Sunday, October 16, 2011


What is an HUF? 
Down the ages, the Hindu community has largely believed in the concept of joint families, joint income and joint property that is shared and enjoyed by all the members of the family. This concept is now recognized as a legal expression in the form of the Hindu Undivided Family (HUF)– a rather efficient tax-planning tool under the Income Tax Act. 

How do you form HUF? As the name suggests, an HUF is a family of Hindus. However, under the tax laws, even Jain and Sikh families can set up HUFs. Typically, an HUF will consist of a person who have lineally descended from a common ancestor, and includes their wives and unmarried daughters. Do note: in Maharashtra, even married daughters are recognised as HUF members. 
While the senior most member is called the karta (manager), the male members are known as coparceners, and the females are referred to as members. In the ordinary sense, an HUF should consist of at least two male members. However, in case the HUF is partitioned, the smaller family that receives the property can constitute an HUF even if it has only one male member. 

What income is regarded as HUF income? All the income that arises on the utilisation of the HUF’s assets and on the investment of its funds is regarded as the HUF’s income that is assessed separately and chargeable to tax. Importantly, the income should have been earned using HUF property or funds or property only; if it arises on account of the personal investments of any member, it will generally be regarded as the individual income of the member. 
 If an HUF contributes funds to the capital of a partnership firm in which it is represented by the karta or any other member who represents the HUF, then the profits and interest received from the firm will be treated as HUF income. This is because the income arises on the investment of HUF funds, and so the income belongs to the family. If, however, the partnership firm also pays the karta (or the member who represents the HUF) a salary for efforts put in by him, the remuneration will be regarded as the individual income of the karta/member. 
It’s important to remember that the same person can be taxed separately as an individual, as well as for and on behalf of the HUF. The two capacities are totally different. And so, the individual and the HUF are totally different units for tax purposes–they are two different assessees. 
Since an HUF is a separately entity, it can earn income from house property, income from business and capital gains, and income from other sources. However, since emoluments are given for personal skills, an HUF cannot earn income from salaries. An HUF can also carry on a business that is managed on its behalf by the karta. It can also hold shares, securities, jewellery and any other valuable articles or articles, apart from movable and immovable property. 

What are the assets of an HUF? Any gift that is given specifically to an HUF can be treated as HUF property. The assets received on the partition of a larger HUF of which the coparcener was a member is also perceived as HUF property is also treated as the property of the HUF. 
Assets can also be bequeathed to an HUF by way of a will that specifically favours the HUF. A point to be noted: in the absence of a will, the assets received on the death of a benefactor after 1956 (when the Hindu Succession Act came into force) will not be regarded as HUF property, but as individual property, even though such assets have been inherited. 

Saturday, October 15, 2011


For those who travel abroad frequently either due to personal or professional reason have to carry foreign exchange with them for using it during their stay outside the country. Most of the people carry currency notes with them which is fraught with various risks. But if you want to avoid the risk of travelling while carrying currency notes , you may seriously consider taking forex cards given by the banks for this purpose. 

What is Forex Card? Forex card is a plastic based card like a debit card or credit card, which is prepaid in nature. The person taking the card can get the desired amount in the desired currency loaded on the card which can be subsequently utilised while on tour. The person needs to approach the bank and pay in Indian rupees for the equivalent amount in foreign currency which needs to be loaded on the card.

Who issues Forex Card? Most of the to league banks in India do offer forex cards to their customers. One can approach bank like ICICI, SBI, HDFC etc for forex cards.

What are the charges? You may have to pay issuance fee of Rs 100-300 for every forex card that you take. Other than this , you may have to pay RS 50-200 as loading fee while loading the card with the desired foreign currency. You may have to pay 1.5% - 3% on ATM cash withdrawal too.

How much forex can you load on your card? As per current RBI regulations, one can load upto maximum of USD 10000 across all forex cards in a year.

Can I have multiple forex cards? Yes. You can have multiple cards for loading cash in different currencies viz USD, Pound,, Euro etc. 

Whats the exchange rate applicable on my spend? You will be charged the exchanged rate of the day when you got the card loaded with the desired currency. The conversion rate is applicable on the day when the rupee is converted in foreign currency which in this case is the day of loading the card in India.

Documents Required ? You will have to give PAN Card copy, Passport,Visa and tickets .

Benefits of the card? Following are the benefits of the card
1. This card will provide you immunity against the risk of physical loss of cash while travelling.
2. It allows you to control the exchange rate applicable . You can choose when to load the card depending on the exchange rate movement. Once loaded, you are not exposed to any adverse movement in currency exchange rate. 
3. Accepted  across all major stores and ATM abroad.
4. Add on benefits like travel insurance and accident insurance being offered by some Banks.

Tuesday, October 11, 2011


For those of us who have Demat Accounts and want to change from one Demat account to another for any reason will have to first get the holdings transferred to the new Demat Account before the account can be closed and you can fully migrate to the new account. So, if you are wondering how can you get the share holdings transferred from your current Demat account to the new one, then read on.
1.Transfer from one Demat Act to another Demat Act of the sole owner :- In case , the transfer of shares is from one Demat account to another Demat account held by the same person in his sole capacity, then he/she needs to fill delivery instruction slip giving the details of the shares to be transferred and the same shall be submitted with the depository. These delivery instruction slips are available with the depository and are like cheque leaves which we use to tranfer money from our account.
2.Transfer from Joint Demat Account :- In this case too, the delivery instruction slip will have to filled and submitted to the depository. Only difference is that here both the owners need to sign the slip.
3.From Sole Demat Account after account holders death:- In such cases the holding is transferred to the demat account of the nominee where there is nominee mentioned in the account. For cases where the holding is less than 1 lakh and there is no nomination in the account, the holdings may be transferred to the legal heir without any court order or will. For cases above Rs 1 lakhs holding without nomination, one will have to give court order or will from the deceased alongwith the death certificate for effecting the transfer.
4. From Joint Demat Account after death of one owner- In this case, the shares will be transferred to the new Demat Account of the surviving holder. The surviving holder will have to submit an application form alongwith death certificate for effecting the transfer.
5.Transfer of Lock in securities:- If the Demat has ELSS etc which has lockin then the transfer can be done only post getting them rematerialised . After rematerialisation, the same can be dematerialised in new Demat account.
6. Transfer of Holding where there is Lien :- For all holdings where there is lien marked , before transferring the same one will need NOC from the party in whose benefit the holding/stock etc is pledged.

Hope this has helped get you some clarity on the issue.

Saturday, October 8, 2011


Till not very long ago, gold or gold jewellery was considered to be most sacred of family possessions in India, and a family would do its all to avoid selling it or  mortgaging gold for taking a loan on it. But, slowly but steadily things are indeed changing in India with many gold loan companies setting up shop and driving home the point that there is nothing wrong in taking loan over gold. One of the gold loan Finance company asks" Jab Ghar me pada hai sona toh phir kyun hai rona?". This has resulted in huge off take in gold loan sales in the country . But does it make sense for you? Do you really understand what it is ? How can you take benefit from it ? Lets try and understand each of these in the following paragraphs.

GOLD LOAN - What is it?
Gold Loan is a loan given against the security of the gold bar/coin or jewellery . The loan seeker needs to mortgage his/her gold with the bank/NBFCs against which they get loans upto 75% to 95% of the gold value. These are like Personal Loans where the end use of the loan amount is not defined and the amount may be used in any manner as deemed fit by the borrower.Since these loans are backed by security of gold , the banks/NBFCs charge much lower rate of interest on these loans as compared to lets say a Personal Loan which is unsecured.
Who Offers These Loans? Most of the banks in India like HDFC Bank, ICICI Bank, Axis,SBI etc offer Gold Loans. Other than banks there are dedicated gold loan companies like Mannapuram Finance, Muthoot Finance which exclusively deal in Gold Loan.Most of the gold loan companies have very wide network and are open on Sundays too,thus making it eminently easy for the borrower to seek loan at his/her convenience.
Loan Amount? Most of the gold loan financers(NBFCS) provide upto 95% of the gold value as loan to the borrower. But if you approach a bank, they are likely to be conservative in their financing and may be willing to offer only upto 75% of the gold value as loan.But to balance that there rate of interest is lower.So you must decide basis that.If you dont want very high loan amount,it may be prudent to approach banks which will give you gold loans at atleast 2-3% lesser than Muthoot Finance, Mannapuram Finance etc.
Benefits of taking Gold Loan? There are quite a number of compelling benefits which make gold loan a very good option for lot of borrowers. Some of the major ones are
1.Quick Loan Disbursal - Gold Loans are probably the loans with smallest TAT(turn around time). You can walkin with your gold coin/bar/jewellery and walk out with loan , all in the smae day in matter of couple of  hours. 
2.Safety and Security of your Jewellery- Since the gold jewellery that the borrower mortgages with the financier is kept in safe custody of the bank/NBFCs , it ensures that the same is in safe and secure custody .This also reduces the cost that the person might be bearing on account of keeping that jewellery in a bank locker on his own. bank Locker rent is thus saved while the jewellery still stays in bank locker only.
3.Lower interest rates - Since these are secured loans, the rate of interest is much lower than a plain vanilla Personal Loan.
4.OD Facility- Some banks also provide overdraft facility on your gold jewellery. This helps those who dont want to take EMI based loans and want to just have facility of overdraft where they pay interest for only usage period .
So next time when you are in urgent need of money , then rather than going for Personal Loan, you may want to consider unlocking the value of gold jewellery in your home .

Thursday, October 6, 2011


Its not uncommon to find people among us who have suffered at the hands of the mediclaim insurers during claim settlement. There are numerous instances where claim is rejected by the health insurance company on technical/material grounds.  This defeats the basis purpose of getting help when needed. So, what can you do to avoid this? Try these steps :- 
1. Check Fine Print for Expense Coverage - The mediclaim polices generally list down the limit of expenditure that is allowed to reimbursed under room rent/ambulance hire charges etc. This  limit varies between policies of various companies and hence before you get yourself admitted to any hospital , it is always advisable to check the expense limit allowed as per your mediclaim .Any extra expenditure done on account of thee heads is generally borne by the patient himself/herself.
 2. Check for exclusion in Diseases - You must also check the number and nature of diseases covered under your mediclaim before you buy it. For example, lot of policies in India dont cover Diabetes at all . This is a major exclusion since Diabetes is very common among Indians and by excluding it the insurer is playing safe. You must select the policy which provides coverage for maximum number of diseases especially the  critical one like Diabetes, Heart related, Kidney Related, cancer related etc. 
3. Time Period Before Coverage of Preexisting Disease- Most of the mediclaim policies in India, have a waiting period of anywhere between 1 to 4 years before they cover preexisting diseases.Any claim made for the preexisting disease during the waiting period is likely to be rejected.Hence go for the plan which has least waiting period. 
4. Plastic Surgery , Cataract, Dental Care and Piles Not Covered - Most of the mediclaim policies in India DONOT cover Dental Care, Piles, Cataract etc . Even Plastic Surgery is considered to be part of cosmetic surgery and as such is seldom covered under mediclaim. .
 5. OPD Not Covered - Any claim that you may have on account of expenses towards medicines /Doctor consultancy Charges etc during OPD care is not covered by most of the mediclaim plan in India. 
6. Disclose all Material Info - To avoid rejection of any claim made by you which is normally covered under the plan, it is also important for you to have disclosed all material information to the insurer while applying/buying the cover. If the firm finds out that you have willingly suppressed an information which is material in nature, then they are well withing their rights to reject the claim. So be truthful and disclose all the relevant (good and bad) information. It might increase your premium but will ensure that your claim is not rejected when you need the assistance the most.
 7. 24 Hr Hospitalization -  One needs to be hospitalised for a minimum of 24 hours before your claim is eligible for reimbursement/payment by the insurer. Only exception is Chemotherapy,radiation treatment done in Cancer where 24 hr hospitalisation isnt mandatory.
 8. Submit your Claim ASAP - Any claim submitted beyond the stipulated timeframe by the insurer might lead to its rejection . It is advisable to submit claims within 7 days of getting discharged from the hospital.   

Saturday, October 1, 2011


After stupendous success of mobile number portability introduced by TRAI , IRDA too has taken a cue and introduced health insurance portability in India from 1st October 2011. This is a huge step in the right direction considering there was lot of discontentment among the consumers about the manner in which they were being treated by their health insurers. Some of the common grouses were:

1. The health insurance companies mandated on a waiting period for covering pre existing diseases to each and every customer once he comes in their fold, irrespective of whether or not the person had any other policy where he had served out the waiting period. So in effect , every time you changed the company , you would have had to start the waiting period all over again.
2. The insurers generally were resorting to increasing the renewal premium by a steep margin for those policyholders who have had a claim in the year. This was mostly done to discourage the policyholders from renewing the policy with them. Thus they wanted to get rid of policyholders who they thought could be "claim prone".
3.In lot of cases, policyholder's request for renewal after a claim was rejected without any material reason from the insurer. This meant a great nuisance for the policyholder since he had to start his waiting period for preexisting disease all over again with the new insurer.

To address some of these issues , IRDA has mandated health insurance portability now. What exactly does it mean?
Health Insurance Portability means that a health insurance policyholder can now choose to change his insurance provider without foregoing any of the benefits covered in his/her current policy. For instance, if you have a health insurance/mediclaim plan from ICICI Lombard and if for any reason you are not happy with the company , then you can change over to any other insurance provider without foregoing any benefit that you may be enjoying under your current plan. 
What are the benefits of Health Insurance Portability? Following are the few of the benefits:
1. CHOICE - Now as a policyholder , you will have a choice which till now you didn't have. You can now switch over to any health insurance provider . 
2. COVERAGE OF PREEXISTING DISEASES - Once you move from one general insurance company to another for their health insurance or mediclaim plan, you will continue to get the same benefit that you got in your old plan.For example , if you were covered for Diabetes in Plan A and then you  migrated to Plan B , then in the Plan B too , you will have that covered. 
3. NO FRESH WAITING PERIOD - Once you change over to new insurance provider, you need not start your waiting period for getting preexisting diseases covered all over again. You will have the benefit of counting the number of years you waited in your earlier plan .For example, if the waiting period for covering Diabetes under the Plan A is 4 years and after 2 years you migrated to Plan B from another company where also the waiting period for covering Diabetes is 4 years, then you will have to serve waiting period of only 2 years with Plan B since you have already served 2 years under Plan A. This is a big change for all the policyholders.
4. NO CLAIM BONUS TOO TO BE PAID - If you had claim free year in your first policy , then on switching over to new policy , you will be entitled to no claim bonus too from the new insurance provider .

How to Change the Policy or Insurance Provider in India?

You will have to do following :-
1. Apply with the insurance company you wish to change to , at least 45 days prior to your current policy getting over.
2. Inform the IRDA too about the insurance firm you wish to change to.

What else should you consider before switching over?
Consider the following before you finally sign on the switch application 
a. Check for the new premium rates being charged by the other insurance companies for similar coverage in terms of Sum assured and diseases covered.
b. Check for the network of hospitals that they have under cashless scheme.The more the merrier.
c.Also check claim settlement ratio of the firms. The company which doesn't have good record in settling the claims does not merit a chance. 
You should go with the firm which has good claim settlement ration, great hospital network and reasonable premium.
So its time to pull out your mediclaim policy documents and check if it needs to be from another company .

Stay wise and happy investing!!