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Avoid buying life insurance just to save income tax

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Mumbai: Despite there exists a general assumption that life insurance is a medium to avoid the income tax liability to a huge limit, one shouldn’t think of saving income tax as his main aim of purchasing a life insurance policy. However, this is a hugely believed wrong concept. The life insurance deals has grown rapidly in India because of the efforts put up by million agents, and lakhs of employees of insurance firms like LIC, who showed the importance of financial security through life insurance to nearly each household in urban and rural areas, the Financial Express reported.

The report states, the phenomenal increasing efficiency of insurance salesmen in the past quarters of a fiscal, nonetheless, believes on the fact that life insurance is sold just for saving personal tax. It’s partly correct that in the last quarter most people concentrated on selling and buying life insurance for such benefits. There exists a large unit of people who would like to reduce tax liability after paying life insurance premium in the required year.

Under section 80C of the Income Tax Act, 1961, one can avail deductions from income on premium payment to purchase and continue the current life insurance policy on his own life, wife and child. U/s 80C allows a maximum deduction limit till Rs 1.5 lakh. However, the tax bracket includes investments made in deferred annuity policies and payment to provident fund, investment in ELSS of the mutual funds. This is in addition to the premium paid under group savings linked insurance schemes.

 

The primary reason to buy a life insurance policy should be the price of a human life which needs to be exchanged using the policy if the insured passes away while he is earning. The qualifying premium amount for such deductions from income cannot be above 10 per cent of the sum guaranteed. However, persons suffering from serious disability or disease can get deductions from premium till 15 per cent of the sum guaranteed. Policies taken before April 1, 2012 can get a fixed deduction of 20 per cent of the sum ascertained.

Policyholders cannot avoid deductions from taxable income if they end a policy quickly in the upcoming years for which deductions have previously been taken. If the life insurance policy is claimed by single premium mode, do not give away the policy before completing two years from the date of first premium received. In case of unit linked insurance plans, the retention period is five years minimum and for the rest two years.

Few life insurers provide health insurance or important health insurance coverage as extra benefit under the life insurance policy. A separate deduction till Rs 25,000 can be claimed by the policyholder u/s 80D. The amount can touch till Rs 30,000 if a senior citizen has such policy. One paying premium for their parents can also avail such deductions.

The maturity earnings earned by the policyholders or their representatives/successors are totally exempted from tax liability u/s 10 (10D). However, maturity earnings in terms of Keyman insurance policy us 80DD are not exempted from income tax.

Life insurance is a suitable tool to offer financial security to the persons who rely on the earning members. The tax exemptions are only incentives paid by the government for motivating people to purchase life insurance in the un-availability of comprehensive social security system. Income tax benefits must be taken up as a reason to buy life insurance. Persons who assume that life insurance business banks up on tax efficiency to survive must change their understanding of the greatest financial tool, the Financial Express reported.


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RBI asks banks to grout ATMs to wall, floor for security by September-end

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Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.

In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.

Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.

 

As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.

Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.

Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.

The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.

The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.

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SBI refuses to disclose communication from RBI, govt on electoral bonds

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New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.

Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.

The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.

 

“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.

The bank also refused to give any details of action taken by it on such communications from the RBI and the government.

The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.

The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.

The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.

A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.

ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.

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Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting

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New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.

GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.

In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.

 

Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.

The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.

Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.

GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.

In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.

The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.

“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.

With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.

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