Money Today experts answer your financial queries
Money Today experts answer your personal finance queries related to any sector - banking, insurance, investment, tax, or loans.
Money Today experts answer your personal finance queries related to any sector - banking, insurance, investment, tax, or loans.
INVESTING
Q: I wish to create a corpus for my grandchildren, aged 2 and 4. I have thought of investing Rs 4,000 to Rs 5,000 per month through SIPs into mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68? Would equity be a better option? - Nilima Pandey, Mumbai
A: Your age does not matter in this case since the corpus you are building is for your granddaughters. Considering their age, the requirement of funds for the two kids should rise manifold after a few years, especially taking into consideration the increasing cost of education. Hence, investing in any large diversified mutual fund with a healthy track record would be prudent. It is suggested, however, that the SIPs are done for a duration exceeding 60 months to fully benefit from long term investing in equities.
Q: I am a serving officer in the armed forces and would be retiring in 10 years. I will get around Rs 65 lakh as a lump sum including provident fund and about Rs 50,000 per month as pension. I will be staying in my own flat and monthly expenses will be an estimated Rs 30,000 per month post retirement. My daughter will be getting married in the next five years, for which I need about Rs 8 lakh. I plan to have a couple of trips abroad, for which I'll need Rs 2 lakh each. Where I should invest my money? I have real estate worth Rs 50 lakh apart from my flat, a couple of FDs and life and health insurance. -Sonal Singh, e-mail
A: Since you are retiring and you need a certain amount of corpus for defined goals, it is advisable that you keep around 35% in long duration debt schemes, which sould adequately provide for your daughters marriage.
Since you have a healthy pension, and you do not need to run down your corpus, around 50% of the corpus could be systematically invested into equities over a longer period, as protection against inflation. Gold funds (ETF's) could also help to hedge against inflation. It is advisable that you keep aside 10% of the corpus for immediate and emergency needs and this can be deployed into short or ultra-short term funds, which can be accessed at a very short notice.
Q: What is the difference between a gold fund of funds and a gold ETF? Which would be the better long-term option and what are the differences between the two? Are either of these options better than holding physical gold? - Viju Shorey, Ahmedabad
A: Gold ETF's are simple pooling vehicles that invest directly into physical gold and therefore is the purest form of holding gold in paper form. Gold FoFs are aggregation vehicles that invest into gold ETF's, gold equity funds and other mandated gold instruments. An investor needing exposure to gold is better off investing in gold ETFs rather than gold FoFs since there might be a variety of different funds that an FoF might invest in and it might dilute the return. Holding physical gold is not a good option owing to the many hassles.
Q: I got married two years ago. We want to buy a house worth Rs 30 lakh in Bengaluru but can afford an EMI for a loan of only Rs 20 lakh with the current income. We hope to have a child in three years. Should we sell some equity investments and the jewellery or postpone buying a house for another year. -Pradeep Padmanabhan, Bengaluru
A: For a home purchase worth Rs 30 lakh you will be eligible for taking a mortgage upto Rs 25 lakh and can fund the rest by using existing corpus (equity, jewellery , cash). Typically, selling family jewellry is usually the last resort. There is always a rent-versus-buy argument. You should assess whether you can stay on rent or you need to make the home purchase immediately. Waiting will help to fund the purchase from your investments and for that you can start a SIP into debt or equity funds. Currently, interest rates are still in the double digit range even for new mortgage seekers and there is an expectation that the rates might be a little lower over the next 12 months, in which case you might get better rates if you wait.
INSURANCE
Q: I'm 35 years old and I've a 5 year old health policy. When I bought the cover I was a smoker. However, I've quit the habit and it has been six months. Should I inform my health insurer and is there a chance of my premium being lowered? - Manoj Gulati, Bikaner
A: Congratulations on quitting smoking. As you already have been holding a health insurance policy for the past five years, I presume that you had informed the insurer in the beginning. In case, you have not, please do inform your health insurance provider of your prior smoking habit and the period of quitting the habit.
Unfortunately, even though you have the habit, the chances of your premium being reduced is very minimal as the symptoms of diseases related to smoking take many years to be seen.
Q: I have a group health insurance cover of Rs 2 lakh from my employer. I'm also covered under the group health insurance scheme of my spouse's employee health policy, which has a sum assured of Rs 1 lakh. In case I'm hospitalised, am I eligible to make a claim for both policies? If yes, what's the procedure? Supriya Mahajan, e-mail
A: You can file a claim with both your health insurance providers, depending on the sum insured of each policy and the claims amount. In case the claim amount is over and above a single policy's sum insured limit, you can process a claim with the other insurer. In either case, you are required to inform both the insurers about the claim.
The procedure of filing a claim includes submission of necessary claim forms, medical files, discharge papers, original bills, receipts, etc and other documents as required by each insurance company. Do note that if you do file a claim with both your insurance providers, the insurance companies are obligated to pay the claim amount in proportion to the sum insured with the insurers.
Q: I am 25, single and my parents are my only dependants. My dad is 65 years old and my mother is 55. I have a group health insurance plan from my company, with a cover of Rs 4 lakh (Rs 2 lakh for self, Rs 1 lakh each for my mother and father). Given my current need, a cover of Rs 4 lakh seems sufficient. But, I don't have another health plan. Should I go for an additional plan on my own? I also assume that I would be given similar health policies in all my future jobs. Also, is it better that my parents, considering their age, have policies of their own? - Monojeet Lahiri, Kolkata
A: Ideally you should opt for an additional health insurance policy for your parents, given their age and must ensure that the policy come with the benefit of lifelong renewal. Your employer-provided coverage is adequate as long as you are in service with that organisation. There could be a time when you are changing jobs or your employer might wish to do away with the group health cover. Hence we suggest that you choose a basic individual health insurance policy for yourself, and revisit the policy once you are married, to include your spouse.
TAXATION
Q: Does an NRI have to pay Income Tax on interest earned from deposits of foreign earnings while abroad? I am told that such earnings are tax free for two years for a returning NRI. Is this true? How do you calculate tax on deposits in India from earnings as an NRI? - Kiran T Madhav, Kozikode
A: Yes, the interest on non-resident external (NRE) deposit is exempt from income tax according to the current Income Tax rules.
An NRI deposit remains 'resident' but not 'ordinarily resident' up to two years if a non-resident is returning to India after a long period on fulfiling additional conditions. The interest on an NRE account (where deposit of foreign earnings is allowed) is exempt and non-resident ordinary (NRO) account is taxable as per the tax rates applicable to the individual.
Q: I am supposed to get refunds for assessment year 2009-2010 and assessment year 2010-2011. However, I am yet to hear from the income tax authorities. What course of action can I take? -Anju Joseph, Kochi
A: The Income Tax Department (ITD) will process your return and you will get the refund as soon as the processing is completed. The status of ITD refund processing can be tracked at https://tin.tin.nsdl.com/oltas/refundstatuslogin.html.
Please note that refund processing is managed by the Income Tax Office, NSDL and SBI. As per income tax laws, there is no time defined within which tax refunds should be processed and credited.
BANKING
Q: I have paid my credit card dues a day before the due date but the cheque was encashed by the card issuer a day after the due date. I have now been penalised for late payment. How should I resolve the matter? Sabika Sachdev, e-mail
A: Payments made through cheque take atleast 48 hours or two working days for your credit card issuer to credit this amount into your card account. Late Payment charges are applicable only if the minimum amount due is not paid by the payment due date. It is always advisable to make your payments at least three days before the payment is due to avoid accrual of late payment charges.
Q: I recently withdrew Rs 5,000 in cash using my credit card due to an emergency. Upon receipt of my next statement, I noticed that the amount had increased by about 5%. Is there a charge on withdrawal of cash or has my credit card company made a mistake in charging me? - Gaurav Sihna, Indore
A: Withdrawal of cash through ATMs results in charges on two debit components in your card account. These are a cash withdrawal fee towards usage of ATM and finance charges on cash withdrawal.
The cash withdrawal fee varies from one card issuer to another. Also, all cash advances carry a finance charge from the date of withdrawal until the date of settlement.
For greater transparency, tariffs for ATM withdrawals are shared with all customers through the monthly statement of account and welcome kits. In case you still have doubt about your matter, please do contact your bank.
Anil Rego, Chief Executive Officer, Right Horizons has tackled financial planning issues; Antony Jacob, Chief Executive Officer, Appollo Munich, has advised on insurance; Kadambi Narahari, Chief Executive Officer, SBI Cards, has replied to banking questions and Taxspanner.com has answered tax queries.
INVESTING
Q: I wish to create a corpus for my grandchildren, aged 2 and 4. I have thought of investing Rs 4,000 to Rs 5,000 per month through SIPs into mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68? Would equity be a better option? - Nilima Pandey, Mumbai
A: Your age does not matter in this case since the corpus you are building is for your granddaughters. Considering their age, the requirement of funds for the two kids should rise manifold after a few years, especially taking into consideration the increasing cost of education. Hence, investing in any large diversified mutual fund with a healthy track record would be prudent. It is suggested, however, that the SIPs are done for a duration exceeding 60 months to fully benefit from long term investing in equities.
Q: I am a serving officer in the armed forces and would be retiring in 10 years. I will get around Rs 65 lakh as a lump sum including provident fund and about Rs 50,000 per month as pension. I will be staying in my own flat and monthly expenses will be an estimated Rs 30,000 per month post retirement. My daughter will be getting married in the next five years, for which I need about Rs 8 lakh. I plan to have a couple of trips abroad, for which I'll need Rs 2 lakh each. Where I should invest my money? I have real estate worth Rs 50 lakh apart from my flat, a couple of FDs and life and health insurance. -Sonal Singh, e-mail
A: Since you are retiring and you need a certain amount of corpus for defined goals, it is advisable that you keep around 35% in long duration debt schemes, which sould adequately provide for your daughters marriage.
Since you have a healthy pension, and you do not need to run down your corpus, around 50% of the corpus could be systematically invested into equities over a longer period, as protection against inflation. Gold funds (ETF's) could also help to hedge against inflation. It is advisable that you keep aside 10% of the corpus for immediate and emergency needs and this can be deployed into short or ultra-short term funds, which can be accessed at a very short notice.
Q: What is the difference between a gold fund of funds and a gold ETF? Which would be the better long-term option and what are the differences between the two? Are either of these options better than holding physical gold? - Viju Shorey, Ahmedabad
A: Gold ETF's are simple pooling vehicles that invest directly into physical gold and therefore is the purest form of holding gold in paper form. Gold FoFs are aggregation vehicles that invest into gold ETF's, gold equity funds and other mandated gold instruments. An investor needing exposure to gold is better off investing in gold ETFs rather than gold FoFs since there might be a variety of different funds that an FoF might invest in and it might dilute the return. Holding physical gold is not a good option owing to the many hassles.
Q: I got married two years ago. We want to buy a house worth Rs 30 lakh in Bengaluru but can afford an EMI for a loan of only Rs 20 lakh with the current income. We hope to have a child in three years. Should we sell some equity investments and the jewellery or postpone buying a house for another year. -Pradeep Padmanabhan, Bengaluru
A: For a home purchase worth Rs 30 lakh you will be eligible for taking a mortgage upto Rs 25 lakh and can fund the rest by using existing corpus (equity, jewellery , cash). Typically, selling family jewellry is usually the last resort. There is always a rent-versus-buy argument. You should assess whether you can stay on rent or you need to make the home purchase immediately. Waiting will help to fund the purchase from your investments and for that you can start a SIP into debt or equity funds. Currently, interest rates are still in the double digit range even for new mortgage seekers and there is an expectation that the rates might be a little lower over the next 12 months, in which case you might get better rates if you wait.
INSURANCE
Q: I'm 35 years old and I've a 5 year old health policy. When I bought the cover I was a smoker. However, I've quit the habit and it has been six months. Should I inform my health insurer and is there a chance of my premium being lowered? - Manoj Gulati, Bikaner
A: Congratulations on quitting smoking. As you already have been holding a health insurance policy for the past five years, I presume that you had informed the insurer in the beginning. In case, you have not, please do inform your health insurance provider of your prior smoking habit and the period of quitting the habit.
Unfortunately, even though you have the habit, the chances of your premium being reduced is very minimal as the symptoms of diseases related to smoking take many years to be seen.
Q: I have a group health insurance cover of Rs 2 lakh from my employer. I'm also covered under the group health insurance scheme of my spouse's employee health policy, which has a sum assured of Rs 1 lakh. In case I'm hospitalised, am I eligible to make a claim for both policies? If yes, what's the procedure? Supriya Mahajan, e-mail
A: You can file a claim with both your health insurance providers, depending on the sum insured of each policy and the claims amount. In case the claim amount is over and above a single policy's sum insured limit, you can process a claim with the other insurer. In either case, you are required to inform both the insurers about the claim.
The procedure of filing a claim includes submission of necessary claim forms, medical files, discharge papers, original bills, receipts, etc and other documents as required by each insurance company. Do note that if you do file a claim with both your insurance providers, the insurance companies are obligated to pay the claim amount in proportion to the sum insured with the insurers.
Q: I am 25, single and my parents are my only dependants. My dad is 65 years old and my mother is 55. I have a group health insurance plan from my company, with a cover of Rs 4 lakh (Rs 2 lakh for self, Rs 1 lakh each for my mother and father). Given my current need, a cover of Rs 4 lakh seems sufficient. But, I don't have another health plan. Should I go for an additional plan on my own? I also assume that I would be given similar health policies in all my future jobs. Also, is it better that my parents, considering their age, have policies of their own? - Monojeet Lahiri, Kolkata
A: Ideally you should opt for an additional health insurance policy for your parents, given their age and must ensure that the policy come with the benefit of lifelong renewal. Your employer-provided coverage is adequate as long as you are in service with that organisation. There could be a time when you are changing jobs or your employer might wish to do away with the group health cover. Hence we suggest that you choose a basic individual health insurance policy for yourself, and revisit the policy once you are married, to include your spouse.
TAXATION
Q: Does an NRI have to pay Income Tax on interest earned from deposits of foreign earnings while abroad? I am told that such earnings are tax free for two years for a returning NRI. Is this true? How do you calculate tax on deposits in India from earnings as an NRI? - Kiran T Madhav, Kozikode
A: Yes, the interest on non-resident external (NRE) deposit is exempt from income tax according to the current Income Tax rules.
An NRI deposit remains 'resident' but not 'ordinarily resident' up to two years if a non-resident is returning to India after a long period on fulfiling additional conditions. The interest on an NRE account (where deposit of foreign earnings is allowed) is exempt and non-resident ordinary (NRO) account is taxable as per the tax rates applicable to the individual.
Q: I am supposed to get refunds for assessment year 2009-2010 and assessment year 2010-2011. However, I am yet to hear from the income tax authorities. What course of action can I take? -Anju Joseph, Kochi
A: The Income Tax Department (ITD) will process your return and you will get the refund as soon as the processing is completed. The status of ITD refund processing can be tracked at https://tin.tin.nsdl.com/oltas/refundstatuslogin.html.
Please note that refund processing is managed by the Income Tax Office, NSDL and SBI. As per income tax laws, there is no time defined within which tax refunds should be processed and credited.
BANKING
Q: I have paid my credit card dues a day before the due date but the cheque was encashed by the card issuer a day after the due date. I have now been penalised for late payment. How should I resolve the matter? Sabika Sachdev, e-mail
A: Payments made through cheque take atleast 48 hours or two working days for your credit card issuer to credit this amount into your card account. Late Payment charges are applicable only if the minimum amount due is not paid by the payment due date. It is always advisable to make your payments at least three days before the payment is due to avoid accrual of late payment charges.
Q: I recently withdrew Rs 5,000 in cash using my credit card due to an emergency. Upon receipt of my next statement, I noticed that the amount had increased by about 5%. Is there a charge on withdrawal of cash or has my credit card company made a mistake in charging me? - Gaurav Sihna, Indore
A: Withdrawal of cash through ATMs results in charges on two debit components in your card account. These are a cash withdrawal fee towards usage of ATM and finance charges on cash withdrawal.
The cash withdrawal fee varies from one card issuer to another. Also, all cash advances carry a finance charge from the date of withdrawal until the date of settlement.
For greater transparency, tariffs for ATM withdrawals are shared with all customers through the monthly statement of account and welcome kits. In case you still have doubt about your matter, please do contact your bank.
Anil Rego, Chief Executive Officer, Right Horizons has tackled financial planning issues; Antony Jacob, Chief Executive Officer, Appollo Munich, has advised on insurance; Kadambi Narahari, Chief Executive Officer, SBI Cards, has replied to banking questions and Taxspanner.com has answered tax queries.
