ET-Wealth December 28 2015 – January 3 2016
Hi Friends, a fantastic newspaper weekly – The Economic Times WEALTH shares with its readers the queries of people from all walks of life related with various aspects of taxation. These queries are answered by well known experts of taxation fields hailing from even greater financial consulting companies. I felt a need to share those queries online since not many people are aware of that fantastic newspaper from the Times of India Group.
Q1. I am a 27-year old PSU employee looking to buy a health insurance plan. My 41-year old sister is a dependant. What are the factors that I need to consider before purchasing a plan?
Ans 1. Before purchasing a health insurance policy, you need to check if the insurance plan you want to opt for covers ‘sister’ as a relationship under the floater plan. If yes, you can buy the floater plan, otherwise you will have to buy two individual plans. Select a sum insured keeping in mind your current and future health needs. Don’t decide solely on the basis of the premium amount. Features like out-patient cover, maternity, optional benefits, no-claim bonus, free health check-ups and cost-sharing features like co-pay, room rent capping and deductibles should also be taken into consideration. It is advisable to purchase a comprehensive plan that covers the out-patient expenses as well to meet health expenses like routine diagnostics, consultations, etc.
Query answered by Expert – Sanjay Datta, Chief, Underwriting & Claims, ICICI Lombard
Q2. I am planning to sell my flat in Haryana, which I purchased in 2010 for Rs. 30 Lakhs. If I sell it now for Rs. 67 Lakhs, how much Tax will I have to pay on long-term capital gains? If I choose to invest in section 54EC bonds to save on tax, will I have to invest the entire amount?
Ans 2. If you sell the flat for Rs. 67 Lakhs, the indexed cost of acquisition will be Rs. 45.61 Lakhs (Formula = Rs. 30 Lakhs * 1081 / 711). The long-term capital gain will be Rs.21.38 Lakhs and will incur a tax of Rs. 4.27 Lakhs. The entire capital gain needs to be invested for claiming the exemption under section 54EC in REC (Rural Electrification Corporation), NHAI (National Highways Authority of India), NABARD (National Bank for Agriculture and Rural Development) Bonds within six months of the sale of property.
Query answered by Expert – Minal Agarwal Jain, Managing Partner, Mahesh K. Agarwal & Company
Q3. I am a 33-year old doctor, seeking to invest Rs. 5 Lakhs for the long-term (minimum five years). Given the relative lull in the market, I am not sure where I should invest this sum. Should I opt for equity, hybrid, or debt mutual funds?
Ans 3. Your goals, not the state of the market, should determine your investment choices. When you say you can invest for a minimum period of five years. I am assuming you are doing it to meet some financial objective for the future. In that case, the present lull hardly matters. I suggest you divide this sum into 12 equal installments and invest this sum through monthly SIPs (Systematic Investment Plans) of around Rs. 42,000 for a period of 12 months in three to four equity schemes. This phasing of the amount will help you benefit from the market’s volatility.
Query answered by Expert – Jayant R. Pai, CFP and Head of Marketing, PPFAS Mutual Funds
Q4. We are selling our residential property in Pune. To avoid tax on capital gains, can it be split and invested in multiple properties or does it need to be invested in a single property?
Ans 4. The long-term capital gain arising from the sale of a residential property is exempt from tax to the extent that this gain is invested in another house. This needs to be done within one year before or two years after the sale of the house, or construction of a house within three years of the date of sale. With effect from financial year 2014-15, tax exemption can be claimed only for one house purchased and /or constructed in India. So, even if you purchase or construct more than one house, the tax exemption will be available only for one house.
Query answered by Expert – Homi Mistry, Partner, Deloitte Haskins & Sells
Q5. I want to invest Rs. 4 Lakhs for my five-year-old grandson, with the aim of helping him fund his higher education. What are my options? Can I invest it directly in my grandson’s name? He does not have a savings bank account or a PAN Card.
Ans 5. You can invest directly in the name of your grandson. Although investments are supposed to be made using funds directly from the investor – no third party investment is allowed – there is an exception when it comes to parents and grandparents. Your grandson does not need to have a PAN card for this purpose, but he will need a savings bank account in his name. The same can be linked to the folio that you are creating for him.
Query answered by Expert – C.R. Chandrasekar, CEO and Co-Founder, FundsIndia.com
Q6. I recently received a gift of Rs. 1.5 Lakhs from my brother. What will be the tax implication for me and my brother? Both of us fall in the 30% tax bracket.
Ans 6. Gifts received in excess of Rs. 50,000 are generally taxable in the hands of the recipient. However, those received from relatives are exempt from taxation. These are family transactions and, hence, beyond the scope of taxation laws. The law has categorically included ‘Brother of an individual’ within the scope of the definitions of the term ‘relatives’. Therefore, the sum of Rs. 1.5 Lakhs received by you from your brother will not be taxable in your hands. You are, however, expected to disclose the sum received as part of your schedule of exempted income in your tax returns to avoid future complications at the time of assessment. Irrespective of whether the gift is taxable in the hands of the recipient or not, there are no tax implications in the hands of the donor. Hence, there is no tax liability or implication for your brother as well.
Query answered by Expert – Divakar Vijayasarathy, Co-Founder, Meeturpro.com