The Tribune, Chandigarh, India

personal finance
e-wallet for your insurance policies
Dematerialisation allows a policyholder to store policies electronically under single e-insurance a/c
Mayank Bathwal

life insurance is a unique financial instrument where an individual enters a financial contract with the insurer to mutually walk the path towards fulfilling specific outcomes through life stages. Insurers are actively engaging with customers through a consultative and mutual discovery process to ensure that customers have optimal insurance cover to mitigate risks.

The purpose of a life insurance policy is to provide protection to your families even in your absence. It has been observed in multiple cases where even after buying the right policy, families have been unable to pass on the benefits to the legal heir. This can be because family members are unaware of the policy details or policy papers are misplaced, forgotten or even destroyed.

Until recently, there was no fool-proof way to preserve policy documents, appoint trusted persons (other than the beneficiaries/nominees of the insurance policy) to manage the risk portfolio etc. but with the regulations, dematerialisation of insurance policies is a powerful solution to all these concerns.

With this, one can remain comforted in knowing that all policies have been stored in an electronic format under an e-insurance account (eIA), which will safeguard the insurance documents of policyholders. The regulator has granted registration to five entities to act as insurance repositories authorising them to open e-insurance accounts. These are NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, Karvy Insurance Repository Limited and CAMS Repository Services Limited.

Each e-insurance account will have a unique account number and each account holder will be granted a unique login id and password to access the electronic policies online. This eIA will facilitate policyholders to effectively manage the policy by providing a single-reference point to the insurance portfolio through the internet. One can now manage all life insurance policies from across insurers under a single e-insurance account. Existing policies can be converted to the eIAs with an easy documentation process. Moreover, there is no fee attached towards conversion or towards opening an e-insurance account. Individuals with no policies too can open e-accounts and upon purchase request the insurer or insurance repository for dematerialisation.

Steps to open e-insurance account

All insurance providers are committed to assist in the process of opening an e-insurance account. The Insurance Regulatory Development Authority (IRDA) has registered five companies to act as insurance repositories-NSDL Database Management Ltd, Central Insurance Repository Ltd, SHCIL Projects Ltd, Karvy Insurance Repository Ltd and CAMS Repository Services Ltd. These repositories are linked to insurance companies and will open e-Insurance accounts for policyholders after receiving complete documentation to maintain policies electronically.

Benefits of e-insurance account

Ease in policy management as all policies are stored together. All insurance policies, be it life, pension, health or general insurance plans can be electronically held under a single e-insurance account. This means that details are available in a single account allowing one view and convenient management.

Safety against the risk of loss or damage of the policy document as is common with paper policies. The electronic form ensures that policies are in safe custody and can be easily accessed whenever and wherever needed. A copy of the policy can be downloaded at any time by accessing the e-insurance account.

Less paperwork as one does not need to undergo KYC verification multiple times unless there is a change. e-insurance account holders are free from the troubles of submitting KYC details each time they buy a policy. Further, any changes in personal details such as address or contact number can be furnished through a single request, thus saving on paper and time.

Single point of contact— it allows checking and changing of policy and account details with a single request. For the policies converted or issued in an electronic form within an e-insurance account, the repository helps in providing mandatory information such as policy status (including premium status, net asset value status, bonus status, loan status, claims status, nominee/assignment status, etc), premium due calendar and online premium payment facilitation, premium history and annual statements. Premium for all policies can be paid online and several service requests can be logged from the e-insurance account.

For insurers, digitisation will streamline operations and endear them to customers. It will also allow for superior underwriting as data will be captured more efficiently. Moreover, customers can expect better quality products as insurers mine data for course correction.

Policyholders invest a great deal of time and effort in tracking various financial products, their payment and instalments etc. In the life insurance industry, most policyholders tend to miss policy renewal dates. Digitisation will enable one to monitor all policies in a single location. Equally relieved will be the beneficiaries or dependents, who need not to run from pillar to post to seek policy details in case of an emergency.

The author is Deputy CEO, Birla Sun Life Insurance. The views expressed in this article are his own

Know tax tangle around your commercial properties
Balwant Jain

a significant appreciation in the prices of commercial properties in recent times in the newly developed residential areas has attracted many investors to the segment. Many people are even borrowing money (loans) to buy commercial properties for the investment purpose. Let's have a look on various aspects of taxation of commercial property, including tax treatment of a loan taken for buying a commercial property.

Taxation of commercial property

Income from a house property in general is taxable under the head “Income from house property” in the hands of the owner. This applies to both residential as well as commercial properties. The amount of rent received or reasonably expected to be received from such property is taxable, also known as annual value, under this head after deduction of certain expenses.

In case you are not the owner and have sublet the commercial property, your income from such sub-letting shall however be taxable under the head “Income from other sources”. In case you are running a proper business centre and the amount in respect of a provision for other services along with letting out of the space constitutes a significant portion, the same can be treated as business income, depending on facts of the case. Except in cases stated above, all incomes derived in respect of a commercial property by whatever names called is taxable under this head. Since all such incomes are taxable under this head no deductions other than being discussed hereunder, are available against the rentals. So do not show your genuine rental income as business income in order to claim other expenses.

Deductions from annual value

For calculating the income taxable under the house property head, the taxation laws allow you two deductions. The first deduction is standard deduction in respect of repairs etc. at the flat rate of 30% of the annual value. The deduction in respect of a let out commercial property or a residential property which is deemed to have been let out is available whether you have actually incurred any expenditure on repairs.

The other deduction available is in respect of interest on a loan taken to purchase or construct a house property, or even for repair or reconstruction of your existing property. This benefit of interest deduction is available for all properties whether residential or commercial. Note that even processing fee or prepayment fee paid in respect of any loan taken for the commercial property is also treated as interest and is thus eligible for a deduction. This deduction in respect of interest is available for money borrowed from anybody, including your friends and relatives.

You can claim full interest in respect of money borrowed for purchase, construction, repair, renovation of the commercial property without any limit whether the same is let-out or used for the purpose of your own business or profession. Note that the deduction for interest in respect of a project under construction is available only from the year in which the construction is complete and possession is taken. For interest paid prior to the year in which the possession is taken for an under-construction project, you can claim aggregate of such interest in five equal instalments starting from the year in which construction is completed.

It is important to note that you are not allowed any deduction for repayment of the loan taken for commercial property under Section 80C.

Taxation of property used for own business

In case you are using the commercial property partly or fully for your own business or profession, the proportionate share is not taxable under this head and you are not allowed to claim any notional rent in respect of such property while calculating your profits in business.

However in case you are using your commercial property for your business, you are allowed to claim any actual expenses incurred for the repairs and maintenance of the same. Likewise you are allowed to claim depreciation on the same commercial property along with the interest which you are paying on the loan taken to buy the property.

The author is CFO, Apnapaisa. The views expressed in this article are his own

tax advice
Monthly alimony to wife taxable
sc vasudeva

Is compensation granted to the wife by husband as a result of mutual divorce subject to income tax? — Ramesh Kumar

It has been held by the Bombay High Court in the case of Princess Maheshwari Devi of Pratapgarh, Poona vs Commissioner of Income Tax (1984) (147 ITR 258) that any lumpsum amount of alimony received by the wife by virtue of decree of the court would be a capital receipt. Capital receipts are non-taxable. However, the alimony received on a monthly basis has been held to be an income in the hands of the recipient and chargeable to tax.

The court, however, observed that a suitable amendment should be made to see that in case where the payment of alimony is paid by husband from his income and is such that the same cannot be claimed as a deduction in his assessment, it should not be taxed in the hands of the wife. However, so far no such amendment has been made to the Act.

In the previous year’s tax return, I had shown Rs 5,000 as deposited in the PPF account and I availed the tax benefit. Unfortunately, this amount could not be deposited in the PPF. Will I show this discrepancy in a revised return or mention it in the ensuing year’s return? — np Singh

It will be better to revise the return. I hope you had filed the return of your income for the year ended March 2013 by July 31, 2013. If that be so, you can revise your tax return for the said year before March 31, 2015.

Explain implications of tax deducted at source (TDS) with regard to the freight payment. Is the deduction to be made only in respect of the freight amount or on the total amount of bill, including the cost of goods which are being sold? — Harish Chander

TDS should be deducted on freight amount only. Section 194C of the Act provides that no deduction shall be made if the amount credited or paid or is likely to be credited or paid does not exceed Rs 30,000. However, where the aggregate of the amounts credited or paid or likely to be credited or paid to the same person during the financial year exceeds Rs 75,000, the person responsible for paying such sums shall be liable to deduct income tax under the aforesaid section. It may be added that in case recipient is a transport operator (may be an individual, firm, company or any other person) and he or it furnishes his or its PAN to the deductor, tax is not deductible w.e.f. October 1, 2009. For this purpose, a transport operator is a person who is in the business of plying, hiring or leasing goods carriages. Deductors who make payment without deducting tax at source from such transport operators are required to intimate PAN details to the department in the prescribed manner.