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Last Updated : Jun 22, 2019 12:50 PM IST | Source: Moneycontrol.com

This week in Personal Finance: Car lease rentals, gold in portfolio, capital gains tax, term insurance with riders

Let’s have a look at ideas of personal finance this week.

Moneycontrol News @moneycontrolcom

Yet to decide whether to buy or lease a car? Let the financial math decide. But, buying a car with a loan works out way cheaper. An article in moneycontrol wades through the numbers and consults experts on the topic. It becomes apparent that leasing works for those wishing to flip cars at frequent intervals.

The lease rentals are rather high in the first year and then reduce in the subsequent years.

The total outflow works out much more expensive(Rs 2.2 lakh more) for  Hyundai Grand i10 when leased compared to what is to be paid in the form of EMIs if an auto loan were taken. But, lease rentals include maintenance costs, small mercy, but still not good enough from a cost perspective. With a loan, you get to own the car after repayment, but the car goes back to the car leasing firm after the term.

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If you don’t want to make a down payment, want to change cars frequently and don’t mind the extra cost, go for leasing.

Planning to add gold to your portfolio? Gold has been an integral part of many Indian portfolios. However, many buy it in jewellery form, which has its own disadvantages such as risk of theft, storage cost, purity issues and convertibility to cash at a discount to the market price of gold. Over the past five years, prices have remained subdued. However, ignoring gold totally may not be a wise move.

“The US started monetary tightening and we are in a situation where long duration bonds globally are trading at negative yields. Diversifying our asset allocation across various assets is important from a risk management perspective. Gold is an asset class with scarce value, which will always be perceived as safe heaven,” says George Heber Joseph, CEO & CIO, ITI Mutual Fund.

Prices of gold bounced back in the international markets after the US Federal Reserve decided to leave interest rates unchanged. The US Central Bank made it clear that there is a possibility of cut in key interest rates. This is a clear signal that the interest rates are likely to go down and that makes a strong case for investment in gold.

That said, do you wonder how to decide capital gains tax on property sale

A home-buyer can claim an exemption against long-term capital gains if he/she invests such capital gains/sale proceeds of one house property/other long-term capital asset, to purchase/construct another house property in India within specified timelines. However, such exemption is not available if the construction is completed beyond three years. This condition causes undue hardship to a home-buyer for reasons beyond his/her control as there could be delay in construction for varied reasons beyond three years.

Judicial Courts have held various principle(s) in this regard to construe a liberal interpretation of date of construction as it is a beneficial provision for taxpayers and should be followed as per intent and spirit of the statute. It has been held that the intention of the legislature was to encourage investments in the acquisition of a residential house and not strictly with the completion of construction or occupation of the property.

Further, under section 54 of the Act, in case you sell your residential house and earn long-term capital gains, there is an exemption available on such gains if re-invested into one residential property in India.  The  Interim Budget 2019 has provided that a once in a lifetime exemption can be availed on such long-term gains if the gains are Rs 2 crore or less and are re-invested in two residential properties in India.  All other conditions for claiming this exemption remain unchanged.

On that note, let’s see how you can bolster your term insurance cover with riders.

Term Plans also allow you to opt for riders with the base plan, in order to have all-round protection. You can choose from the following riders according to the risks you need coverage for.

Accident Death Benefit: This rider pays an additional sum assured on the death of the insured due to an accident.

Total Permanent Disability Benefit: This rider pays an additional sum assured if the insured person becomes totally and permanently disabled due to an accident.

Waiver of Premium: This rider waives off future premiums payable in case of total and permanent disability/diagnosis of critical illness/death. In case the policyholder and insured are different, then, on the death of the policyholder, all future premiums are waived off and the policy continues for the insured person. If the policyholder and the insured are the same, then in case of diagnosis of critical illness or permanent disability, all future premiums are waived off.

Critical Illness: In case the insured person is diagnosed with any of the critical illnesses such as cancer, heart attack, stroke, kidney failure and paralysis, the rider sum assured is paid to the insured person.

Surgical Care: This rider pays the rider sum assured in case the insured person undergoes surgeries that are related directly to organs such as brain, heart, liver and lungs or other valid listed surgeries.

Hospital Care Benefit: In case the insured person gets hospitalized for a period of more than 24 hrs, this rider pays a daily cash benefit. The daily cash benefit is a fixed amount based on the rider sum assured. If a person gets admitted to the ICU unit, the amount payable doubles.

Each rider takes care of specific risks and pays accordingly. The payouts under a rider can either be an additional amount or an accelerated amount i.e. it is paid from the base sum assured. Riders enhance your protection quotient and take care of the remaining two Ds—Disability and Disease.
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First Published on Jun 22, 2019 12:47 pm
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