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'Now is the time to invest in infra bonds'

March 03, 2010 16:33 IST

Tax cutsThe Budget announcements have been made. The finance minister changed the tax slabs giving more money in the hands of the people. However, he also hiked duty on petroleum leading to a fuel price rise.

The entire Opposition walked out of the Lok Sabha in protest terming the Budget 'inflationary'.

What effect will the Budget have on food prices? And on prices of other things? Has the FM given with one hand and taken away from the other?

In a chat on on Wednesday, banking and insurance expert G V Nageswara Rao replied to many such queries. Here is the transcript:

deep asked, nageshwar rao chat mein to aooo!!!
G V Nageswara Rao answers,  at 2010-03-03 14:55:16Hello everyone, I am Nageswara Rao. It is my pleasure to be with you all. I was to be here at 3pm as told to me. I am sorry if I kept some of you waiting. I am here now.

Ishiqa Khanna asked, what is a term insurance ok?
G V Nageswara Rao answers, Term insurance is an insurance cover where you pay premium and in case of death the sum assured is paid to you. There is no maturity benefit. So the premium is low. There are also term plans which return all the premiums paid in case no death occurs.
amit asked, I have ICICI life time super ULIP..For last 3 years i had invested 1k per month through SIP..Shall I keep on invesing for few years ahead?
G V Nageswara Rao answers, I do not know about the specific plan. I also do not know which fund option you have chosen. However, I would add taht if you had chosen an equity fund option, it is a good idea to continue your monthly premium contributions since it gives average costing. But I hope you are aware of the risks of investing in equity markets.
saikatgh asked, Please describe something about NPS and how to apply , where to apply ..Is the forms available in any IDBI banks..
G V Nageswara Rao answers, NPS is a pension scheme in which you choose the type of funds to invest in from a basket of choices. Upon retirement, you can use the corpus to buy an annuity from any insurance company. The scheme is available at most branches of IDBI Bank.
psasidharan asked, Hi..please tell me in view of the current budget, what would be maximum savings limits which can fetch the rebate on tax. Pls tell us the break ups of the sections too..thank you
G V Nageswara Rao answers, The current budget has introduced an additional deduction of Rs 20,000 for infrastructure bonds. This is over and above the limit of Rs 1 lakh under Sec 80C which is available for several instruments including life insurance. There is also the deduction under Sec 80D for health insurance premiums up to Rs 15,000. You reduce your tax burden by availing all these benefits.
reddy asked, Is PPF or NPS is better ?
G V Nageswara Rao answers, PPF offers a fixed rate of interest that is declared every year. At present it is 8.5%. NPS on the other hand does not offer a fixed or guaranteed rate of return. Your returns depend upon the NAV of the funds chosen by you. You can choose debt as well as equity funds.
karuna asked, which term plan returns all premiums paid in case no death occurs?
G V Nageswara Rao answers, IDBI Fortis has Termsurance plan in which you have the option to get back all the premiums paid in case there is no death.
GaneshNadar asked, When you invest in Insurance policies which also promise mutual funds benefit, if the basic insurance policy also at the risk of the market. Meaning can we loose everything?
G V Nageswara Rao answers, If you choose an equity fund under a ULIP policy, it is possible to lose the principal amount also in case of adverse market movement. If you are concerned about risk, you can choose capital protected options where you can be sure of the capital being protected. Or if you are conservative, you may opt for guaranteed return funds where returns are assured.
Vignesh1 asked, Hi Nageswara Rao, I am residing in a rented house and I have taken Home Loan for construction of house in my native. Will I be able to get tax benifit on the Home Loan repayment as well as enjoy tax benifit through HRA?
G V Nageswara Rao answers, I am not really a tax expert and you should consult someone who can advise you better. From what I know, you will be able to get tax benefits on HRA as well as home loan. If you own a house, you could also be liable to pay tax on income from house property.
amit123 asked, What are infrastructure bonds,are they readily available with us and what are their returns?
G V Nageswara Rao answers, Now that the budget has provided this benefit, you can expect to see some public issues of infrastructure bonds. IDBI was one of the regular issuers of such bonds in the past. You will need to watch for such issues to come.
Sripada asked, Which is better pure term policy or term policy with return of premium?
G V Nageswara Rao answers, It depends upon your need. Pure term policy is cheaper but you will not receive any benefit upon maturity.In case of return of premiums, all the premiums paid are returned on maturity if there is no claim. However, it is also more expensive.
Jenny asked, Hi Nageswara Rao i want to know that share market is good for investment for long term perspective,or can you suggest any other option?
G V Nageswara Rao answers, If you are prepared to invest for long term, stocks usually provide a higher return than fixed income investments. Studies have shown that the longer you hold equity, the less are the chances of loss.
\alok asked, SIP is better for middle class income people for minimize risk
G V Nageswara Rao answers, I would agree that SIP is a better option to minimise risk.
sanjai asked, PPF gives 8% interst
G V Nageswara Rao answers, I am sorry, I was a bit confused. You are right. PPF gives 8%. EPF (Employees Provident Fund) gives 8.5%.
atulvnayak asked, What is better option debt or equity while giving option for NPS investment. My age is 46 yrs, as it closes on age of 60.
G V Nageswara Rao answers, I think you have 14 years to go for retirement. So you can opt for equity component depending upon your risk appetite.
jay asked, I have 25K per month savings potential.. I am 37 years of age.. Please suggest broadly how i should structure my investments.
G V Nageswara Rao answers, You are quite young. If you have regular source of income and you are prepared to invest for the long term, equity investments could be the best option for you.
arun asked, Sir, What about the future of TAX saving MFs after the implementation of new direct tax code? Please suggest me Sir..
G V Nageswara Rao answers, In the new Direct Taxes Code as proposed, equity linked or tax-saving mutual funds are not allowed for tax deduction.
NSK asked, What is the duration of the INFRA STRUCTURE BONDS?
G V Nageswara Rao answers, Infrastructure bonds usually are of 5 to 10 years duration.
Rajas asked, Dear Sir, If you could please address my question regarding lease purchase car used by employee and its taxability in the hands of employee. Thanks Rajas
G V Nageswara Rao answers, I am not a tax expert and you should consult someone who knows better. From what I know, if a car is provided by the employer to the employee, it is treated as a perquisite and there is a certain value given in the Income Tax rules. It does not matter if the employer buys or leases the car.
atulvnayak asked, Direct tax code will eat away lots of tax saving instruments - ELSS, Housing loan, long term gain, PPF withdrawals. What would be an option to save after 1 April, 2011.
G V Nageswara Rao answers, Direct Taxes Code in fact increases the deduction limit from Rs 1 lakh at present to Rs 3 lakhs. However, it taxes all withdrawals. One of the options will be a flexible insurance/pension policy where you get tax deduction and withdraw whenever needed. But you will pay tax on withdrawals and you should plan withdrawals when your tax liability is low, such as after retirement.
Joejo asked, What is Direct Tax Code?
G V Nageswara Rao answers, Government is reforming the whole Income Tax Act and it is called the Direct Taxes Code. Finance Minister said in his speech that he hopes to implement it from April 1, 2011. It brings about many changes related to deductions for investments.
samadmsin asked,  am 30 years of age, married. Have a potential of saving 15K per month. Please suggest a good regular savings area / investment for me
G V Nageswara Rao answers, You are young. If you are prepared to take risk and are willing to invest for long term, consider investing in equity.
Ruksar asked, Hi, am 37yr old, thinking to buy house, should I buy in as home loan rate will increase after 31st March please suggest
G V Nageswara Rao answers, Home loan is usually long term. Interest rates may go up or go down during that time. If you choose a floating rate loan, you will be charged whatever is the prevailing rate from time to time.
slahoria asked, What will be the future of ELSS after DST?
G V Nageswara Rao answers, Direct Taxes Code does not provide a tax deduction for ELSS.
ABCDEF asked, Hi, I'm 38 now & want to retire at 45 years. Please suggest optimal Debt : Equity Ratio Thanks
G V Nageswara Rao answers, You will probably need to invest a lot of money if you wish to save over 7 years to last for the rest of life. You could consider a pension plan. You might want to take only a small component of equity as your time horizon is small.
Sampath asked, Will the interest rates on Home loan increase post March 31,2010?
G V Nageswara Rao answers, You can say that we are generally entering increasing interest rate cycle. So the chances of interest rates going up are high, although timing cannot be predicted with certainty. Thanks all of you, it was a pleasure to be with you.