An Introduction to Child Insurance

By Jennie Kakkad 

With rising cost of living, it has become imperative for parents to plan for the future needs of their child at the earliest. Many parents start with the planning task when the child is in the womb. This helps them take care of any certain or unforeseen financial burden with ease without compromising on the interest of their child.

Child insurance is one such option that helps you in planning and securing your child future at any time. There are a number of insurance companies offering policies to suit your child's growing needs. Child insurance is a great option because taking out a small amount of premium from your monthly or annual income will not affect your other needs, and you won't even come to know how conveniently you collected a pool of money for your child's benefit.

A number of benefits are covered under this type of insurance. For example, education, health, medicine, and marriage are the common ones. However, generally one has to take a separate policy for each benefit. Every policy has different terms and conditions suiting different customer needs.

Some policies provide a guaranteed amount of lump sum money at the end of the policy tenure. They are commonly known as child endowment policies. Similarly, child money back policies work like an income plan where at periodic intervals guaranteed or non-guaranteed amount of money is paid to the insurance holder to help him meet various demands like admission fees, coaching classes, etc. from time-to-time. These days Unit Linked Insurance Plan (ULIP) has become popular. They are high-risk and high-return plans normally taken for a long tenure.

Every policy has a different growth rate that varies directly with the level of market risk involved. Policies with guaranteed returns, for instance, are less growth-oriented than the ones with varying returns like ULIP. Some of the policies also have a security feature according to which an assured sum of money decided in advance is payable in the event of the unfortunate death of the parent. Moreover, all future premiums are waived off.

You can take a policy depending upon your desired policy tenure, amount of premium, and the benefits covered. As there is a cut-throat competition among all the insurance companies, you can get the best deal for your child. The health of a child is covered under medical insurance.

Article Source: http://EzineArticles.com/6607288

Tips for Successfully Investing in Mutual Funds

By Marcus Beattie

Most people today choose to invest in mutual funds. In fact, they are now considered an essential element of a well balanced portfolio. However, it is best to have a thorough understanding of what a they are, how they work and how to invest in them to take advantage of this investment option. They are quite suitable for those who do not want to get involved with the day-to-day operations of the market.

The Basic Things You Should Know Before You Invest

First, you should know what a mutual fund is before you invest in it. A mutual fund refers to a company which holds different instruments of investments like stocks, bonds, securities, certificate of deposits etc. One fund can hold any number of such investments. In fact, while choosing a one, you should make sure that it does hold several options.

Why are so many people attracted towards them? With mutual funds you will not have to constantly study the market to search the stocks and bonds that you should buy or sell. Instead you pay a fee to the fund company which carries the investment for you.

Before you invest, you need to do your research well. There are plenty of reputable mutual fund companies. You should study financial journals and websites before you shortlist some of them. Find out which funds have been performing consistently well.

You can ask for prospectus to find out how well the company has performed over both short and long term. Compare the performance each year with the benchmark index. If the performance diverts from the index widely every year, it is probably best not to consider that company. Look for consistency rather than sudden peaks while choosing your mutual funds.

Another important point to consider when choosing your preferred investment is the objective of your investment. Depending on whether you are saving for your retirement or a college fund or a vacation, you can choose funds of varying levels of aggressiveness. Whatever the goal, decide what proportion of your portfolio should consist of mutual funds and stick to it.

You should always talk to the fund manager in question before you make a firm commitment. Once your decision is made, you should fill in all the forms properly. The great advantage of mutual funds is that once you have invested your time and effort to search the company, you will have to devote little time to it. The fund will manage your investments and you will enjoy a healthy profit.

Do Your Due Diligence Before You Invest

When you have decided to invest, scrutinize the performance of the company carefully. Perhaps its successes were achieved under a different management regime which has now changed. It is better not to change your stocks too often because every time you do so, a taxable return is generated. Finally, choose a no load fund for your purposes. Do not forget to retain a copy of all your documents pertaining to mutual funds because you are going to need them for tax purposes.

Article Source: http://EzineArticles.com/6587456

TAX SAVER

TAX SAVER FUND

tata fund

FIX A LEVEL TO INVEST OR REDEEM MF's... AVAIL TRIGGER FACILITY

FIX A LEVEL TO INVEST OR REDEEM MF's... AVAIL TRIGGER FACILITY

Our busy schedules leave us little time to track the markets and know exactly when to invest in a mutual fund scheme or when to exit one. If you don't want to lose out on investing opportunities, a good idea is to avail of the trigger facility provided by asset management companies (AMCs).

This tool allows you to fix a date, price or index level at which you want to enter the market and get out when the expected returns have been achieved.

"When the market starts moving up, investors often raise their previously set targets without booking profits. Realisation sets in only when the market corrects itself and reaches a level where investors either fail to gain or even lose their investments," says Sankaran Naren, CIO equity, ICICI Prudential AMC.

The trigger mechanism is especially useful for passive and conservative investors, who can set a trigger amount or a percentage of appreciation, and based on this, their money can be shifted from equity funds to debt funds. Kalpen Parekh, deputy CEO at IDFC Mutual Fund, says, "It helps you build a profit discipline so that you accumulate at the right time and exit when your return expectations are met."

So, one can choose targets based on near-term goals, such as buying a laptop or going for a holiday. Says Ajit Menon, executive vice-president and head of sales at DSP BlackRock Mutual Fund: "This feature can help investors and financial advisers in planning for financial goals."

DSP BlackRock is the latest fund house to have introduced this facility this month, joining the AMCs that have been offering it for the past couple of years. These include Birla Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, IDFC Mutual Fund, Principal Mutual Fund, Reliance Mutual Fund, Tata, Quantum and UTI Mutual Fund.

Different types of triggers

There are several trigger options (see Types of Triggers), though these differ between fund houses. However, each of these will help you earmark the point at which you want to redeem your funds or shift from one type of fund to another. For instance, if you choose to switch appreciated capital, you can fix a percentage of gain, say 10%, 30% or 50%. When your investment amount grows by this figure, the profit you have earned can be moved to debt funds, while the original amount remains in the equity fund.

Another fund house may offer the same facility under a different name, such as NAV option. So, you can fix a criterion that if the NAV rises from Rs 20 currently to Rs 30 (or your investment grows from Rs 10,000 to Rs 15,000), the gain, that is Rs 5,000, can be redeemed or shifted to another fund. Similarly, if you have to pay, say, the instalment for a laptop on 1 October, you can fix the trigger date a few days before it.

While all fund houses offer to move your appreciated investment to a debt fund, a few AMCs, such as HDFC, ICICI Prudential and IDFC, also have an entry trigger. Here, if the trigger is set at a predefined level, the money is moved from debt funds, such as liquid funds or money manager funds, to select equity funds.

Says Parekh: "In a market phase like the current one, we will not see a significant movement and will be range-bound between 17,000 and 20,000. However, even in this phase, there is a band of 20% that can benefit investors. You may want to invest half your funds when the Sensex level is, say, 19,000 and the rest when it is at 17,500. Also, you could withdraw when the Sensex crosses 20,000."

While switching funds to a debt scheme, fund houses offer two options-switching only the gain and keeping the original investment intact, or switching the entire investment along with the appreciated value to protect it from shrinking.

How to choose a level

The level of returns that you can choose will be based on your risk perception. "The return expectations should be linked to your goals. Though an investor will compromise on a bull run, a 12-15% return from equity is good considering the present GDP and inflation estimates," says Rajendra Dhulla, a financial planner who runs advisory firm Pratham Services. Levels of 50% and higher would hardly be met during your time frame and only under select sectoral funds, says Dhulla.

Sandeep Shanbhag, director at investment advisory Wonderland Consultants, says, "The trigger facility works on the classic principle of buying low and selling high. It is a way of weeding out emotion and discretion from investing once the goal is met." However, he suggests, "If the goal is for the long term, such as saving for retirement or child's education, then there is no need to opt for a trigger."

Applicable loads

What happens if the fund charges an exit load if you redeem units within a year and your targeted returns are achieved within this time frame? Each fund house has its own policy. For instance, ICICI Prudential Mutual Fund customers would have to bear the applicable exit load, while IDFC Mutual Fund does not levy this charge. "There is no separate exit load for the investors who book profits using the trigger option as this would wipe out a portion of the return," says Parekh of IDFC.

There is a catch here. When the money is moving from the equity fund to the debt fund on achieving the target, there is no exit load. However, when you withdraw from the debt scheme, you will have to bear the exit load. To avoid paying this load, when you shift the money to a debt option, choose a liquid fund. Taxation

If your target is achieved and money is transferred to the debt scheme, the appreciated amount will attract the capital gains tax based on the time at which the target was achieved.

"A transfer or a switch within a year will be taxed as short-term capital gains of 15% on equity, though you may or may not have sold the units," says Shanbhag. However, you won't have to pay tax if your target is achieved after a year as there is no long-term capital gains tax applicable on mutual funds.

To avoid losing a part of expected returns, Shanbhag suggests, "When fixing a trigger level, you may not know time frame in which the target will be met. So, choose a level after accounting for the tax you may have to pay."

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/mutual-fund-investments-avail-trigger-by-amcs-to-fix-a-level-to-invest-or-redeem/articleshow/9506280.cms?curpg=1

GIFT TAX 2010 RULES

GIFT TAX -TAX ON GIFT BUDGET 2010

High Value Gifts were a safe haven to show one’s love to others financially. Now the tax man  has tightened (putting it mildly) the strings attached to gifts. In fact the rule has become so tight that it may be the end for all high value gifts in India.

Gift Tax Earlier  Since 1998, there is no Gift Tax per say in India. The gift is added to the income of the receiver and is taxed accordingly. Earlier (prior to October 1st 2009), gifts in kind (a car or a house) were not considered at the cash value.

Also all gifts received at the time of marriage were exempt from tax. The gifts could have been from anyone and of any type. This made very high value gifts the norm at the marriages of very rich people. The taxman was hoodwinked by making marriages occasions for large scale conversion of illegal money (black money) into legal gifts

The New Rule

The change in the rule related to gifts says that the receiver has to pay tax for receiving any gift valued at Rs.50,000 and more. The ‘any gift’ clause means that not only cash but all gifts of any value. So if someone receives a gift of a house worth Rs.30 lakhs, then he/she is automatically in the highest income bracket and has to pay 30% + surcharge on value of the house as tax (close to Rs.10 lakhs in this case).

The rule thus effectively prevents money laundering in the guise of high value gifts.

Which Donors’ Gifts are Exempt• There is exemption for gifts received from certain relatives.

• The gifts that one receives from relatives on the occasion of marriage

• Gifts received by way of a will and inheritance are exempt

An NRI can gift to his/her parents in India from their NRE account without their parents suffering any tax.

Gifts Received by Children

The gifts received in the names of one’s minor children will be clubbed with the parents’ income for taxation purpose. Also the taxman is very alert in saying that, in case of both parents having income, clubbing will be done with that parent who is earning more. So one cannot hide under the cover of their minor child(ren) receiving the gifts.

Other Deals that Comes under the Hammer

Not only gifts, but any real estate deal done for values lower than the state governments fixed rates, will also be taxed. Here the tax will be charged on the difference between the state government’s rate and purchase price. The tax needs to be paid by the buyer of the property.

Conclusion

The tightening of the rules related to gift tax will curb money laundering to a great extent.

However it does protect genuine gifts from relatives and loved ones. Several guises used earlier to cover up transactions as gifts are now taxable.

Source: http://www.prudentcorporate.com/upload/Gift%20Tax%202010.pdf