Steps to Reduce Health Insurance Premium
Most people take health insurance policies only to avail tax benefits available under section 80D of Income Tax Act. As per this section, one can claim deduction of up to Rs 25,000 for insuring self, spouse and kids (the limit is Rs 30,000 if the individual or spouse is above 60 years). Additional deduction of Rs 25,000 is also available for insuring parents (Rs 30,000 if parents are above 60 years).
Taking health insurance only to get tax benefit is a wrong strategy and this should be done based on need analysis. Medical insurance need depends on various factors like age, medical history , parents, etc. Once the insurance need is assessed, next question is to see how much insurance cover you already have. We say this because most people have some basic cover from the place they work. For example, assume that you are a 30-year-old male and need a cover of Rs 10 lakh, but your company cover is only for Rs 5 lakh.
For this additional Rs 5 lakh, you need to take Rs top up insurance' and not the normal base cover. While an additional base cover of Rs 5 lakh will cost around Rs 5,500, this top up plan will cost only around Rs 2,500.More importantly , even if you take an additional insurance, it will act like a top up and will kick in only if the medical cost goes above the base cover (i.e. Rs 5 lakh in this case).This is because insurance claim is based on actual expenses and not on the amount of cover you have.
What about the people who don't have existing base cover? They can also split the policy into base cover and top ups instead of taking a total cover. Instead of taking a base cover of Rs 10 lakh that costs around Rs 7,500, you can go for a base cover of Rs 2 lakh (costs around Rs 2,700) and a top up of Rs 8 lakh (costs around Rs 3,800), so the total cost will come only around Rs 5,500. While the cost of base cover for Rs 15 lakh will be around Rs 9,500, it will be only Rs 7,000 if you split it.
You can also reduce the cost significantly by avoiding the normal medical cover and going only with the Rs critical illness cover'. After all, you need insurance against critical illness (i.e. the ones that cost big money) and not against the normal diseases.
Critical illness covers offer several advantages. It usually comes with normal life insurance and therefore, you can take it till the age you want this cover. Since normal medical insurance is on yearly contract, there are instances of insurance companies rejecting (or increasing premium significantly so that you drop out) because of big claim in previous years.
Unlike the normal health insurance premium that will keep on increasing with the age bands (i.e. even without any claim), premium for critical illness cover will remain constant for the entire term. That means the benefit of starting early (i.e. lock into a low premium) is available only in critical illness cover.
In personal finance, if you divide the number 72 by the rate of interest, you get to know the number of years it will take for you to double the money..
Eg: if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8. Thus it will take 8 years to double your money if you invest at 9% p.a. rate of interest.
*INTEREST:* We can use this rule in reverse to know the rate of interest needed to double your money to achieve your set goal.
Eg: If you have 250k today and you need 500k in 5 years. Just divide the number 72 by 5, the answer is 14.41%. Thus you need a type of investment avenue, where you earn at least 14.41% p.a. as rate of interest/returns to double your investment amount in 5 years.
This 'Rule 72' helps you to understand about inflation also. It helps you to calculate the amount of time it will take for inflation to make the real value of money half. Let's say present inflation is 5.5%. When you divide 72 by 5.5% the answer is 13.09 years. That is to say, if you have 100k in your kitty today, it would take around 13.09 years for the value of the money to be halved..
Hope it helps you in your day to day investments and other finance related activities.📈😊
How to choose Right Mutual Fund Scheeme
Choosing a scheme from thousands ofmutual fund schemes available in the market is not easy for many investors. Opting for the right mutual fund scheme is one of the biggest hurdles faced by many new investors. However, you would be fine if you are ready to follow some broad guidelines.
What is your investment objective?
"Why are you investing? This is the first question you should ask yourself and be sure to define your expectations in terms of time horizon, returns and risk," says Amar Pandit, Founder and CEO, My Financial Advisors, a Mumbai-based wealth management firm. Defining each of these parameters would help you choose the asset class you are going to invest. For example, if you have an investment horizon of five to seven years, you can invest in an equity scheme. If you have near to medium term goals, you would be better off in comparatively safer debt schemes.
Is the fund house reliable?
Yes, there are many mutual fund houses and a mindboggling number of schemes. But you can eliminate a number of them from your list by short-listing a few fund houses you would like to do business with. Does the fund house enjoy trust of the investor community? Who is the promoter of the AMC? Is the AMCbusiness a focus area for the promoter? Is the AMC known for its consistent performance? If the answers are positive, you can consider to handover your money to the fund house.
Who is my fund manager?
No, we are not asking you to chase star fund managers. We just want you to familiarise yourself with your fund manager, so that you would be able to track his views, investment strategy, etc. This becomes crucial especially during a bad patch - a trusted fund manager would be able to communicate to you properly and put you at ease. These days most fund houses have put in place a process to ensure that everyone stick to the broad guidelines. However, some fund managers still make a difference - it could be extra returns or effective communication to investors. Always look how he has managed the scheme of your choice over a medium to long period. If the fund manager has taken over the fund very recently, it would be a good idea to give him some time to prove his worth.
How has the fund performed?
It is time to get into specifics. Take a look on how the scheme has performed over a long period, preferably during different market cycles. Always look for consistency over outperformances during different phases in the market. You could take look at the performance of the fund scheme against its benchmark, peers, category average to get a rough idea how the scheme has fared over a long period. "Check whether the fund has performed well during different market cycles and whether it was able to push itself up after a downfall, if any", adds Amar Pandit.
Are the key ratios in fund's favour?
There are some key ratios that would further help you to eliminate some more schemes from your shortlist. Total Expense Ratio(TER) is one of the main ratios. It is simply a measure of the cost to the investor. It takes care of the fund manager's fee, administration and other operational expenses. Needless to say, lower expense ratios are better as more of your money is invested. You can also take a look at some other key ratios like Sharpe Ratio (tells you how much extra risk the scheme is taking to produce extra returns), standard deviation (tells you how volatile the scheme is) to finalise a scheme to invest.
For any query feel free to call me (Gaurav Kansal) at 9313368533
GST – All you need to know
What just happened this week?
What is the GST?
What taxes will be subsumed?
How will GST benefit specific sectors?
- Shift from unorganized to organised market: In sectors where the unorganized market is higher, the organised players in those sectors will benefit post GST
- Efficient logistics planning: GST would lead to lower freight costs and optimal supply chain planning. This would benefit companies who have high freight costs. Organised logistics companies would stand to benefit
- Today many products attract higher tax if we aggregate the State VAT, Central Excise and CST. Further, there is a cascading effect of State VAT getting calculated including Excise duty. Tax credits cannot be utilised across various taxes so it adds up to higher tax incidence as well. For example CST and VAT credits cannot be fully set off against excise duty and vice versa, this leads to tax on tax. Cascading effect leads to 200-300bps of higher tax.Due to above factors, sectors like Auto see total tax incidence of 28-30%, this adds to cost of the supply chain. So a lower GST of ~18% would save cost; which if retained will add to margins or if passed down to consumers will lead to more incremental demand growth.
- There are many unorganised players that exist today due to tax arbitrage opportunities in various sectors. Due to this, the organised players become cost uncompetitive. Post GST due to availability of set off credit across the value chain, organised players will become competitive and can gain market share from unorganized players. Logistics, building materials, plastic products and consumer durables are some of the sectors where the unorganised players’ share is high due to tax evasion. GST would help the organised players to gain market share
- Logistics companies – generally local truck companies are resorted to for avoidance of tax, but now due to tax credit availability, large companies would move to organised companies who offer better services or can simply outsource the entire activity to logistics companies
- Building materials like tiles, pipes and plywood have 70% unorganised market due to tax evasion. Post GST due to level playing field, companies with strong brands will become highly competitive and can gain market share
- Footwear (unorganized share is 55%), Batteries (40%) are other sectors who will benefit
- Due to CST and higher VAT in some states, Corporates resort to un-economical logistics planning which increase the cost of delivery to customer. Post GST since there is a seamless set off of tax credit availability, corporates can simply focus on optimal logistics structure and cut the freight cost. Bulk commodity sectors like Cement, Steel would stand to benefit.
- Also GST would push companies to outsource the logistics operation to third party companies who can bring in economies of scale through large warehouses and hub & spoke model to bring down overall logistics cost. So for companies it will be a cost saving and logistics companies would see shift of volumes from unorganised players to them.
Timeline of events to watch out for
- Getting the legal framework in place:
- Passing of the constitutional amendment bill in the Lok Sabha
- Ratification from 50% of the state assemblies
- Presidential assent
- Cabinet approval to form GST council
- GST council’s recommendation of model GST laws
- Cabinet approval for CGST and IGST laws by centre and SGST laws by states
- Passage of the CGST and IGST laws by centre and SGST laws by states (mostly in the winter session)
- GST rule notification
- IT infrastructure for the GST
- CBEC back-end systems by end-Nov. 2016
- Back-end systems for 14 states by end-Nov. 2016
- Back-end systems for CCA, banks, RBI, state accounting authorities by end-November 2016
- The GST Network would provide front-end and back-end processes for 17 states by end-Dec. 2016.
- Testing and integration for all stakeholders by Jan.-Mar. 2017
- Officials (around 60,000) to be trained on the GST laws and the IT framework.
For More Details Keep Visiting www.bimahelpline.com
- Additional Tax benefit of Rs 50000/- over and above 1.5 lacs u/s 80 C
Contribution To Tier I:
NPS also allows client to choose from any one of the following entities to manage Pension Fund:
- Only multicity cheques / payable at par cheques are acceptable for contribution.
Most financial planners suggest that the first step in any financial plan should be to ensure that one has adequate health insurance. One must get adequate health insurance cover for self and family even before starting to save for one's goals. What's more, the premium paid for health insurance also provides a tax benefit by reducing your taxable income and thereby your tax liability. Here are five crucial things to know about tax benefits of health insurance plans as per income tax laws for fiscal 2015-2016.
Parents: The premium paid towards health insurance policies for your parents qualifies for deduction under Section 80D of the Income Tax Act. The benefit is available to individuals on health insurance premium paid for self, spouse, children and also parents. Importantly, it does not matter whether the children or parents are dependent on you or not.
The quantum of tax benefit, however, depends on the age of the individual who is medically insured. On the premium paid for self, spouse, children and parents, the maximum deduction that can be availed is Rs 25,000 a year, provided the age of the individual is not above 60. If the premium paid by an individual is towards health policy for his or her parent who is a senior citizen of age 60 or more, the maximum is capped at Rs 30,000. A taxpayer may therefore maximise tax benefit under section 80D to a total of Rs 55,000 if his age is below 60 while parents age is above 60. For those tax payer individuals who are of age 60 or more and are also paying health insurance premium for their parents, the maximum tax benefit under section 80D would therefore be a total of Rs 60,000.
Life insurance companies riders: The Section 80D tax benefit is on the premium paid towards health policy and therefore does not restrict one to buy health plan only from health insurance companies. The premium paid towards critical illness or medical insurance riders in a life insurance policy also qualify for tax benefit under the same section. Further, premium on health insurance policies of life insurance companies is also eligible for the same tax advantage.
Health check-ups: Within the maximum limit of Rs 25,000 or Rs 30,000, the preventive health check-ups get a benefit of up to Rs 5,000. This means, if you pay premium of Rs 20,000 towards Mediclaim and undergo a health check-up costing Rs 5,000, the total of Rs 25,000 can be availed under section 80D. Most prominent hospitals offer preventive health check up packages. With lifestyle ailments on the rise, it's always better to keep an eye on one's health.
Tax benefit available on both types of health insurance: Both 'indemnity' and 'defined benefit' kinds of health insurance plans would qualify for tax benefit. Not just the indemnity plans such as individual health insurance plan popularly called Mediclaim and Family Floater plans but also defined benefit plans such as daily hospital cash plan and critical illness plan of any standalone health insurance company or a general insurance company would qualify for tax benefit.
Cash payment: One may pay premium in cash, however, in order to avail tax benefit, the income tax rules disallows tax benefit on premium paid in cash. One may however pay by Internet banking, cheque, draft or even by credit card to get tax advantage on premium. However, cash payment for preventive health check up is eligible for section 80D benefit.
Conclusion: It's often said that one should not invest merely for saving taxes. In case of health insurance, which anyhow is not an investment, premium paid not only buys you health cover but also aids in saving taxes. In view of the rising hospital costs, buying a health insurance certainly helps.
Good health is a blessing for each person. It is a tool that guides you towards a happy and healthy life. We all know that a healthy body nourishes a healthy mind and that helps you work better through the day. With a healthy body, you will be free to focus on different aspects of your life. We all know that in the old age, people are more prone to disease . It is thus essential to take extra care of the health in the old age and get quality treatment in time of need. But for many people getting quality treatment in older age is a tricky prospect due to lack of funds. As a responsible child, it is thus our duty to ensure our parents under an effective health plan to secure their health in old age that will take care of all health issues and help them lead a trouble free life.
This travel insurance and trip insurance plan offers precise cover under all facets of a global travel plan. However, it is compulsory according to the rule books of most countries of the world.