Money Matters

  • Ifthikar Bashir
  • Publish Date: Feb 19 2018 9:16PM
  • |
  • Updated Date: Feb 19 2018 9:16PM
Money Matters

IS IT POSSIBLE TO REDEEM EQUITY LINKED SAVINGS SCHEMES (ELSSS) BEFORE THE COMPLETION OF LOCK-IN PERIOD? I AM PLANNING TO INVEST RS 10K PER MONTH. HOWEVER, THERE ARE CHANCES THAT I MIGHT NEED THIS MONEY IN DEC’2019 AS I AM PLANNING TO VISIT ABROAD.

 Firdous Ahmad, Barzulla Srinagar

 

Every tax saving investment comes with a mandatory lock-in period. Equity Linked Savings (ELSSs) or Tax Planning Mutual funds has a mandatory lock-in period of three years. It is not possible to redeem your investments in ELSS before the completion of of the mandatory lock-in period.

 

I HAVE A POST OFFICE RECURRING DEPOSIT FOR THE LAST FOUR YEARS. IT WILL MATURE IN MARCH 2018. WHAT WILL BE THE TAX IMPLICATION ON IT?

Raza via email

 

The income you earn by way of interest on the recurring deposit is added to your other income, if any, and taxed as per the slab system. No TDS is deducted for interest income up to Rs 10K in a financial year. Over and above this limit, TDS will be deducted on the interest earned at the rate of 10%.

 

 

I HAVE 2 CHILDREN. TO MEET THEIR EDUCATION GOALS, I WOULD LIKE TO INVEST RS 20K PER MONTH FOR A PERIOD OF 15 YEARS THROUGH SIP. I AM READY TO TAKE HIGH RISK. CAN YOU SUGGEST 3 EQUITY FUNDS THAT WILL SERVE THE PURPOSE.

Tanveer Khan, Hazratbal Srinagar

 

Risk-taking is a good thing, but when you actually face risk, it’s a different situation. I would always suggest that one should always try to reduce risk. For that, you can invest in 2-4 good multi-cap funds. Some of the recommended funds are:

Aditya Birla SL Frontline Equity fund, ICICI Prudential Value Discovery fund and DSP BlackRock Opportunities fund.

My suggestion would be to continue your SIP irrespective of market conditions meaning thereby that the SIP investment should continue even during a bad market phase.

 

I INVEST AROUND RS 30K IN MUTUAL FUNDS VIA SIP. I ALSO HAVE PURCHASED LIC AND PNB METLIFE INSURANCE POLICIES WITH ANNUAL PREMIUMS. I INVEST IN A RECURRING DEPOSIT TO ACCUMULATE THESE ANNUAL PREMIUMS. SHOULD I CONTINUE WITH THIS RD OR SHOULD I INVEST IN LIQUID FUNDS? IT IS IMPORTANT TO MENTION THAT I HAVE TO PAY PREMIUMS ON STIPULATED DATES AND CANNOT AFFORD NEGATIVE RETURNS. I DON’T HAVE ANY TERM POLICY. I HAVE PAID 6 PREMIUMS OF EACH POLICY. SHOULD I CONTINUE WITH IT?

Mohammad Talha via email.

 

As you have already mentioned that you do not have a term insurance policy, we understand that you have traditional insurance policies like endowment or ULIP which combine insurance and investment. However, you should keep your insurance need and investments separate. The only kind of life insurance that makes sense is term insurance because only in that case you are buying purely a risk cover. The moment you buy any other kind of insurance which promises a lump sum repayment at the end of term, you are actually making an investment that is disguised as insurance. Such policies are expensive, provide you with little life cover and the investment part offers moderate returns despite decades-long lock-in.

The way to go about it, is to calculate how much cover you need and then find a good, low-cost, term insurance. The premium for a term insurance policy will only be a fraction of the premium that you are paying for your other insurance policies. In my opinion, you should discontinue these insurance policies. You would likely incur losses on surrendering them but its better to book them now and re-organize your investments.

I PURCHASED AN INSURANCE POLICY MORE THAN 2 MONTHS AGO FROM ONE OF THE LEADING INSURANCE COMPANIES, HOWEVER, I HAVEN’T RECEIVED THE POLICY DOCUMENT. IN THIS CASE, HOW DO I COUNT THE FREE-LOOK PERIOD? 

 Rameez Ahmad, Hyderpora Srinagar

 

The free- look period is a right given to the policyholder which allows him to go through the terms and conditions of the policy and reverse the purchase decision if he finds it unsuitable. This right can be exercised within 15 days (if purchased offline) or 30 days (if purchased online) of the receipt of the policy document.

The onus of proving the date of receipt of the policy document is on the policyholder. Therefore it is best you write to the insurer stating that you haven’t received your policy.The request for exercising the free-look option must be made in writing to the insurance company. You can also download the free look period form from the company’s website.