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How can you save more taxes in 2022 ? Here are 6 investment schemes to save more money

The best time to start your tax saving investments is at the beginning of a calendar year or a financial year. While tax planning is important, getting aware of all tax saving schemes and choosing the right one is crucial.

 

Tax saving schemes ensure you don’t pay more taxes and make money in the long run by investing in savings-oriented schemes. Here are some of the best tax saving options with a deduction of up to ₹1.5 lakh in your income tax for the year.

 

Here are a few options of tax saving schemes:

 

ELSS Mutual Fund

Equity-linked saving scheme (ELSS) is a type of mutual fund scheme that primarily invests in equity funds. ELSS offers tax benefits to investors. The investments in the scheme are eligible for tax deduction under section 80C of the Income Tax Act, 1961 up to a maximum of ₹1.5 lakh.

 

One can invest through both lump sum and systematic investment plans (SIP) to avail the tax deduction. This way, ELSS offers both investment and tax saving benefits.

Here are the five top performing ELSS funds in the industry:

 

Funds% return in last 3 years
Quant Tax Plan37.52%
BOI AXA Tax Advantage30.92%
Mirae Asset Tax Saver26.53%
Canara Robeco Equity Tax Saver26.19%
IDFC Tax Advantage (ELSS)24.54%

 

National Savings Certificate (NSC)

NSC is a fixed income tax-saving investment plan that you can open with any post office branch. The scheme is an initiative of the government of India and hence is relatively safer. The investment in NSC qualifies for deduction under section 80C of the income tax act of up to ₹1.50 lakh.

These certificates earn an annual fixed interest of around 6.8% per annum (revised every quarter by the government), thus guaranteeing a regular income for the investor. The scheme has two types of certificates — 5-year and 10-year.

 

National Pension Scheme (NPS)

NPS is a pension cum investment scheme launched by the government of India to provide old age security to citizens of India. The scheme offers tax saving options to both government and private employees. Any citizen between the age of 18-60 can invest in it. The amount invested by the depositor is invested in several schemes including the equity markets. Again the basic amount of deduction offered by the fund is up to ₹1.5 lakh on the same amount of investment. However, NPS allows one to get an additional ₹50,000 deduction under section 80CCD (1B), taking the overall tax deduction amount to ₹2 lakh.

 

Unit Linked Insurance Plan (ULIP)

ULIP is offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan.

A portion of the premium paid by the policyholder is utilised to provide insurance coverage to the policyholder and the remaining portion is invested in equity and debt instruments. ULIP also provides tax deduction up to ₹1.5 lakh.

 

Here are the top 5 best performing ULIP plans in the industry:

ULIP plans by insurance companies% returns in last 3 years
PNB MetLife – Met Pension Plus27.40%
AEGON Life iMaximize Plan – Opportunity Fund23.40%
Bharti AXA Life – Future Secure Pension – Growth Opportunities Pension Plus23.30%
Future Pension Advantage Plan – Future Pension Active21.80%
Kotak Platinum Edge – Frontline Equity Fund21.40%

 

Public Provident Fund (PPF)

PPF is one of the safest investment options to start with that can help you secure your retirement and save tax as well. The PPF has a minimum tenure of 15 years with as little as ₹500 to open an account.

 

You can open a PPF account through a post office or in any nationalised bank.

 

Income tax exemptions are applicable on the principal amount invested in a PPF account. The interest rate for PPF is set and paid by the government for every quarter which is currently at 7.1%, more than the savings rate in banks. Taxpayers can claim a maximum deduction up to ₹1.5 lakh.

 

Home loan

If you have taken a home loan to buy a new house, you are also allowed to claim a deduction of up to ₹1.5 lakh under section 80C of the income tax. The deduction can be claimed on the principal amount repaid in the particular financial year. Check your home loan interest certificate for EMI payment details.

 

However, note that even if you put more money i.e ₹1.5 lakh each in any of the above tax saving options like ULIP, ELSS MF, your maximum deduction from taxable income will still be a total of ₹1.5 lakh only.

 

However, investing in NPS can get you an additional ₹50,000 deduction, taking the overall tax deduction amount to ₹2 lakh.

 

Source: Business Insider

 

9 income tax saving tips that also help financial fitness

Here is a look at 9 ways one can save income tax and improve one’s overall financial fitness.

 

1. Investment in tax-saving instruments

To encourage saving by citizens, the government has provided certain tax deductions on the amounts invested in specified instruments under section 80C of the Income-tax Act, 1961. Some of the popular specified investment instruments for tax planning are:

  1. Employees’ Provident Fund (EPF)
  2. Public Provident Fund (PPF)
  3. Fixed deposits (tenure of 5 years or more)
  4. Life insurance policies

Investing in these instruments wisely can serve the dual purpose of meeting financial goals and tax savings (up to an investment limit of Rs 1.5 lakh per financial year) concurrently. However, tax savings will be available only if an individual opts for the old tax regime. If one opts for the new tax regime, which offers concessional tax rates, one will have to forgo many of the tax deductions and exemptions available under the old tax regime like the section 80C benefit. For those who have opted.

 

2. Selection of appropriate components in the salary structure offered by the employer

In the case of a salaried individual, one can evaluate the salary structure offered by the employer and opt for those salary components which help maximise tax benefits.

For example, one can opt for House Rent Allowance (HRA) in case they are paying rent, telephone/ internet expense reimbursements, education allowance, food coupons, etc. Accordingly, one can claim appropriate deductions/exemptions.

 

3. Increase in retirement fund contribution

Salaried individuals can look at making an additional contribution towards the ‘Voluntary Provident Fund’ in addition to EPF if the investment limit of Rs 1.5 lakh is not exhausted.

This additional contribution will also be deductible from taxable income subject to conditions. Further, the employer’s contribution to NPS (subject to 10% of salary) will provide an additional deduction to the employee.

However, do keep in mind that the employee’s contribution to EPF and VPF should not exceed Rs 2.5 lakh in a financial year, or else income tax will be payable on the interest accretion on the excess provident fund contributions.

 

4. Tax benefits on a home loan

If a housing loan is availed from a financial institution such as a bank or NBFC or housing finance company to acquire/ construct a house property, then the interest and principal paid on the loan taken can be claimed. claimed only if the old tax regime is opted for. Do keep in mind that the deduction on the principal repayment amount is subject to the overall Rs 1.5 lakh limit under Section 80C.

 

5. Protecting oneself with health insurance

Income tax provisions provide for deductions against premiums paid towards health insurance for self, spouse, dependent children, and dependent parents.

Hence, one can buy health insurance for oneself and family members to help manage medical expenses in case of health emergencies and at the same time, avail tax benefits for the premium paid towards these policies (Rs 25,000 for self, spouse, and dependent children; Rs 50,0000 for senior .. for senior citizen parents, as applicable).

Similarly, if senior citizens are not covered under any health insurance policy, then also they can claim a deduction of up to Rs 50,000 for medical expenses made during the year.

 

6. Claiming an appropriate deduction for medical expenses, tuition fees, etc.

It is important to note that in certain instances even if one doesn’t make any additional investment, tax benefits can be availed in connection with certain expenditures incurred like Rs 5,000 for preventive health check-ups.

However, the deduction for expenditure on health check-up is subject to the overall limit under section 80D which includes the health insurance premiums mentioned above. Also, Also, parents can claim a tax deduction of up to Rs 1.5 lakh under section 80C (under the overall limit of Rs 1.5 lakh) for the tuition fee paid for their children’s education.

 

7. Filing of tax returns within the specified timelines


The importance of filing income tax returns and other statutory forms (as applicable in one’s case) within the specified timelines cannot be emphasised enough. by the tax authorities. Further, filed income tax returns (ITR) are also required to be submitted for various purposes like applying for immigration documents, housing loans, carrying forward losses, certain high-value transactions, etc. Hence, it is important to file one’s ITR within the set timelines to avoid interest/ penal implications.

 

8. New concessional tax regime

A new simplified optional personal income tax regime has been introduced by the government from FY 2020-21 onwards.

Subject to certain conditions, an individual or HUF will have the option to pay taxes at reduced slab rates which are applicable without certain exemptions and deductions. In view of the same, one can compare tax payable under the existing and new tax regime and opt for the regime which is more beneficial from a tax perspective.

 

9. Documentation requirements

While no documents are required to be uploaded while e-filing ITR, one should maintain an adequate record of documents for investments made like PF account statements, passbooks, copies of insurance policies, pension plans, bank statements, etc. for a hassle-free interaction with the relevant authorities.

Source:economictimes.indiatimes.com

5 Most Common And Avoidable Tax Saving Mistakes

Morgan Stanley’s advertisement on tax-saving showed a catchy line, “You must pay taxes. But no law says you have to leave a tip.” The ad highlighted the importance of not ignoring the opportunity to legally save on taxes. Because, the lower amount of taxes you pay, the greater is your disposable income.

 

Mistake 1: Delaying Tax Saving Planning Till March

Many people delay executing a tax-saving plan until the end of a financial year, i.e., March. However, this is far from a good strategy. The truth is that the sooner you start working on your tax-saving planning, the better.

 

For instance, if you invest money in your PPF account in the first month of the financial year, you will receive a lot more tax-free interest for the year than investing the money in March.

Similarly, starting financial planning early in the financial year allows you the convenience of investing in an ELSS fund via the SIP route. Otherwise, you will have to put a large chunk of money later in the year. And this can be pretty troublesome from a cash flow perspective. Moreover, you may also end up borrowing money from credit cards to invest, which is a horrible idea.

So, don’t make the mistake of waiting until March to start your tax planning.

 

Mistake 2: Tax Saving Is Only About Investing

People often assume that tax saving is only about investing money in tax-saving products. It happens because much of the marketing effort is attracting your attention to products like ELSS, tax-saving fixed deposits, insurance policies, etc.

However, investing is only one part of sound tax management. The other important part that doesn’t receive due attention is how you manage your spending. Income tax laws allow for several deductions from your taxable income for certain expenditures that you make. For instance, payment of children’s tuition fees, health insurance premium, repayment of home loan, education loan, and house rent are expenses that quality for a tax deduction.

As a taxpayer, you need to explore all such tax-saving options to determine what works best for you. The more prepared you are with the tax laws, and the sooner you act on them, the better are your chances of minimizing your tax outgo.

 

Mistake 3: Not Evaluating Enough On Tax Saving Products

You can evaluate every tax-saving investment option on three broad parameters. The first parameter is liquidity, which simply means the ease you can access and withdraw your money when you need it. In this regard, you must have a clear understanding of the instrument’s lock-in period in addition to the premature withdrawal rules, including its taxability and penal charges.

The second broad parameter when evaluation a tax-saving financial product is the risk of losing money. Some investments are inherently volatile. And these are generally the investments that have some component of equity in them.

INSTRUMENT UNDERLYING ASSET CLASS RISK (LOSS OF CAPITAL) EXPECTED RETURNS *
Public Provident Fund Debt No 7 – 8%
Equity Linked Saving Scheme (ELSS) Equity Yes (Moderate) 12 – 14%
Sukanya Samriddhi Yojana Debt No 8%
National Savings Certificate Debt No 7%
Post Office Time Deposit Debt No 7%
Bank Tax-Saver Fixed Deposit Debt No 6 – 7%
National Pension System (NPS) Equity & Debt Yes (Low) 8 – 12%
Unit Linked Insurance Plans Equity & Debt Yes (Moderate) 7 – 12%

* Estimates Based On Historical Performance; May Not Sustain In The Future

That said, it is also crucial to factor that the presence of equities allows instruments like ELSS, ULIPs, and even NPS to offer inflation-beating returns over the long run. So as an investor, you need to ask yourself how comfortable you are in tolerating some volatility in the portfolio to make more returns.

Finally, the third parameter you need to consider when picking tax-saving products is their post-tax returns.

INSTRUMENT TAXATION
Public Provident Fund Tax-Free
Equity Linked Saving Scheme 10% Tax Payable On Long Term Capital Gain Exceeding ₹1,00,000
Sukanya Samriddhi Yojana Tax-Free
National Savings Certificate Interest Earned Is Taxable
Post Office Time Deposit Interest Earned Is Taxable
Bank Tax-Saver Fixed Deposit Interest Earned Is Taxable
National Pension System 60% Maturity Is Tax-Free; Rest 40% Goes To Annuity Which Is Taxable
Unit Linked Insurance Plans Mostly Tax-Free Except Where Annual Premium Exceeds ₹2,50,000

Investors generally check for tax benefits in terms of the deduction it allows. For example, a PPF or ELSS offers deduction under Section 80C. NPS provides a little more.

But what’s equally important to understand is the taxation on the income earned by that asset. And also how the maturity proceeds and early withdrawals will be treated from a taxation perspective.

Understanding these aspects can not only help you zero in on the right investment product, but it can improve your post-tax returns as well.

A big problem with not having an acceptable awareness or knowledge of tax-saving instruments is the inherent inefficiency in the planning process. This inefficiency often passes down as a legacy from parents and other well-wishers.

Consequently, many investors continually invest in LIC policies and other small saving schemes that typically struggle to beat inflation. While such investments with subdued returns can help you save some taxes in a particular year, you may end up wasting a lot more in potential returns on your money by investing in these products.

 

Mistake 4: Investing In Insurance-Cum-Investing Products

Every year in March, millions of Indians blindly invest in traditional life insurance plans like endowment and money-back policies to save taxes.

Such is the last-minute rush that life insurance companies have effectively marketed the month of March as India’s tax-saving season. And it should come as no surprise that insurance companies rake in around 20% of the entire year’s traditional life insurance policy sales.

Now, from a utility perspective, these insurance-cum-investment plans offer meager returns and often struggle to catch up with the long-term inflation rate, which is about 6%. Not just that, these products deliver lower returns than what a PPF, National Savings Certificate, or other small savings schemes offer.

Additionally, these insurance plans come with an investment commitment that runs from 10 to 20 years, and any attempts at a premature withdrawal or policy closure attract a heavy penalty.

 

Mistake 5: Not Diversifying Your Tax Saving Investments

All the tax-saving products come with lock-in requirements. As a result, they seldom align with your short-term financial goals. That is why you must understand how these investments fit within your overall long-term financial goals.

Most individuals rarely look at their investments in PPF, EPF, and other instruments as part of their overall financial portfolio. In effect, such investors grossly miscalculate their asset allocation.

Consequently, they invest less in the equities and miss the chance to accumulate a bigger corpus in the long run. While they think they are in a particular risk profile, unfortunately, their investments are stuck in a different risk basket.

 

Conclusion

Tax planning investments are no different from conventional investments. The basic principles such as asset allocation or diversification apply to managing tax-saving investments as well. Now that you know the most common and avoidable tax-saving mistakes, you can reflect on how you work your tax-saving activities.

Source:etmoney.com

5 Most Popular Ways to Save Tax | Deeva Ventures Pvt Ltd

5 Most Popular Ways to Save Tax

1. Equity Linked Saving Scheme (ELSS)

As the name suggests, Equity Linked Saving Scheme or ELSS is a type of mutual fund scheme that primarily invests in the stock market or Equity. 


Investments of up to 1.5 Lac done in ELSS Mutual Funds are eligible for tax deduction under section 80C of the Income Tax Act. The advantage ELSS has over other tax-saving instruments is the shortest lock-in period of 3 years. 


This means you can sell your investment only after 3 years, from the date of purchase! However, to maximize returns from ELSS funds, it is recommended to keep your investments intact for the maximum duration possible. 


If you have an ELSS SIP (Systematic Investment Plan), each installment has a lock-in period of three years, which means each of your installments will have a different maturity date.


2. Life Insurance

Life insurance policies can be useful tax planning tools because the policyholder is eligible for tax benefits under the Income Tax Act 1961 (Act). 


Though there are multiple modes for saving tax, life insurance is one of the most effective tax planning instruments. Plans from Life Insurance can be used for protection, long-term savings, and tax planning.


3. Health Insurance

Health care plans provide tax benefits. Premiums paid towards your health care policy are eligible for tax deductions under Section 80D of the Income Tax Act, 1961. The quantum of the deduction is as under:


  • A) In the case of the individual, Rs. 25,000 for himself and his family

  • B) If an individual or spouse is 60 years old or more the deduction available is Rs 50,000

  • C) An additional deduction for insurance of parents (father or mother or both, whether dependent or not) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 50,000 if parents are 60 years old or more.

  • D) For uninsured super senior citizens (80 years old or more) medical expenditure incurred up to Rs 50,000 shall be allowed

4. National Pension Scheme (NPS)

A tax exemption of Rs.1.5 lakh can be claimed on the employee’s and employer’s contribution towards the National Pension System (NPS). Tax benefits can be claimed under Section 80CCD(1), 80CCD(2), and 80CCD(1B) of the Income Tax Act.


A) 80CCD(1), which comes under Section 80C, covers self-contribution. Salaried employees can claim a maximum deduction of 10% of their salary, while self-employed individuals can claim up to 20% of their gross income.


B) 80CCD(2), which is also a part of Section 80C, covers the employer’s contribution towards NPS. This benefit cannot be claimed by self-employed individuals. The maximum amount that an individual is eligible for deduction is either the employer’s NPS contribution or 10% of basic salary plus Dearness Allowance (DA).


C) Under Section 80CCD(1B), individuals can claim an additional amount of Rs.50,000 for any other self-contributions as an NPS tax benefit.

Therefore, individuals can claim up to Rs.2 lakh as tax benefits under NPS.


5. Home Loans

A) Under Section 80C, you can claim a deduction up to ₹ 1.50 Lakh for the principal repayment done in the financial year.


B) Under Section 24B, you can claim a deduction for up to ₹ 2 Lakh for the accrual and payment of interest on the home loan.


C) Under Section 80EEA, you can claim a deduction for up to ₹ 1.50 Lakh for the interest payment of a home loan availed during the financial year.


D) Under Section 80EE, you can claim an additional deduction of up to ₹ 50,000 for the interest payment of the home loan, if you have availed home loan for an amount less than ₹ 35 Lakh and the value of the property is within ₹ 25 Lakh.


E) In the case of a joint home loan, each borrower can claim a deduction of principal repayment (section 80C) and interest payment (section 24b) if they are also the co-owners of the property.

 

Don’t Wait To Start Saving, Take Action Today | Deeva Ventures Pvt Ltd

Don’t Wait To Start Saving, Take Action Today

In life, we need to take action.  Today, I need everyone to start saving immediately if you haven’t yet. 


How many of us have always thought about saving but think that we can always do it tomorrow? We always think that we can wait, but you will be waiting forever to be financially free too.


  • 1. We can’t wait to go on a vacation but we can always wait to pay our mortgages.

  • 2. We can’t wait to get rich quickly but we can always wait to learn how to get rich through time.

  • 3. If you give yourself excuses, stop.

  • 4. We can’t wait for early retirement but we will have to wait.


  • 5. If it, is you, change?

  • 6.If you want to feel financially secure, save.

  • 7.We can’t wait to leave work but we can always wait to learn how to increase our wealth.

Trim down your spending and start saving.  Otherwise, I guarantee you will regret it.


4 Reasons to Invest in NPS | Deeva Ventures Pvt Ltd

4 Reasons to Invest in NPS

Here are some of the reasons that make NPS a go-to solution to retire rich while at the same time avail tax benefits.

 

Accumulate Wealth for Retirement

With NPS, you can create a corpus for retirement and secure a pension for yourself after retirement. 

 

You can withdraw up to 60% of the accumulated corpus at the age of retirement and utilize the remaining corpus to buy an annuity to receive a pension regularly.

 

Get Extra Tax Deduction of Rs 50,000

Your investments in NPS make you eligible to claim an additional tax deduction of up to Rs.50,000 under section 80 CCD(1B) over and above the tax benefits of Rs. 1.5 Lakh available under section 80C.

 

Earn Market-linked Returns

NPS provides you an opportunity to earn market-linked returns that beat inflation and help you to accumulate a relatively larger corpus for retirement.

 

Enjoy the Option to Rebalance the Portfolio

Your NPS portfolio gets rebalanced once every year wherein your allocations in equity shares are shifted to debt as your age increases.

 

5 Health Insurance Benefits

5 Health Insurance Benefits

The treatment costs of illnesses have been rising, therefore the need to have health insurance cannot be understated. 


Having Health Insurance is not mandatory from the government of India but ignoring it could prove costly. Various medical policies offer different features and benefits.


Health insurance policies are of two types –

1. Individual Plan

2. Family Floater Plan


In an individual plan only, you are covered and the sum assured is available only on your hospitalization, whereas in the Family Floater plan other members of the family can be covered. 


The cover is available on hospitalization of any of the members who are covered under the policy.


You take a health insurance plan with a clear intent to protect your capital from getting eroded. 


Hospitalization expenses can cause a serious dent in your savings which could include the cost of medicines, doctors and nursing fees, and prescription costs. There are health insurance companies that offer daily hospitalization cash expenses.


Pre and Post Hospitalization Expenses

While all insurance companies cover hospitalization expenses, still it is suggested that you check if the policy you intend to buy covers pre and post-hospitalization expenses. 


These costs could cost you a lot of money depending on the type of illness and treatment required.


List of diseases Covered

The policy that you have could have a feature or enhancement to the current benefits which could be a result of insurance companies subscribed plan, regulatory mandate, or it can also be because the insurance company has decided to extend these benefits as you have not claimed for a long time. 


Few medical conditions which are covered can be extended, so one needs to be in communication with the health insurance company.


Top-Up

There are instances like getting a promotion or a salary hike, birth of a child where you might feel that the current health insurance coverage might not be sufficient and you need to enhance your cover. Getting a new health insurance plan can be a new process. 


This is where the top-up option comes in handy. It allows getting an extra sum assured on top of the existing cover. Unlike a new plan, you don’t have to go for medical screenings for buying a top-up.


Income Tax Benefit

Payments made towards Health Insurance qualify for deduction under section 80 (D) of the Indian Income Tax Act. 


If you buy health insurance for yourself or your family then you get a tax deduction of up to Rs 25, 000 and if also take a policy for your parents who are senior citizens then the tax benefits available increases up to Rs 50, 000.


Additional Benefits

You can also opt for additional benefits like the cover for ambulance charges, day-care procedures, health check-ups, and vaccination charges.


5 Lessons for Term Insurance Buyers

5 Lessons for Term Insurance Buyers

We are trying very hard to make savings which could come in handy as the economy of our nation India continues to steam ahead.


Effective financial planning is needed to consider your financial requirements and goals. People will always search for financial instruments which give them higher returns on investments.


Term Insurance Policies are a financial instrument that helps you to get the benefits of protection and tax benefit.


It helps the family to stay financially secured in case of the demise of the policyholder, therefore, buying a term insurance policy is an important instrument when one thinks about taking life insurance.


Online Purchase of term plans can be the first crucial step toward making a successful financial strategy. It offers you protection against the unknown and can be used as a supplement for retirement income.


Buy for the Right Reason

You need to analyze the need you want to take up term insurance. You need to remember that you are buying term insurance for a specific purpose that offers cover to your family in case of your demise.


Tax benefits can’t be the main reason for your decision to purchase Term Insurance. This policy funds your retirement and the education of your child. If you are buying this at a young age then it would cost you cheaper.


Deciding the Cover Amount

To arrive at the final sum of term insurance, customers need to estimate their annual income, salary, monthly expenses, current and future expenses like school fees, the mortgage to take care of the financial requirements of their family after their demise.


Tenure of Policy

The tenure of your life insurance policy needs to be Retirement Age minus the Current Age, if your current age is 35 years of age and you want to retire at the age of 60, policy tenure would be 25 years. Some plans offer high life insurance cover till the age of 75.


Additional Coverage & Benefits

Add-On is riders that you can take along with a base cover, some of them are critical illness rider, accidental death benefit rider, waiver of premium.


The benefits are available at a higher premium which is added to the base premium. We need to understand the importance and relevance of these riders so that a proper selection of the riders can be done.


Credentials of Life Insurance Company & Its Claim Expense

Before you finalize a life insurance policy, you would need to be completely assured of the credentials of your chosen life insurance company.


Factors which one should look at include Assets under Management and Solvency Ratio.

 

5 Things to know before investing in ELSS Mutual Fund

5 Things to know before investing in ELSS Mutual Fund

Your insurance agent may be pushing life insurance as the best option, while your friend extols the benefits of a plain vanilla PPF account or even a tax saving FD with a bank.

 

And yet, there’s an 80(C) instrument that not just has a relatively short lock-in period of just 3 years – but has delivered a 5-year category average return exceeding 15% per annum and a 10-year annualized return of more than 17% per annum.

 

These are tax saving mutual funds or ELSS (Equity Linked Savings Schemes. These numbers may seem tempting, but make sure you’ve understood a few things about ELSS funds before you say “Tax Saving Mutual Funds Sahi Hai” and jump in with both feet!

 

1. They Have no Premature Exit Option

Tax saving mutual funds have a hard lock-in period of 3 years, and there are no options for partial or complete withdrawal. If you’ve invested in more than once tranche over the course of a year, each tranche will be treated as a separate purchase and will have to complete three years before you can access them.

 

2. They are High Risk in Nature

Being equity-oriented in nature, ELSS funds tend to be quite volatile. In a sense, that’s the price to pay for a significantly higher long-term return compared to low-risk products.

However, if you’re not willing to withstand ups and downs in your fund value, give ELSS funds a pass.

 

3. Their Returns Are Non-Linear

Many investors who are used to the linear returns associated with traditional products tend to get quite disconcerted by ELSS funds.

 

Understand that ELSS funds may go through phases of flat or even negative returns, but things tend to average out over the long term as cycles reverse. It’s vital to set your expectations right while investing.

 

4. The Dividend Option isn’t a Very Smart Idea

You may be tempted to go for the dividend pay-out option in an ELSS, but know that this isn’t a good idea.

 

First, you’ll take a hit of 15% in terms of dividend distribution tax. Second, dividends from ELSS funds are non-predictable in both timing and quantum, so you can’t really base any plans around them.

 

5. SIP’s are a Better Idea Than Lump Sums

For the next fiscal year, start a SIP in an ELSS fund instead of investing your money as a lump sum at the end of the fiscal year.

 

Your unit costs will get averaged out neatly, and it’ll be a lot easier on your pocket too!

 

4 Tips for the smooth Health Insurance Claim.

4 Tips for the smooth Health Insurance Claim.

So in this blog, I will talk about what you should do to extract the maximum value from your policy during claims and come out of the process truly satisfied


One of the biggest reasons for dissatisfaction with claims is a lack of awareness of the policy terms and conditions.


It can’t be stressed enough that every policyholder should read one’s policy document as soon as you receive it and if any terms and conditions are not clear, you should call us up at your insurer to understand more about it.


1. Limits on certain procedures

Your policy will have limits of certain procedures like the maximum price of the room that you can avail of.


Now you might want to go for a higher-priced room and you’ll assume that you can simply pay the difference between the actual rent of the room and the allowable limit. Please don’t do that.


Contact your insurance company before you do something like this. Insurers often treat room up-gradation as a partially payable claim.
In other words, never decide to alter the terms of your insurance contract unilaterally.


2. The minimum hospitalization required is 24 hours

Most health insurance policies require the patient to be admitted for a minimum of 24 hours or more to avail of the policy benefits.


This is a firm rule but excludes a few day-care procedures which will be clearly mentioned in your policy document. So if you were to go to your hospital for a tetanus shot, for example – you won’t be able to file a claim on that basis.


3. Waiting period on certain diseases

The third area you need to pay attention to is your waiting period for certain diseases. A waiting period is a sort of a hibernation period during which any claims made will not be admissible


A good number of consumers are not aware that claims for certain conditions are inadmissible for up to two years.


While these are a handful of conditions but it includes popular ones like tonsils, hernia, cataract, etc. A list of these medical conditions will be available in your policy wordings.

And finally, there is a waiting period on pre-existing conditions where there is a wait of 3 -4 years.


This is another clause that several policyholders are not aware of because they did not read the policy document and leads to dissatisfaction when they apply for claims within the waiting period for pre-existing ailments.


A common problem related to this is that consumers don’t state their pre-existing condition while taking the policy. This generally happens under two circumstances.


One, when consumers allow agents to fill the proposal form on their behalf. Two, when they make the application process very lightly and leave these details accidentally or on purpose.


This is a very difficult situation for the policyholder and the insurer. But because every insurance contract was agreed upon based on good faith, there is every probability a claim will not be admissible in case the declaration made by the policyholder is false or partial.


4. Examine the plan’s co-payments, sub-limits, and exclusions

The fourth area and the last of the key clauses that have a major impact on the claims are limiting conditions like co-payments, sub-limits, and exclusions.


Co-payments:

Co-payments are where you will have to pay part of the claim and the insurer will pay part of the claim.


If you have ever made a car insurance claim without having zero depreciation on your car insurance policy, you would have noticed that you had to pay like 30-35 percent of the total bill to the workshop and the insurance company paid the rest.


Similarly, co-payment may be triggered in your health insurance contract in some situations which is why you should read the policy document carefully once you receive it.


Sub-limits:

The same is true for sub-limits which by definition mean that the insurance contract has a capping on how much is payable for a particular illness.


Sub-limits are used for procedures like cataract, total knee cap replacement, and kidney dialysis. These too will be in your policy document and will go something like Rs 20,000 per eye for cataract removal.


Exclusions:

And finally, the exclusions, which becomes the cause of a lot of hardship. Most health insurance policies don’t cover maternity and childbirth, yet a huge number of claims are lodged toward these due to a lack of awareness of policy exclusions.


Other exclusions in the policy include participation in adventurous activities, abuse of intoxicants like alcohol, mental disorder-related ailments, etc.


Some smaller payments are generally not included. Again, most policyholders assume that these expenses are claimable but that is not the case.


Some expenses which are not payable by health insurance include registration and discharge charges, cost of hearing aid, any toiletries, donor screening charges, etc.


Understanding co-payments, sub-limits, and exclusions are a must to ensure you are claiming for the right procedures as contracted under your health insurance contract.


The secret to a happy claims experience is to have a clear understanding of what is claimable and what is not under the terms of your policy – most of which are available in the policy wordings. This includes inclusions, exclusion, waiting period, sub-limits, etc.


Conclusion

If you are thorough in your research, you wouldn’t have to worry about claim rejection. And when you know what is in your policy, then it also gives you the necessary knowledge to fight for any unjust calls made by the insurer’s claims team.