Byapaar.com – The Indian Business Blog

Since the year 2000 India has shown enormous growth in the field of Insurance. As the federal government of India permitted the private sector market and the Foreign Direct Investment they have shown a rapid growth. They can invest up to twenty six percent.
Once upon a time the life insurance company in India was a protected sector. This means it was nationalized. Incorporation of LIC in the domain of life insurance was first done in the year 1956. History draws us back in those days when LIC enjoyed monopoly. Hence it has enjoyed the top position quite a long time.
Ultimate privatization of Indian insurance had been done after the foreign crisis banished. R V Malhotra committee was formed. In the year 1994 RV Malhotra committee had submitted its first draft.
Insurance is the main key frame in the Seventh Schedule to the constitution of India. The Insurance domain in India has gone through a lot of changes as well as several phases.
A contract between the policy holder and the insurer, who promises to pay a sum of money (“benefits”) to a designated beneficiary upon the death of the insured person, defines the term Life Insurance. This contract of paying benefits also includes terminal or critical illness under its canopy. The policy holder promises to pay a stipulated amount (the “premium”) at regular intervals to lump money.
Life Insurance provides peace of mind, as the insured person knows that his/her demise will not result in financial hardship for the family.
The Life Insurance is a legal contract and the terms of this contract draws the line to limit the insurer’s liability. Suicides, war, fraud, riot and civil commotion are not privy to the benefits of Life Insurance.
There are two main streams in which the life-based contracts work:
a. Protection policies: provides benefits, generally a large sum of money, in times of specific events and the common form being term insurance.
b. Investment policies: facilitates the growth of capital by regular or single premiums.
Whole life, variable life and universal life policies are common forms of investment policies.
The recently introduced viatical settlements, which involves purchase of a life insurance policy from an elderly or a terminally ill policy holder has not been widely appreciated. A purchaser consolidates the life insurance policy of a person including the right to name the beneficiary, in exchange for a price discounted from the policy value.
Life insurance policies are also surrounded by the cobwebs of fraud and exploitation. The benefits have been the epicenter of many murder crimes.

Different people have different needs at various stages of life. So they have to plan accordingly and make some investments for financial security. For long, state owned insurance companies like Life Insurance Corporation of India (LICI) have been offering lots of investment options in India along with traditional saving agencies like banks and post offices. LICI has been the most dominant player in this field with almost monopoly status.

But the scenario has changed since Indian economy started liberalizing and opened up the sector to private and foreign players through IRDA bill in 1999 amidst protest from many quarters. Not surprisingly the who is who of global insurance majors rushed into Indian market and set up shops after tying up with local companies who have little or no experience in insurance business. Soon the market became hot as news players started to market their products more aggressively seldom seen in India. People got spoilt of choice as agents now came to homes or offices with insurance quotes their offered by their respective companies. My intention here is not to write about the history of insurance companies but it is absolutely necessary to know the background for the main topic.

So everything has been going smoothly for all with a booming stock market and fast growing economy. It has been like honeymoon for both investors and insurance companies. But nothing in a market environment is permanent and one fine day in the middle of September this year everything came tumbling down as world financial markets crashed. As most insurance companies invest funds they collect from clients, most of them suffered huge losses due to the global financial problem phenomenon.

To cite a personal example, one of my colleagues invested Rs. 50,000/- with an insurance product offering high returns (thus highly risky) and linked to stock market with life insurance as an added option, (continue reading…)

The general notion is that it feels great to be famous – to be someone! But sometimes it is great too if you are nobody like me who works as Asst. Teacher in a semi-govt. school in a semi-urban locality in one of the remotest and non-descript part of the country. Why do I feel great? Because I don’t have to go through the arduous task of filling tax returns every year like my colleagues do! Yes you read it right! I don’t have to pay income taxes (I belong a special community in a special area where nobody from my community has to pay) although my income from regular job and online is roughly around Rs. 500,000 per annum. I don’t even have a (PAN) card! But from what I see my colleagues go through, I reckon it is not funny to file returns especially as every year there are some changes made in tax policies by the government. So, I find my mates go around finding the best and cheapest tax accountant available in the town. Professional consultation is not always for just filling of returns, but salaried individuals with limited income also need to exploit the different schemes on offer by the government to save some paisa for the future and thereby get tax rebates.

As I have avid interest in economic and business affairs, I do read lots of finance and business related papers and journals. The other day I found one of the magazines (Outlook Money) that I subscribe to enclose a little pocket book titled “The Complete Tax Guide for 2008-09” which is really a handy item for all normal tax-payers. It gives a complete guide from calculating incomes to deductions, computation and tax planning, clubbing of income to filing of returns. I believe most net junkies don’t have time to read books anymore. While business houses can afford to hire chartered accountant firms for audit services, individuals can save lots of money if they have basic ideas about tax laws and tax saving schemes. Here, I’ll write what is advised on that handy book about “tax saving strategies during your lifetime.”

The budget of 2008 had much to offer to the salaried tax payers of the country. The smooth passing of the Finance Bill with no changes to the proposals made can bring in showers this financial year. There are two ways in which tax payers will benefit. One, the threshold level of income tax has gone up. This means that a greater part of the income come under zero tax status.

Two, the tax slabs have also been raised. Currently the maximum marginal rate of tax of 30 percent is applicable from the income level of Rs. 250,000, this now stands doubled at Rs. 500,000 for the next financial year. This means an under 65 year old male tax payer with a gross (continue reading…)