NEW HOUSE INSURANCE

I want to get my new house insured. What are the various types of insurance products available in the market?
A s a house owner, you can insure the building against the risk of fire and allied perils and the contents against various risks. Both can come under a householder’s package policy. For the building only, you have an option to buy a long-term policy of 10 years at a time, for which insurers offer a discount of 50 per cent on the premium. The policy for a building covers perils like flood, cyclone and inundation and an optional cover against earthquake. The package policy covers almost all risks associated with a household, such as third-party liability and liability under Workmen’s Compensation Act towards house help, among others.

PARTIAL WITHDRAWL IN ULIP

I have a unit-linked insurance plan (Ulip) from Bajaj Allianz. The agent told me that I could partially withdraw money from it. Can I withdraw anytime? As I shall be claiming tax benefit for this policy, how long should I continue it to avail the tax benefit?
Partial withdrawal is allowed only after the completion of the lock-in period, which varies from 3-5 years depending on the policy. The sum assured will be proportionately reduced by the amount of partial withdrawal made. As per the Income Tax Act, if a person discontinues a Ulip before the premium for five years has been paid, no deduction shall be allowed for the premium paid in the year of termination and the deductions allowed in the past shall become income of the person in the year in which the Ulip is terminated.

VESTING TIME IN PENSION PLAN

How much pension can I commute at the time of vesting? If I don't exercise this option at vesting time can I do it later?
Generally speaking, up to one third of the accumulated corpus at the time of vesting can be commuted to give you a lumpsum. This means that if the corpus is of Rs 30 lakh, you can get a commutation amount of Rs 10 lakh. Pension will be paid on the balance amount of Rs 20 lakh. The exact amount available for commutation, however, depends on the terms and conditions of the specific pension plan.
The option to commute pension can be exercised only at the time of vesting of the pension policy, and not later, when one actually starts receiving the pension.
As this policy is taken on the life of the child, it does not provide protection if the parent dies. Ideally, one should take a policy in one’s own name instead of the child’s. Take the premium waiver rider to ensure that the policy continues even if the premium-paying parent passes away.

MEDICAL COVER

I am 31 and my net annual salary Rs 2.1 lakh. I can invest up to Rs 15,000 per year for medical cover premium. Please give details of changes made in this year’s Budget to the tax benefits on medical cover taken for parents. What kind of policies should I invest in to save tax?
First, ensure that you have adequate life cover. Ideally, it should be five to seven times your gross income. Then, buy a floater medical policy to cover all family members. Buying a medical cover with an annual premium of Rs 15,000, which is the upper limit for deductions you can claim for health insurance under Section 80D, could fetch you a very high sum insured. See if you need that much before buying. The Budget has proposed a hike in the maximum deduction one can claim for health policies taken for parents to Rs 15,000 if they are aged below 65 years and to Rs 20,000 if their age is 65 years or above.

JOINT CLAIMS

I have taken a joint home loan with my wife. Both of us are working and jointly own the house. How should we claim tax deductions? Can we split the total loan repayment of Rs 2.50 lakh between us?
As you and your wife are joint owners and have taken a joint loan, both of you are eligible for tax concessions in the ratio of ownership. If the house is a joint property and the percentage of ownership is not mentioned (which is normally the case when a couple own a property jointly), it is presumed that the ownership is equal.
Both you and your wife can claim a deduction separately of up to Rs 1 lakh from your respective gross total income for the return of principal amount under Section 80C of the Income Tax Act, 1961. Each of you can also claim deduction for interest component paid under the head ‘Income from house property’. The maximum deduction both of you can claim separately is Rs 1.5 lakh in case the property is self-occupied. There is no restriction on the amount that can be claimed as deduction for a rented property. You and your wife can divide the total interest paid equally and claim deduction for it in your return.

HRA DEDUCTIONS

My son, who gets HRA from his employer, stays in my house and pays rent to me. Will the rent be included in my income? Can a son pay rent to his father if he resides in his house and claim tax exemption for it?
Yes, your son can pay you rent for staying in a house owned by you and can claim exemption for it from the HRA paid to him by his employer. The basic condition for claiming this exemption is that he should be actually paying the rent to you. The rent he pays you will be included in your income under the head income from house property and taxed as per the applicable rates.

GROUP INSURANCE

My employer gives me medical cover under a group insurance scheme. The insurer reimbursed a claim for an expense of Rs 40,000 incurred by me for my mother’s surgery by depositing the amount in my salary account. Will this money be added to my total income? Is it taxable?
Claims under medical policies are of the nature of reimbursement of expenditure already incurred by the policyholder. Since medical insurance is a contract of indemnity and there is no profit element in the claim received by the insured, it is not taxable in his hands. Thus, the medical expense reimbursement credited in your salary account will not be included in your total income for tax purposes.