Krishna is a 40 year old finance professional working with a private firm. His family consists of his home maker wife and two young children. A couple of years back, an article in a magazine made him aware of the importance of medically insuring himself and his family. This prompted him to buy a family floater policy with an annual sum insured of 4 lakhs on which he pays a premium of around 15,000/- per annum. He was pleased with his decision of having adequately provided for any unforeseen medical emergency.
The union budget 2014, one of the most awaited events since the Modi government came to power, was presented yesterday by the finance minister.
Here is what it means/changes for you as a common investor and tax payer-
The main purpose of life insurance is to provide financial stability to the breadwinner’s dependent family members in the event of his untimely death. Today it is more common to find women who are financially independent with careers; yet there are a significant number of them who choose to stay at home and take care of the house and their young children.
In such families, it is usually only the husband who takes a life cover for himself as the housewife is perceived to have no monetary value. Even the life insurance companies prefer insuring working people – many of them do not offer to insure housewives or have an upper limit on the maximum insurance cover which can be provided, that too subject to the husband’s income and existing cover! They do have a seemingly very valid argument for this – while the loss of a stay at home mom or wife is an irreparable loss for the family in emotional terms, since she doesn’t contribute to the family income in any way, it doesn’t have any monetary impact. And since the loss of income is what an insurance policy is supposed to protect against, it doesn’t make sense to insure her and is viewed as an unwanted expense.
We live in an era where almost every product is sold using aggressive marketing techniques. Most products in the finance domain- credit cards, loans, bank account, real estate are advertised using eye catching colorful images and bold text. And using fine print has become a common method of advertising – all the positives and attractive features of the product on offer are highlighted in bold and the accompanying conditions, restrictive clauses and “not so attractive” features which could influence the prospective client to re-consider his buy decision are very carefully tucked away in small or fine print somewhere at the bottom part of the page or the last page.
The captioned statement may sound too good to be true, and it is only fair if you think – “there must be a catch somewhere”. Honestly, there isn’t and this concept of indexation benefit, if properly understood and implemented, is one of the most powerful tax planning tools; and if timed correctly can not only be used to make your returns on debt and debt oriented investments tax free, but also enable you to book a long term capital loss which can be offset against any other long term capital gains.
Even as I write this, India’s job market is going through one of the worst crises ever. Two of the largest sectors – finance and IT which employ the majority of India’s workforce are experiencing a major slowdown. A leading IT company was in the news recently for laying off as many as 1000 employees in the tech capital of Bangalore without any notice.