffice to meet rising healthcare costs.

People with cardiac issues should also buy this plan if they only have group insurance coverage from their employers.

 

Checks to run

Customers should first check if their existing heart-related conditions will be covered or permanently excluded. Thereafter, they should verify the waiting period-two or four years – for heart – related conditions. They should also check for room rent, capping. Looking for clauses related to exclusion, sub-limit, and co-payment. These may not be mentioned in the one-page brochure, so refer to the customer information’s sheet or the policy wording.

Customers checking for a sub-limit on specific treatments, elaborates that one product offers a sum insured of Rs 10 lakh but has a sub-limit of Rs 3 lakh for cerebrovascular, renal, cancer, and related ailments. The co-payment requirement should preferably not exceed 10 per cent.

Checking if the insurer has imposed a “personal waiting period” on you specifically, assessing the strength of the insurer’s hospital network.

PROS AND CONS OF FIXED-BENEFIT PLANS  

• Besides indemnity-based plans (which compensate you for hospitalization bills), fixed-benefit plans covering cardiac ailments are also available 
• These may be single-disease covers (for cardiac ailments only) for critical illness plans (where a number of dreaded diseases, including cardiac ailments are covered)
• If the customer is diagnosed with a disease covered under these plans, they pay a predefined fixed amount
• Such policies are a great add-on to the regular hospitalization cover as they can be used to take care of many ancillary costs
• Understand the specific definition and the stage of the critical illness covered
• Once they make a payout, these covers end

 

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

Health plan: Compare features, costs, port if you find better deal

 

Health plan: Compare features, costs, port if you find better deal

Combine base policy with super top-up; buy multi-year policy to cope with rising health insurance premiums

Health insurance premiums are on their way up. A survey of 11,000 owners of personal health insurance policies by Local Circles found that 52 per cent had witnessed an over 25 per cent increase in their renewal premiums in the past 12 months.

An index (based on the average premiums of India’s top five health insurance providers) compiled by insurance distribution platform Policy X  shows that premium rates for new policies rose 5.54 per cent year-on-year (Y-o Y) in the first quarter of 2024.

 

High medical inflation

One major reason for escalating premiums is medical inflation, which has averaged between 12 and 15 percent per annum in recent years, and resulted in larger-sized claims. It is driven by advancements in medical technology and improved healthcare facilities, which have resulted in higher treatment costs. Sophisticated procedures, which are lifesaving, also, at times, push up costs.

Attributes rising hospital rates to increasing costs of drugs, implants, and other inputs.

The increased incidence of lifestyle and other diseases (some linked to environmental degradation) is also leading to higher claims.

India is the diabetes capital of the world. The incidence of hypertension, heart ailments, and cancer is also going up.

Both during the Covid-19, pandemic and in its aftermath, the number of hospitalisations surged, leading to an unprecedented increase in number of claims. This puts pressure on insurance providers.

Insurers in India faced elevated costs attributable to the heightened frequency and quantum of claims.

Low insurance perpetration is another factor. If penetration were to increase, costs could be spread over a larger customer base.

The 18 per cent goods and services tax (GST) also drives premiums up.

Premiums of individual policies go into subsidising the premiums of group covers.

 

Lifestyle inflation

Several individual-related factors also drive premiums up. One is the age band. When an individual moves from one age band to another, his insurance premium rises, even though the policy’s premium rates may not have increased.

Lifestyle inflation also plays a part. With growing affluence, people prefer to go to higher-end hospitals in metros and stay in private air-conditioned rooms, including suites. The cost of the entire treatment package is influenced by the room the patient stays in.

 

Compare and port

Health insurance should not be a purchase that, once made, is forgotten. Keep comparing the policies from different providers to ensure you get the best premium and coverage. If you can find a policy that offers comparable or better coverage at a lower price, consider porting.

Combining a base policy with a super top-up is another option. The deductible on the super top -up should be equivalent to the base policy’s sum insured.

A young person who has a health policy should, upon getting married, convert it into a floater plan and add his wife (and later child) to it. Doing so is more cost-effective than buying separate plans for each member.

Fitness-conscious individuals should go for policies that offer activity-based discounts (walk a certain number of steps each day and get a discount).

Buying a multi-year policy, which can provide protection against both a hike in premium rates by the insurer and an increase in premium due to a change in age slab. Going for a quality professional group cover (if you belong to one and a cover is available).

If you can’t afford the premium, opt for co-pay as a last resort. This will, however, increase your out-of-pocket expenses. Fully understand the terms and conditions if you go for this option.

 

RISING PREMIUM COSTS: WHAT NOT TO DO

• Getting rid of the policy cover, remember that health insurance can take care of recurring claims in subsequent years (or even same year) whereas a corpus could get steadily depleted due to repeated hospitalisations 

 

• Reducing the sum insured as no-claim bonus accumulates, it could mean you may not be able to cope with medical inflation

 

• Buying medical insurance only up to the level of premium on which tax benefit is available: Sum insured should be determined by your family’s needs and medical history

 

• Including elderly parents in the family floater (put them in a separate plan), doing so will push up the cost of your floater  

 

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

 Email: pmgiia26.com Mobile  9868944340

 

Tailor health insurance riders to your family's medical history

 

Tailor health insurance riders to your family's medical history

Understand exclusions in each rider to avoid surprises at the time of claim

 

A growing number of health insurance customers are nowadays supplementing their bade health insurance policies with riders. According to insurance aggregator Policybazaar.com, while only 15 per cent of customers purchased riders on their platform in 2022-23 (FY23), the number rose to 60 per cent in FY24.

A rider is a supplementary cover which can be purchased with the base policy by paying an additional premium. Riders allow customers to extend the scope of coverage and customise their plans to suit their individual needs.

Sum insured bonus: In a normal policy, if the customer does not make a claim, the insurer offers a no-claim bonus and increases the sum insured by 10 to 20 per cent each year. By buying this rider, you can fast track the bonus amount and enhance the sum insured by 100 per cent each year, up to 500 per cent. The bonus accrues even if the customer makes a claim.

Consumables: Many health plans do not cover the cost of disposable items, such as syringes, medical tapes, makes, etc.  

The cost of such consumables can constitute as much as 15 per cent of the hospital bill in case of a prolonged hospitalisation.

During Covid, the bill arising from consumables shot up (due to the usage of PPE kits and so on), resulting in high out-of-pocket expenses for policyholders. By purchasing this rider, customers can ensure they do not have to worry about this expense during a medical emergency.

Day one pre-existing disease cover: Pre-existing diseases (PED) are expensive to treat as they are usually chronic. Most health insurance plans cover PED’s after a waiting period of two or three years. By buying this rider, customers can get PEDs covered from day one.

Hypertension, diabetes, high or low blood pressure, and asthma are some of the diseases covered by this rider.

This rider is highly recommended four those already suffering from certain diseases at the time of policy purchase. This rider covers a maximum of seven conditions.

Day one here means coverage from the 31^st day from the start of the policy (since it is mandatory to serve an initial waiting period of 30 days).

Room rent waiver: Many policies came with a cap on the kind of hospital room the customer can stay in. This cap is sometimes an absolute amount and sometimes a percentage of the sum insured. In many cities, hospital room rents have shot up due to which this cap does not allow patients to stay in the kind of room they would like to. Customers who buy this rider can get admitted into any room they like, including a suite (if one is available).

OPD rider: OPD expenses include doctor’s consultation fee, teleconsultation fee, diagnostics, and pharmacy. This rider is useful for families where there are children and seniors, requiring recurring visit to the doctor an da pharmacy.

Dos and don’ts

Purchase riders that align with your family’s needs. Evaluate your medical history, lifestyle, and potential future needs before purchasing a rider. Buying unnecessary riders that inflate your premium without providing significant value, the need to understand the terms and conditions of each rider to avoid surprises at the time of claim.

Finally, buyers need to decide whether to buy a cover in the form of a rider or as a standalone policy. In some cases, like a critical illness policy, a standalone policy may be advisable as it covers a wider range of ailments.

 

THE COST OF RIDERS

• According to Irdai guidelines, the total cost of riders cannot be more than 30 % of the premium of the base policy
• A sum-insured bonus rider costs about 10-15% of the base premium
• The consumables rider would increase the premium by about 6-8%
• A rider for Day-1 pre-existing disease cover is expensive, it could cost as much as 20-25% of the base premium
• The cost of riders varies according to medical condition, pre-existing diseases, age, and other underwriting considerations

 

 

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Email: pmgiia26.com Mobile  9868944340