One of the most popular and important riders added to an insurance policy is the ‘Waiver of Premium’  rider. If this rider is a part of one’s insurance policy, it ensures that the premiums to be paid by the insured are waived in the event that the insured becomes ‘completely disabled’ or loses his source of revenue because of unemployment owing to an injury or sickness. In such a situation, even though the premiums are not paid by the insured, the policy does not lapse.

With the growing uncertainty of life, getting an insurance policy has become a must for almost every individual. When you take an insurance policy, you also tend to add ‘riders’  to the policy. Riders are the additional benefits that you may buy and add to your policy. They are options that allow you to enhance your insurance cover, qualitatively and quantitatively. Riders can be mixed and matched based on one’s preferences for a small additional cost.

One size does not fit all

A one size fits all approach does not apply to insurance policies. Therefore, the kind and number of riders added to an individual’s insurance policy depends on the many factors such as the individual’s health, future plans, purpose of the insurance etc.

One of the most popular and important riders added to an insurance policy is the ‘Waiver of Premium’  rider. If this rider is a part of one’s insurance policy, it ensures that the premiums to be paid by the insured are waived in the event that the insured becomes ‘completely disabled’ or loses his source of revenue because of unemployment owing to an injury or sickness. In such a situation, even though the premiums are not paid by the insured, the policy does not lapse.

What is a waiver of premium?

A waiver of premium is an extra option life insurance companies provide you with on top of your purchased life insurance policy at an additional cost. This offers protection and cover for your premiums if you should fall seriously ill or incur injuries that leave you impaired – in a situation where you cannot earn. In such an unfortunate event, the life insurance company will become responsible to pay the premiums which you were expected to pay.

The best part about this rider is that anyone who takes up the insurance policy can effectively add this rider to the policy. The amount of premium to be paid depends on the premium you pay on the base policy and on other riders. The higher the premium on the base policy, and the more the riders you add, the higher will be the premium you pay on this rider.

Is it worth it?

Many ask whether this rider is worth being latched on to the base policy. With the increasingly stressful lifestyle, hazardous traffic situations and a horde of other factors, addition of this rider to an insurance policy would be very helpful. This rider also ensures that in the event of death of the insured during the term of the policy, the policy does not lapse and remains in force even during the Auto Cover period. The Auto Cover Period is a term of two years during which full death cover continues even if the insured has not paid premiums – subject to at least two full years’ premiums having been paid.

One other feature of this rider that bears attention is the fact that the premium paid for this rider qualifies for tax deduction under section 80D of the Income Tax Act.

How is it useful?

This rider is especially useful in a child insurance policy as this primarily has been set up in place to provide money for your child in the hour of his or her need.

In the case of a child insurance policy, where you are ensuring your child receives a sum of money at a certain pre-defined age, this will ensure that the process is uninterrupted and premium payment is continued, so that your child receives the money at the pre-determined date.

Imagine the scenario if do not opt for this and end up in an unfortunate situation, where you are unable to pay your premium and the policy lapses. Then it would be no good to anybody, so to have this drawback plugged, its better to pay up the additional cost to ensure continuity in the premium payment.

The terms and conditions regarding what constitutes serious illenss or injury and conditions regarding the time frame when the premium payment starts by the insurer etc.  are defined by the insurance company and may vary from one company to another. Be sure to research on this thoroughly and understand the clauses and conditions of the insurance company until you choose an option offered by a company with which you are most comfortable with.

Usually, the premium paying term for the rider is throughout the benefit period but a few companies restrict the time frame to the policy owner attaining a particular age or for a maximum duration of 25 to 30 years.

Therefore, choose riders according to your need and budget. Sometimes its is the choice that we make that will help us through tough times.

The Iyers had a simple formula -  If they earned Rs. 100/- whether Raghu’s salary or Radha’s freelance income Rs.30.00 went towards investments. Of this – Rs.10 went to long term saving, Rs.10 went to short term (1-2 years) needs and Rs.10 went to build an emergency corpus. After a couple of years they had created an emergency corpus which enabled them to start investing that Rs.10 for their children.

Mrs. Iyer watched from the bench her husband swing and perfect a put on the golf course. Her thoughts went back 32 years when they had just come back from an exciting honeymoon. Her father-in-law sat them down and had a chat that changed their life… or should we say, put their life on track.

Both Raghu Iyer and Radha had been class mates at IIM Calcutta and had married couple of years after they had passed out. They had high flying corporate jobs and were earning handsome salaries. Their background and the position required them to maintain a certain standard of living and they did. Young, enthusiastic and full of energy they were the work hard, party hard type of people and loved it that way.

Raghu had an inkling as to what his father was about to say that evening. Appa was a disciplined man and had a certain way with everything. Now, he would ask them to take stock and live a more sober life which meant cutting down on their wardrobe spending, lesser partying, they will have to travel economy and avoid going on a shopping sprees on impulse. This whole planning for the rainy day thing was boring and budgeting was something they hated to do. Actually Raghu dint know of a single person who loved budgeting. So they dreaded the meeting.

But that evening, Raghu’s father told them just one thing that let them live life king size then and now.  Initially for the first few months it was a bit tough, but things started falling in place quickly. Then came the children – twins and Radha was forced to quit full time working. This was a conscious decision; however, it did impact their cash flows. But they still went ahead and bought the house they had identified and upgraded their Maruti 800 too. Their annual vacations were sacrosanct and it provided both the Iyers and the children exposure to different parts of the world.

Relatives and friends envied them but took solace in the thought that with this kind of lifestyle, the Iyers would have to compromise on their long term and retirement savings and would be reduced to be dependents on their children when they grow old.

The children did well and went abroad. Raghu retired early at 55, took up the cause of rural education and nurtures his passion for golf. The Iyers are well settled and would comfortably see through their twilight years in each other’s company. Relatives and friends are still envious of them.

The Iyers had taken their father’s advice seriously and saw to it that their and the children’s future was well taken care of. Radha smiled at the thought of her father-in-laws words that defining moment. It sounded ridiculously simple then but now it seems profound.

“Religiously put aside 30% of your earnings into carefully chosen investments. Spend the rest of the money, the way you want and please”.

It was so simply said, so straight forward yet the Iyers decided to carefully implement it.

The Iyers had a simple formula -  If they earned Rs. 100/- whether Raghu’s salary or Radha’s freelance income Rs.30.00 went towards investments. Of this – Rs.10 went to long term saving, Rs.10 went to short term (1-2 years) needs and Rs.10 went to build an emergency corpus.

After a couple of years they had created an emergency corpus which enabled them to start investing that Rs.10 for their children. They adjusted their life around living with Rs.70.00. The short term investments provided for their holidays and indulgences and the children had a reasonable sum of money in their accounts when they went to college.

Of course a student loan was inevitable but that was still fine. And needless to say the Rs.10.00 invested every month for the past 30 years in equities and fixed deposits were a decent corpus when Raghu turned 55.

However in this the magical secret was three things:

- Passivity – they mindlessly took away Rs.30.00 from every hundred and never meddled with their investments.

- All incremental income, annual bonuses or performance incentives followed the same pattern of 30% being invested – 70% being spent.

- And there arose no particular need to withdraw from their long term savings because they had emergency cash, were comfortably insured and planned their fantasy spending plans.

The Iyers are happy people but are a bit shy to share this learning with youngsters. Question them about it and they simply say – “The lesson is just – Spend less than you earn and pay yourself first”.

It is a good idea to categorize your payments under different headings like daily living expenses, entertainment and vacation, health etc. This will give you a fair idea of how much you spend on different categories. It is easier to keep track and also control your expenses once you know how much portion of your earnings goes into each expense.

Getting married? Starting a job? Getting further education? Starting your own family? Have you planned for these important phases in your life? Good control over your personal finances will help you achieve the goals you have set for yourself and cope with changes in your life. How can you achieve that? The answer is having your own personalized budget.

How do you draw a budget that suits your need? Say, you are interested in taking an educational course and are thinking of taking a student loan. How will you accommodate this additional expense? To begin with, you need to draw your personal budget.

- The first step is to calculate your monthly income. Consider income from all sources including income from your investments. ——- A

- Next, make a list of your monthly expenses. For example, if you are a salaried employee, list your routine expenses like expenses on commute, food expenses, utilities, clothes, charities etc. Then think of any extraordinary expenses that you may have to incur during the budgeted period, such as home improvement projects or purchasing a car. ——- B

- It is a good idea to categorize your payments under different headings like daily living expenses, entertainment and vacation, health etc. This will give you a fair idea of how much you spend on different categories. It is easier to keep track and also control your expenses once you know how much portion of your earnings goes into each expense.

- Calculate the difference (A – B = C).

- The next step is to redraft your personal budget to include expenses related to the educational course like interest and principal payment, course fees, expenses on tuitions and books, loss of wages etc. If you still have a comfortable surplus of cash (C), you can finalize this budget. If not, consider the expenses that you can avoid and reconsider the amount of loan. Once you reach a bottom line that you are comfortable with, finalize your budget.
- When you decide the cash surplus / short you will be comfortable with, you should also think of the percentage of income you would ideally like to save for your future. Think of short term as well as long term or retirement savings.

You may compile your budget into an excel sheet or use a physical book or diary. Alternatively, there are several free softwares available online for the taking.

Here are a few tips of a working budget:

- Keep your working sheet as simple as possible and keep it clean. Each item and category should be clearly defined.

- It is a good idea to create a flexible spreadsheet or if you have a hand written budget in mind, leave – enough space to add items of income or expenses in the existing budget.

- Maintain budgets on a continuous basis. Ideally, one should have a monthly budget rolling into an annual budget. The annual budget should also be in line with the long-term budget.

- An important part of budgeting is keeping track of actual income and expenses and calculating variances. If variances are beyond acceptable limits, then it is time to revisit your budget and make necessary changes.

- If you have a long list of income or expenses, it is advantageous to use excel or other computer software. For example, by using excel you can add comments, format your sheet, create reports using certain information from the excel sheet.

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Can you survive a job loss for six months? Do you have some funds stashed away for such emergencies until you gather your reins and surge ahead confidently with a new job and a new plan for the future in place? What about a medical emergency? Do you have resources that you can tap into for such a scenario. If the answer is No, then it is time to take a serious look at how you manage your money.

Alert #1: You are terrible with bills and payments!

Maybe its forgetfulness or a laid back attitude or a chaotic lifestyle, whatever the reason, if you are laden with unpaid bills, get fined for late payments 70 per cent of the time, bounce a few cheques every 10 months, then it is time to take stock of your organisational skills, at least in your personal finance department.

Keep a monthly tracker, set reminders on your mobile, keep an online calendar that beeps when bill, insurance and other payment deadlines arrive, choose whatever means that you are comfortable with to meet the objective of being methodical with payments.

Sort bills in a folder, keep them accessible at one place.

Alert #2: You use your credit cards excessively and often take loans.

The golden rule is to spend less than you earn. Distinguish between your needs and desires. If you desire something too expensive, which you are tempted to purchase with your credit card, think twice.

Don’t splurge, see if it should be on your priority list. If it is a must have and you need it that badly, save for it. That will help you decide if you feel it is worth the effort.

Remember, too much debt will eat into your monthly spending and put a road block to any kind of saving, as you will be busy paying off your credit card bills and EMIs on personal loans for you to set aside anything for a saving.

Instead, try to reap the power of compounding interest by saving some funds. Once you are sitting pretty on a pile of money, you could then indulge in a well-deserved vacation or that powerful music system, you always wanted as part of your relaxing Sundays.

Alert #3: Obsessive, compulsive, impulsive shopping.

Well, shopping malls, branded stores and supermarkets lined with tempting new entrants were designed with you in mind. These places you should avoid like the plague, if you are not someone who checks the price tags of goods, but instead rely on the ‘I want it right NOW!’ mind frame.

Don’t stack your living room or your kitchen or your fridge, with things that are purchased without any rhyme or reason.

Take the example of Rema. She has to try out new brands, interesting gizmos that she has no use for, antiques that she fancies endlessly and also food stuffs, the packaged, canned, ready to serve, frozen variety.

Her living room is stacked with odd, terribly expensive antique pieces that she does not even have the time to look at, her fridge overflows with canned foods that are well past their expiry dates and she owns three different kinds of mp3 players which she does not use! You are now thinking what a waste of money! Exactly!

It is painful routine, but make it a habit. Keep a tab on your money outflow, make a note of what, where, when, how you spend. At the end of every month, track your bills using an excel tracker or a good old accounting notebook and shred bills that are not required retaining warranty papers and bills, for goods that can be returned.

Rema did that and realized how much more she could save with a little discipline!

Alert #4: You are a debt juggler!

Do you have a priority list of debts that you clear based on how heavy the late fee or charges are going to be or when next you need to repeat the use of that particular service? If this is the kind of lifestyle you lead, you need help!

Find ways to cut back on your monthly expenses and pay off all your dues as quickly as you can. Don’t let yourself into such a pins and needles situation again! Always cut back on spending, conserve on resources until to achieve control over your finances.

Alert #5: Cheques that bounce!

If you think you can write cheques that cannot be encashed and get away with it scot free, think again! Bounced cheques come with hefty fine amounts and establishing such patterns will not bode well for your financial track record.

Alert #6: Late and default payments.

It can be minor expenses like a fine for the video or book that you returned late or consistently incurred late payment charges on your credit cards or EMI payments. The former just piles on miscellaneous expenses that end up adding to a significant percentage, while the latter can lead to big trouble.

Making a habit of this consistently can get you labeled as a defaulter. Your interest rates and lending rates could increase at an accelerated pace on the basis of your track record for late payments. Defaults will be reported to CIBIL.

If a pattern is notice you will find taking a loan or applying for a credit card in future extremely difficult. CIBIL keeps track of all your credit and generates a report that clearly shows your past repayment track record.

Nowadays banks are keeping a close tab on these credit reports and base their loan decisions on the financial health of the loan applicant.

Alert #7: You don’t have back up funds in place!

Can you survive a job loss for six months? Do you have some funds stashed away for such emergencies until you gather your reins and surge ahead confidently with a new job and a new plan for the future in place?

What about a medical emergency? Do you have resources that you can tap into for such a scenario. If the answer is NO, then it is time to take a serious look at how you manage your money.

Small strategies will help go a long way! Here is a sample of a few things to start with, use your judgment and build on it. Give it plenty of thought, time, effort, patience, commitment and enforce a plan of action.

a. Start a savings bank account that is different from your salary account. Determine how much money you would need to comfortably and prudently manage your monthly expenses then transfer the rest automatically to your savings account, every month and keep it inaccessible for routine needs and curb any temptation to eat into these savings.

b. Prepare a budget and stick to it.

c. Keep your credit cards locked away atleast until you take control of your spending habit. One can also use a credit card to wisely keep track of monthly payments, but that is for people who can differentiate between a want and a need. Until you find yourself in that place, lock it away!

It is better to start as early as possible before you find yourself in a financial mess. Before you land yourself in big trouble learn to implement some rescue measures well in advance!

Keep watching this space on more such tips on managing your money.

Home construction loans are used to finance for the construction of newly acquired home or if you are planning to build a home. But, with so many home construction loans available in the Indian market you should decide the best one that would suit you the most and is favorable to you.

There are different types of home loans tailored to meet one’s needs. The most important thing is one should know each and every term related to Home Loans before applying for a loan. It is always advisable to consult a home loan expert or financial consultant before applying for a home loan or purchasing a property.

You can take different types of home loans like Home construction Loans, Mortgage Loans, Home Extension Loans, Home Improvement Loans, Bridge Loans, Land Purchase Loans etc for different schemes available in the market.

• Home Purchase Loans: These are the basic forms of home loans used for purchasing of a new home.

• Home Improvement Loans: These loans are given for implementing repair works, healing and renovations in a home that has already been purchased.

• Home Construction Loans: These loans are available for the construction of a new home.

• Home Extension Loans: These loans are given for expanding or extending an existing home. For eg: addition of an extra room, etc.

• Home Conversion Loans: These loans are available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need of pre-payment of the previous loan.

• Land Purchase Loans: These loans are available for purchasing land for construction purposes. But there are some strict rules related to this loan, though, as earlier many investors has used this loan for leveraging their investments and then selling the land in a short time.

• Bridge Loans: A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory.

What are Home Improvement Loans?

Home improvement loans are used to finance improvements and add on to the existing set of credentials of beauty on your owned house, recently purchased property or rented accommodation. Home improvement loans are used to maintain or enhance the value of your house.

In general it includes: repairs, remodeling, energy savings related items (permanent in nature), repairs, a new kitchen, a new bathroom, terrace, an extension or general property improvements. Many improvements in landscape and even swimming pools are nowadays considered to be a part of home improvement.

What are Home Construction Loans?

Home construction loans are used to finance for the construction of newly acquired home or if you are planning to build a home. But, with so many home construction loans available in the Indian market you should decide the best one that would suit you most and most favorable to you.

What is Bridge Loan?

A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. Bank of Baroda has introduced the ‘Bridge Loan’ for top rated corporate clients against expected equity flows/issues. Bank can also extend bridge loans against the expected proceeds of Non-Convertible Debentures, Global Depository Receipts and funds in the nature of Foreign Direct Investments, provided the borrowing company has already made firm arrangements for raising the aforesaid resources/funds. This facility would be available for a period not exceeding 12 months.

What are Home Extension Loans?

Home extension loans are used by customers to get loans from the banks to extend their houses, by adding more rooms, kitchens, wash rooms, terraces, or any other rooms for your growing family. It may also be used to enclose open balcony/terrace space, or constructing a Puja ghar. Home extension loan thus falls under the category of Home loans. The difference between home extension loan and home improvement loans is decreasing in the Indian market.

Maximum Amount of Home Extension Loans:

Banks generally offers about 70-85% of the total amount of home extension as loan. The amount of loan sanctioned also depends on a number of factors such as the age of the applicant at the time of loan; tenure of the loan; repayment capacity of the borrower; his/her credit history, etc.

What are Mortgage Loans?

Mortgage loans (Home Equity Loans) helps customer to en-cash the market value of the property by taking a loan by mortgaging the property. So, Home equity loans are availed by customers, who wish to mortgage his/her property to the bank for taking some loan for some other purpose. Then, it’s up to the bank’s discretion to consider the market value of the property and accordingly decide how much to pay to the customer.

Both the residential as well as non residential property can be considered for the approval of the loan, provided the mortgager is a licensed title holder and the land is free form any kind of dispute.

Home equity loans don’t restrict one to use the loan money in specific ways. It might also be used in marriage, higher education, medical expenses, etc. However care should be taken that it should not be used in any illegal or speculative purposes.

Conditions of Home Equity Loans:

• Applicants: An individual or someone with joint account can apply for the Home equity loans. However the co-applicants need not be co owners of the property.
• Amount of Loan: About 60-65% of the actual value of the property can be had from the bank in the form of loan, which may go as high as a few crores for commercial and residential property and its repayment period may range from 10 to 15 years, depending on individual bank’s policies.
• Types of Interest: The rate of interest in the home equity loans can both be fixed as well as floating, according to the requirement of the customer. Banks now-a-days however are preferring the floating rate loans, as their risk is lesser with these loans.

What are Land Purchase Loans?

Land Purchase loans are used by customers who wish to purchase a plot of land for commercial or residential purpose. Everyone has his/her dream perfectly sketched in his souls and so is his ambition to get his house erected on the exact location he dreamt that to be.

Loans that are strictly for land purchase can be as scarce as good residential plots. While many lending firms around the nation compete to provide mortgages for the purchase of a house on a lot, only few institutions typically will be interested in lending for an empty plot.

Eligibility:
21 Years and above having regular income is applicable.

Maximum Loan:
85 % of the cost of the plot and is also based on the repayment capacity of the customer.

Maximum Term:
15 years, this of course takes into consideration your retirement age.

Terms for the Loan:

• You can purchase your land, then take your time building your home (typical limits set here are that the work has to start in about 3 months and the construction has to be finished within 12 to 24 months)
• Separate loans will also be available to construct the house. Some banks will sanction the loan for the plot based on the complete project (land + building). So the building approval also will need to be given at the time of applying for the land loan itself.

Disadvantage(s):

• Land loans can carry higher interest rates and bigger down payments than conventional mortgage loans, to reflect the increased risk.

Documents Required by Banks for the Approval of Most Home loans:

Salaried customers:

1. Application form with photograph
2. Identification and Residence proof
3. Latest salary slip
4. Form16 or Last Income Tax Returns
5. Last 6 months / One Year’s bank’s statement
6. Processing fee cheque

Businessman/ Self employed professional:

• Application form with photograph
• Educational qualification
• Identity and residence proof
• Proof of business existence with business profile and last 3 year’s income tax returns
• Last 3 years income statement and balance sheet.
• Last 3 month’s / 6 month’s personal and business bank statements.
• Processing fee cheque

Summary

This article has explained the different types of housing loan products available in the market and also the eligibility and documents that you will require to approve the loan from the financial institutions.

Choosing the right kind of insurance cover not only determines the care that we receive should our health take a wrong turn, but it can be the wild card in your financial plan. There are many benefits of an insurance cover; however, topping the list of benefits is the financial support that a family gets in the event of the untimely death of the income provider. As getting the insurance cover is an important aspect of a sound financial future, choosing the right insurance cover is equally important.

With the increasingly uncertain times, what with terrorist attacks and tumultuous financial markets, getting an insurance cover for you and your family has become imperative. However, many of us do not take decisions because of it being such a big ball of wax.

Choosing the right kind of insurance cover not only determines the care that we receive should our health take a wrong turn, but it can be the wild card in your financial plan. There are many benefits of an insurance cover; however, topping the list of benefits is the financial support that a family gets in the event of the untimely death of the income provider. As getting the insurance cover is an important aspect of a sound financial future, choosing the right insurance cover is equally important.

First and foremost, choosing an insurance policy must be based on your current and projected income or simply put your current and projected ability to pay the insurance premiums, your medical state, your age, future financial plans etc.

Secondly, you also need to look at:

Cost-Benefit Ratio

The cost of the insurance cover depends upon many reasons, some mentioned above and other factors depending on what is covered in the cover or its riders. Thus, you have to keep a close eye on the cost of buying insurance and ensure that it justifies the benefits covered under the policy. Simply put, a right balance must be struck between the cost and benefits available.

Cover

You need to ensure that the insurance covers all your dependants and that it also covers the majority of health problems.

Thirdly, the promises made by different insurance companies are all fine; however, it depends on you whether you need a pure insurance cover or you need an insurance cover coupled with an investment opportunity. The four major kinds of insurances that most people opt from are:

• Term Insurance – Term life insurance or term assurance is life insurance which provides coverage for a limited period of time
• Endowment Policy- An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its ‘maturity’) or on earlier death.
• ULIPs – Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time.
• Money-back Policy – Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the endowment period, money back policies provide for periodic payments of partial survival benefits during the term of the policy

When comparing between these plans it is important that you keep in mind the factors that were talked about in the first point. Let’s take a look at an example:

Arun is a 25 year old businessman who wishes to take an insurance cover for Rs. 20 lakh for a period of 20 years. There are two options he can choose from.

• Option 1 – He can opt for an endowment/money-back policy and pay a premium of Rs 90,000 annually. If he survives through the policy term, he shall be eligible to receive the entire sum assured and vested bonuses, if the same are declared by the insurance company.
• Option 2 – He pays Rs 4,000 annually and enjoys the risk cover of Rs 20 lakh. Being a term insurance cover, he is not eligible to gain any survival benefit from the insurance company and the insurance premium paid can thus be treated as the cost of covering his life for 20 years.

Whereas under Option 1, he has earned an annualized return of about 6%; Option 2 gives him about 9% returns during the period. Therefore, it is important for Arun to decide what he wants and opt for a plan accordingly.

It’s important to correctly identify your dependants’ financial needs to establish just how much life insurance cover to arrange. A general rule is to choose a policy providing at least ten times your salary, but more may be appropriate, with the amount varying depending on how you intend it to be used. Basically you decide how much you want your dependants to receive in the event of your death, and your premiums will be determined accordingly. Hence, make sure you keep all these factors in mind, compare different plans and choose your cover accordingly.

The deadline for filing income tax returns is 31^st of July for years when the financial year ends on 31^st March. Despite this deadline being an extremely familiar and well known   one, many people still miss it for a variety of reasons. Reasons may be genuine problems or simple procrastination for missing this deadline. In case you miss the deadline there are still ways to retrieve the situation by filing belated returns under various clauses. Discussed in this article are various types of cases when tax returns are not filed by the specified deadline of 31^st July. Most of the tax payers who miss the deadline will fall under one of the following categories whose case is discussed below.

Nil Tax Pending

This includes all such people who have either paid advance tax or have resorted to TDS and thus have no outstanding taxes to be paid up. This is a comfortable situation. One can fill the returns by the end of that financial year without any penalty being levied. Thus for the current assessment year one can safely file returns up to 31^st March 2013. However in case of filing returns for the current assessment year beyond that date will result in a penalty of Rs. 5000 which is again at the discretion of the assessing officer.

With Tax Pending

In the case of an individual who has certain amount of unpaid tax pending due to various reasons such as income from other sources or change of employer in middle of the year, the return can be filed even after the deadline up to the end of the assessment year. However a penal interest of 1% will be charged on the outstanding amount of unpaid tax. For example if an individual has a net tax payable of Rs. 100,000/- and has paid Rs. 60,000/- through TDS and Rs. 30,000/- as advance tax then the outstanding amount is Rs. 10,000/-. For this outstanding amount of Rs. 10,000/- he will have to pay a penalty of Rs.100/- which is 1% of that amount for each month delayed beyond 31^st July in case the return is filed by 31^st March 2013. Thus the net tax payable if paid in October 2012 in this case will be Rs.10,000/- + 3% of Rs. 10,000/- which is Rs. 10,300/-. However if the same return is filed after 31^st March 2013 in the month of April 2013, then there will be an additional penalty of Rs. 5000/- (as applicable in the previous case) making the total amount payable as Rs. 10,000/- + Rs.5000/- + 9% of Rs. 10,000/- which is Rs. 15,900/-. These provisions for late filing and additional penalty clauses are detailed in the section 234 of the IT Act.

Tax Refund Due

In this case also one can file the returns after 31^st July in order to claim the amount due for refund. However the only disadvantage in such a situation is that the refund claim will be processed late and thus the actual receipt of the refund amount may take considerable time.

Losses to be carried forward

For individuals who have losses incurred in the current assessment year and wish to carry forward the same for exemption in the subsequent years, not filing returns by the deadline of 31^st July has the biggest disadvantage. Irrespective of the fact that whether you have outstanding taxes due or not, in case the return is not filed on time then the losses incurred in this year cannot be shown for offsetting income so as to get exemption in the next year. For such individuals it becomes mandatory to complete the process of tax filing before the deadline to advantage of tax benefit in the subsequent years. The only exception in this clause is losses incurred on housing property where one can carry forward the losses even if the return is not filed before 31^st July.

Common Disadvantages

Irrespective of the category that one falls in above discussed cases there are a few disadvantages that one will have to bear in case the returns are not filed before the deadline. The first of these problems is that in case the return is filed after the deadline then there is no revision of the same permitted. This implies that the individual can no longer file a revised return for that assessment year. The other disadvantage is that certain exemptions under Section 80 are not available to assessees who file their tax returns after the due deadline.

Filing tax returns have been made extremely simple and easy in the past few years. The wonderful provision of online filing is also available to all individual assesses. Thus one must endeavor to file the returns before the deadline to avoid missing out on exemptions being given by the IT department.

What is the loan amount I am eligible for? Can more than two of us take a joint home loan? BankBazaar.com answers all your queries.

I along with five others plan to buy a plot of land and construct apartments for us. We are considering a joint loan. I would like to know if:
1. We can get a joint loan?
2. Will there be any legal problem in obtaining such a loan?
3. Will we all get tax benefits for the loan amount?
– Arnav

Yes, it is possible for a group of six people to take a joint loan. Banks allow anywhere between two and six persons to take a joint loan, depending on their respective credit profiles.

However, banks as a rule do not allow friends or even siblings to take a joint loan. A joint home loan can be taken by a married couple or a parent and child. In some instances, brothers are allowed to take a joint loan. Just in case the six of you include a father, mother and four brothers, you can be assured that a loan will be sanctioned by the bank you approach.

b. There is no legal problem with six people opting for a joint loan. However, banks insist that all co-owners of the home must be co-borrowers in a joint home loan, though the reverse is not stressed.

c. Section 80C and Section 24 grant income tax rebates to people with home loans. However these tax deductions are capped at Rs 1 lakh for the principal repaid and Rs 1.5 lakh for the interest repaid for each individual. Another added advantage of jointly taking a home loan is that all the borrowers can simultaneously avail these income tax rebates, thus maximising the tax benefits of the home loan.

I work as Manager of Sales with a Multi National Company. My monthly take home is approximately Rs 30,000 per month, which comes to Rs 6 lakh per annum including all benefits. I want to buy a property in Indrspuram (Delhi NCR), which costs Rs 32 lakh (Rs 30 lakh for home and Rs 2 lakh for registration). How much loan should I take from a bank?
– Pushpam Kumar

You are eligible for a maximum of Rs 13 lakh at 20 year loan tenure, which is the maximum tenure given by most banks. The loan amount is based on your income of Rs 6 lakh per annum. You need to have funds to make a down payment of Rs 19 lakh to purchase that property you have identified.

The Equated Monthly Installment will be approximately Rs 15,000 per month assuming an interest rate of 13 per cent that is prevalent in the market, today.

You can consider a joint home loan if you fall short of funds for the down payment. The advantage of applying for a joint home loan is you can combine your income and a family member’s income to be eligible for a higher loan amount.

Also remember, banks generally fund a maximum of 85 per cent of the cost of the property you plan to buy, hence it is essential to have at least 15 per cent of the cost of the property as down payment.

Its financial year end and the Budget bandwagon is rolling full steam. Every newspaper and magazine keeps publishing reports and reports and reports and reports! Some great, some not so great, but, one thing is common; most of the terminology is not common for the common man. So let’s try to understand some of the jargon that the budget throws at us apart from its share of surprises.

Glossary of budget related terms

What is AD-VALOREM DUTIES?

Sounds like some foreign language! Yes it is.

It is a Latin word, which means “according to value”. It is nothing but a kind of tax similar to that of VAT, which is calculated according to the value of the goods. Here the value of the goods plays a vital role where as the weight of goods and the number of goods goes unimportant.

Annual Financial Statement!

The government presents an annual financial statement to Parliament, which is nothing but a statement that includes the income and expenses of the country for that financial year. It is divided into three parts namely Consolidated Fund, Contingency Fund and Public Account.

BUDGETARY DEFICIT

This is nothing but the difference between the Revenues and Expenses projected in the budget. If the Expenses exceed the revenues, the we are faced with a deficit.

BUDGET ESTIMATES

This is an approximation of what the Finance Ministry expects to happen in the coming year. The estimates are made for both revenues and expenses. This estimation helps the FM to plan for funds t run the Country’s finances in the coming year.

Consolidated Fund, formed under the provision of Article 266 (1)

The consolidated funds are one of the important parts of the annual financial statements. The consolidated fund includes all the revenues received by Government such as Income Tax, Central Excise, Customs and non-tax revenues, the receipts and the loans that it has raised. The government uses the consolidated fund to meet all its expenses including the loan repayments. The money from the consolidated funds cannot be withdrawn without the approval of the parliament.

Contingency Fund, formed under Article 267 (1) of the Constitution of India

Almost all of us will have some amount saved from our earnings for an emergency. The same way the government also keeps apart some amount of money for funding during times of emergency. It is generally referred to as the recovery fund or the disaster funds, where the terms of using the fund is clearly defined. Most of the times, the contingency funds are used for the welfare of people affected by natural disasters as per the terms of the funds. Sometimes such funds are created as a security against feasible losses that might occur in income from taxes and other revenue sources.

The Secretary to the Government of India, Ministry of Finance and Department of Economic Affairs holds the fund on behalf of the President of India.

CESS
There are certain periods when the government is forced to raise some additional capital for specific purposes or projects which are a priority at the time of presenting the budget. At the same time, the government cannot raise the taxes across the spectrum to get this “extra” revenue needed. So it adds a “Cess” component which is a tax on the tax. For example to increase funding for education, the government added a 2% cess. Meaning of the tax is 10% the payer would have to pay an additional 0.2% (2% of 10%) as cess.

Public Account, formed under the provision of Article 266 (2)

The public account is an account that holds all the public money with the exception of the funds that are covered under the consolidated funds. The public money is usually credited to the so-called public account of India. The main source of cash to this account is from the contributions from General Provident Fund and Public Provident Fund, Security Deposits and Earnest Money Deposits received by the Government, through the sale of Savings Certificates. Here the government will refund the money at the end of the agreement or contract.

Liquid funds invest in money market instruments. Money market is a market for short term borrowing and lending. This market deals with debt instruments such as certificate of deposits, commercial paper and treasury bills.

While searching for different investment options, you might have come across the term ‘Liquid Funds’. There are many of us who might have wondered what these funds are and more so after the news articles popped up telling everyone that investing in these funds is not a smart choice. However, before we make a decision, let’s discuss what Liquid Funds are.

What are Liquid Funds?

When we try and understand the term ‘liquid’ in financial terms, it means an asset which is as good as hard cash. Real estate is the least ‘liquid’ of all assets and a savings deposit is the most ‘liquid’ of all. Similarly, Liquid Funds are a kind of mutual fund or debt fund which can be redeemed in as less as 24 hours.

What are Liquid Funds invested in?

Liquid funds invest in money market instruments. Money market is a market for short term borrowing and lending. This market deals with debt instruments such as certificate of deposits, commercial paper and treasury bills.

What is the ‘lock in’ period for Liquid Funds?

Most funds have a lock-in period of a maximum of three days to protect against procedural (primarily banking) glitches, and offer redemption proceeds within 24 hours. However, some funds may even have a lock in period of a week or a month or more. However, the tenure is always far less than a normal mutual fund.

What are its features?

Here are some of the features of Liquid funds:

• No Entry and Exit load (sometimes exit load is charged if redeemed before the lock in period)
• Low annual fee 0.30 to 0.70%
• Variable Minimum investment amount according to scheme
• Great tax benefit
• Easy liquidation, hence the name
• An average 8% p.a return on liquid funds
• Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk.

What are the tax benefits?

If you invest in a short-term fixed deposit, the returns are taxable as per the investor’s tax bracket. Therefore, if you are in the highest tax bracket most of your returns from the fixed deposit would be wiped out.

On the other hand with liquid funds, as mentioned before, if the dividend option is taken, the returns are tax-free in the investor’s hand!

Has the past performance been good?

In the last one year, liquid funds have returned between 7.7 per cent and 8.85 per cent. Recent data shows that banks are taking fresh exposures in liquid funds which indicates a high degree of safety and confidence in liquid funds. This shows that liquid funds are a good product to invest in if you are looking to fulfill some short-term goals.

How does it compare to a short-term fixed deposit?