Category: Personal Finance

Best 5-Year FDs With Higher Interest Rates Up To 6.75% For Regular Investors

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Meaning of prevailing interest rates

For an investor, the rate of interest depends significantly on the bank or NBFC providing the investment alternative. Different interest rates on deposits are given by each bank. In addition, the rate of return also relies on the investor’s age. As compared to citizens under 60, senior citizen investors can expect better returns. Although interest rates differ on the basis of many factors, investors can reap good returns from FDs if compared to savings accounts.

Meaning of lock-in period on FDs

Meaning of lock-in period on FDs

The maturity term is also considered as the lock-in period on a fixed deposit. Through this period, without financial consequences investors can not withdraw their deposits. Withdrawing the amount before the lock-in duration expires is specifically forbidden with tax-saving FDs. Premature withdrawal is acceptable for some types of FDs, but it relates to penalties. From one investment plan to another, the specific penalty conditions can vary. That being said, keeping deposits unchanged until maturity is often beneficial. Investors earn high returns when the term expires. Withdrawing prematurely will result in the FD’s reduction of interest income.

5 Year FD Rates

5 Year FD Rates

Banks ROI in %
DCB Bank 6.75
Equitas Small Finance Bank 6.75
AU Small Finance Bank 6.50
IndusInd Bank 6.50
RBL Bank 6.40

Key pros of FDs

Key pros of FDs

By investing in a fixed deposit investors can cherish the below given benefits:

  • FDs offer assured returns on the invested sum, unlike most other investments.
  • When it comes to the duration of the scheme, the best FD plans provide flexibility. Most financial institutions provide maturity tenures spanning from 7 days to 10 years, for instance which means that both short term and long-term investors can consider FD as a part of their personal finance.
  • On fixed deposits under cumulative option the interest rates are compounded on a monthly, quarterly, or half-yearly basis.
  • For non-cumulative fixed deposit plans, the investor can determine the frequency of the interest return. They can, thus, serve as an additional stream of income for creating wealth.

Cons of FDs

Cons of FDs

As the bank fixed deposits are mostly preferred by the risk averse investors, still there are some demerits of FDs which investors must take into consideration, and they are:

  • If an investor is attempting to beat inflation then FD is not a good bet for him or her.
  • For a prescribed period, a lump sum balance is locked-in. If you wish to make good returns from the savings, you should not use this money in case of an emergency. Premature withdrawals relate to penalties and other related charges.
  • When an investor chooses to pursue a premature withdrawal from an FD, a part of their interest income from the scheme will end up being forfeited.

Taxation

Taxation

In compliance with the rules applied by the Income Tax Act, fixed deposit interest earnings in a year encounter TDS, or Tax Deducted at Source. Interest income is then added under the heading “Income from Other Sources” during Income Tax Returns. The TDS will then be measured against your overall tax liability by the IT Department. Interest earnings, nevertheless, is only withheld when interest income surpasses Rs. 40,000 from all streams. On the other side, if a person opts for a tax-saving FD, they can seek a tax deduction of up to Rs. 1.5 Lakh for the principal sum in a fiscal year.

Who and why should one consider FD?

Who and why should one consider FD?

While investing in market-linked securities to gain better returns, investors can be subjected to risks. Therefore, investors often need to pursue safer investment alternatives to ensure sustainable financial growth. Fixed deposits are stable and, as compared to riskier investments, contribute to assured returns. For new investors, fixed deposits are ideal savings vehicles. In addition, such schemes can significantly benefit risk-averse people. There is almost no chance of principal loss, as FDs give guaranteed returns. That being said, investors should note that, as opposed to other high-risk alternatives, the rate of return on such an investment is restricted.

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5 Best 2-3 Year FDs With Good Returns Up To 7%

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How to open an FD account?

In case you have an active savings account with a bank you can open a fixed deposit account at the same bank. But without needing to open a savings bank account, some banks can allow you to open an FD account. But for the same your bank will ask you to go with the KYC procedure. And for the KYC process the bank will ask you to submit the photocopies of your ID proof, address proof and passport size photographs. Along with the application form the bank may ask you to submit your original KYC documents for verification.

Maturity period and deposit limit

Maturity period and deposit limit

To open an FD account the minimum deposit cap varies across banks. There is no limit, though, for the maximum deposit amount in an FD account. The minimum and maximum period provided for which it is possible to hold an FD differs from bank to bank. Currently, for a minimum duration of 7 days and for a maximum of 10 years, one can invest in FD. In compliance with your criteria, you can pick the period over which you want to hold the FD account.

2 Year FD Rates

2 Year FD Rates

Banks ROI in %
Equitas Small Finance Bank 6.75
AU Small Finance Bank 6.50
DCB Bank 6.50
IndusInd Bank 6.50
RBL Bank 6.50

3 Year FD Rates

3 Year FD Rates

Banks ROI in %
Equitas Small Finance Bank 7.00
AU Small Finance Bank 6.75
DCB Bank 6.75
RBL Bank 6.75
IndusInd Bank 6.50

Interest payouts

Interest payouts

The rate of interest on fixed deposits (FD) provided does rely on the period over which you are invested in the FD and will also differ on FDs for the same period from bank to bank. Higher interest rates are usually provided to senior citizens on FDs across all the tenures. And in order to earn interest payouts one can select either a cumulative or non-cumulative alternative. Along with the principal amount the interest paid on deposit is reinvested and paid at the time of maturity under the cumulative option. In the case of a non-cumulative option, interest is added to the account of the depositors at the payout interval selected at the time the FD account is opened. Usually, one can pick from the alternatives presented by the bank to earn interest on a monthly, quarterly, semi-annual or annual basis.

Premature withdrawal facility

Premature withdrawal facility

One can break his or her FD before the maturity date in the event of any emergency necessities and for the same the bank may impose a penalty on premature withdrawals. The amount of the penalty ranges across banks. The guidelines about premature withdrawals must be reviewed before opening an FD account because some banks provide FDs without an early withdrawal facility and don’t impose penalties on premature withdrawals respectively.

Taxation

Taxation

Against your fixed deposit, TDS is automatically imposed by your bank. Consequently, partly through your income tax filings and partly through TDS, the maximum taxes on your fixed deposit returns are charged. That being said, TDS is only withheld by the bank if the yields on fixed deposits surpass Rs 40,000 per year for the general public and Rs 50,000 per year for senior citizens. If the return surpasses Rs 40,000 or Rs 50,000, and you submit your PAN to the bank, the TDS on your fixed deposit income withheld by the bank will be 10 per cent. A TDS withheld by the bank on your fixed deposit revenue is 20 percent if you do not support the bank with your PAN. That being said, in those situations, only if you submit Form 15G or 15H to your bank then only you can claim interest income without TDS. Optionally, at the beginning of the financial year, Form 15G for non-senior citizens and 15H for senior citizens must be submitted to prevent the full inconvenience of the additional TDS deduction.

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Post Office RD Vs SBI RD: A Comparison In Terms Of Good Returns

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Investment

oi-Vipul Das

|

An RD account is a type of term deposit that enables you to deposit a predefined amount for pre-defined periods. The amount of the instalment, once specified, cannot be changed. An eligible individual can open a bank or post office RD account online as well as offline by visiting the nearest branch. If you are willing to open an RD account to reap good returns, State Bank of India (SBI) and the post office provide their customers with RD alternatives. So let’s compare here both State Bank of India (SBI) and the post office RD account to get the best one out.

Post Office RD Vs SBI RD: A Comparison In Terms Of Good Returns

  • For the general public, SBI RD interest rates range from 5 percent to 5.4 percent with an additional interest rate of 50 basis points for seniors. From 8 January 2021 onwards these rates are valid. Post Office RD bid 5.8 percent which is effective from January 1, 2021 per annum which is compounded by a quarterly basis.
  • Post office RD comes with a maturity period of 5 years whereas SBI recurring deposits have a tenure of 1 year to 10 years.
  • It is possible to open an SBI RD account via cheque/cash, but a post office RD account can be opened by depositing the minimum balance limit.
  • By visiting the nearest post office branch you can open a 5-Year Post Office Recurring Deposit Account offline, whereas you can open an SBI RD account by visiting the official net banking portal of SBI.
  • Customers are required to render monthly deposits of a minimum of Rs 100 and multiples of Rs 10 into the SBI RD account. In terms of deposits, there is no upper ceiling. But Rs 10 per month, or any amount in multiples of Rs 5, is the minimum amount needed for opening a Post Office RD. There is no upper ceiling, however, on contribution.
  • The 5-year RD rate for the post office is determined by the government. For SBI, though, the rates of interest differ across the tenure.

SBI RD Rates

Tenure ROI for general public RO for senior citizens
7 days to 45 days 2.9 2.9
46 days to 179 days 3.9 3.9
180 days to 210 days 4.4 4.4
211 days to less than 1 year 4.4 4.4
1 year to less than 2 year 4.9 5.0
2 years to less than 3 years 5.1 5.1
3 years to less than 5 years 5.3 5.3
5 years and up to 10 years 5.4 5.4

Key takeaways of SBI RD scheme

An individual with many benefits is given by the SBI Recurring Deposit Scheme. The following are some of them:

  • A loan against the amount invested in the RD can be used by individuals. One can avail up to 90% of the amount against his or her RD account. SBI also gives individuals the right to overdraft the amount of RD available.
  • The tenure varies between 12 months and 120 months for the deposit. Consequently, unlike other RDs, at the convenience of the account holder, the recurring deposit provided by SBI may also be used as a long-term investment tool.
  • SBI RD scheme also comes with a nomination facility using which an account holder can nominate his spouse or other family members as a nominee.
  • SBI enables minimum deposits on their RD account in multiples of Rs. 100.
  • Individuals at every SBI bank branch can use the facilities of the SBI RD scheme.

SBI RD account charges

Considering several instances there are some charges that are imposed to the account holders:

  • Individuals keeping an account for a period of five years or longer will be charged a penalty of Rs. 1 for every Rs. 100 if the due monthly instalment is not paid.
  • The penalty imposed will be Rs. 2 for every Rs. 100 for those with an account of more than 5 years.
  • A service charge of Rs. 10 will be imposed on individuals who have three or more successive defaults in the deposit of monthly instalments until the RD account matures.
  • The account will be terminated with the amount paid to him/her prematurely if the account holder fails to render six consecutive deposits in the RD account.

Taxation on SBI RD

According to the Income Tax Act, 1961, RD is taxable. The amount deposited in an RD is liable for in the annual income of an individual, and the interest received on it receives 10 percent of TDS. That being said, TDS on RD is only available if in a financial year the gross interest received is over Rs. 10,000. By submitting Form 15H or Form 15G, individuals can also avoid TDS applicable to their interest.



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Stove Kraft Open Its IPO Today: Should You Subscribe?

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Investment

oi-Roshni Agarwal

|

Now this kitchen solution company Stove Kraft will be the fourth IPO of the month and year. Here are the details on the issue and which investors can bet on the issue and for how long?

Stove Kraft Open Its IPO Today: Should You Subscribe?

Stove Kraft Open Its IPO Today: Should You Subscribe?

Issue details: The public issue of Stove Kraft comprises fresh issue of Rs. 95 crore together with OFS of 82.50 lakh equity shares by promoters and investors. Price band has been decided at Rs 384-385 per share. And the issue will close for subscription on January 28. Already, the company has raked Rs. 185 crore through anchor book.

About Stove Kraft: The company manufactures kitchen appliance under the brand Gilma and Pigeon and also proposes to begin manufacturing of kitchen solutions under the BLACK + DECKER brand.

Issue objectives: The proceeds from the issue will be put towards repayment of debt.

Financials: The company logged revenue CAGR of 13 percent over FY 18-20. Over the period from FY18-20, there had been low operating margin with EBITDA ranging between 2-5 percent. In the financial year 2019-20, Stove Kraft’s profit rose to Rs 3.2 crore from Rs 0.7 crore in FY19 and loss of Rs 12 crore in FY18. The operating revenues in FY20 rose to Rs 669.9 crore from Rs 640.9 crore in FY19 and Rs 529 crore in FY19.

Valuation: “The company has priced its issue at 34.5x PE on a trailing basis, its peers TTK Prestige and Hawkins Cookers are currently trading at 61.0x and 47.5x respectively. On FY20 basis, the company priced its issue at 301.5x PE. Due to cost cutting measures, company margins improved in the first half of FY21 which is not sustainable. Cost such as travelling, advertisement reduced in H1FY21 due to COVID-19 are going to come back once business comes back to normalcy,” said Angel Broking.

So, as the valuations for the issue are deemed high in comparison to listed peers on FY20 earnings, lower brand value and likely unsustainability in the profitability logged in the H1FY21, brokerages are neutral are on the issue. Sustainability of improved profitability performance remains a critical factor, said ICICI Direct.

Should you subscribe to Stove Kraft IPO?

For small listing gains, investors can subscribe to the issue to only exit after listing as the issue does not seems attractive and this too can be betted on by investors who have a high risk profile. While, moderate to risk-averse investors can avoid the issue for now unless there is no clarification on the various issues raised around the public issue.

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Valuations out of comfort zone: What you should do now

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A famous law in economics — Stein’s Law– states, “If something cannot go on for ever, it will stop”.

With the Sensex touching the 50,000 mark last week, one thing on every one’s mind is this – will the exuberance continue or will the markets succumb to Stein’s law? In this column we analyse two metrics that investors can keep track of to judge the market situation.

Buffet Indicator

In an interview in 2001, legendary investor Warren Buffet noted that the single best measure of where valuations stand at any moment was the ratio of market capitalisation of all listed securities as a percentage of GNP. This has subsequently become famous as the Buffet Indicator. Since in many cases there is no significant difference between GNP and GDP, the market capitalisation by GDP is more commonly used.

According to Buffet, in the context of US economy, if the percentage relationship falls to the 70-80 per cent levels it’s good time to buy. If the ratio approaches 200 per cent as it did in 1999-2000 during the dotcom bubble, investors were ‘playing with fire’.

Of course, it was playing with fire as those who remained invested in the benchmark Nasdaq index at those levels of market cap-to-GDP, saw 77 per cent of their investment value burnt from the peak of the bubble in March 2000 to its bottom in October 2002.

Right now the market capitalisation-to-GDP in the US is around 190 per cent — right in the ‘playing with fire’ zone. Given that financial events in the US always impact the rest of the world, this poses risk for stock markets across the world. .

Where does India fare in this metric? India’s current market cap-to-GDP is around 100 per cent now. While this might appear lower than the ratio in US, we need to see this in the context of our economy and history.

Our market cap-to-GDP peaked at around 149 per cent in December 2007, and the Nifty 50 index fell 60 per cent from those levels by March 2009, falling back to a ratio of a little above 60 per cent of the annual GDP at that time. Since then, the highest we have reached is 105 times in 2017 Given our history, the Buffet Indicator for India is signalling over valuation. Every time it has crossed the 80 to 90 per cent levels, markets have either crashed or atleast underperfomed risk free options. While it might be lower than the ratio in the US, one needs to factor in that we have an unorganised sector that makes up 50 per cent of the GDP and our corporate profits to GDP ratio is about half the levels prevailing in the US.

Trailing PE ratio

Historically, Indian markets have always cracked or underperfomed sooner or later after benchmark Nifty50 index nears/crosses trailing PE of around 24 times. In the peak of the Y2K/dotcom bubble, it traded up to a PE of 29 times in February 2000. From the peak level of 1,756 then, the Nifty 50 corrected by around 50 per cent as the bubble burst and unwound.

In the housing bubble driven bull market of 2007-08, it traded up to a PE of 24 times in January 2008 and subsequently the index witnessed wealth destruction of around 60 per cent as the entire world faced consequences of the sub-prime crisis created by the housing bubble. Currently, the trailing PE of Nifty 50 is at a historical high and mind boggling 36 times. Even if one were to be very generous and take an EPS 20 per cent higher (closer to FY20 consensus EPS estimates prior to covid-disruption) to adjust for Covid impact on earnings, it trades at around 29 times – levels from which it crashed in 2000.

While in general the logic is that markets look to the future and one should look at forward PE, trailing PE has been historically a good indicator from an index level. The reasons being forward earnings is built more on expectations which may or may not pan out, and the other reason being forward earnings cannot be disconnected from trailing earnings. While there might be individual cases of earnings differing vastly from trailing levels, at an aggregate or index level it is usually not the case.

Historically, trading at over stretched PE ratios has had severe consequences. For example, the main index in China SSE Composite traded up to a PE of over 40 times in 2007 as equity mania rose to historic proportions there. This culminated in a correction of more than 70 per cent. Despite robust economic growth since then, the index is still 40 per cent below its peak of 2007, nearly 14 years later. It trades at humbling PE of around 18 times today.

What this means to you

While market pundits and fund managers you watch on TV might justify these valuations by pointing to record low interest rates, they are sharing only half the truth.

The other part which is not explicitly explained is that interest rates are low because economic growth is low. Low growth will result in low earnings growth. In the long term stock markets have always been a function of earnings growth and interest rates. They are likely to perform worst when interest rates are high and earnings growth is low. They perform best when interest rates are low and earnings growth is high. Hence the current scenario where interest rates and earnings growth are low is not a case for all time high valuations.

Whether it is the Buffet Indicator or the PE ratio, the indications clearly are that Indian markets are in over-heated territory. That means it is time for you to be prudent in your equity allocation, plan for the long-term and not follow the herd for quick profits. As the famous quote from ‘The Dark Knight’ goes – ‘You either die a hero or live long enough to become the villain’. Bull markets usually choose the latter. One must invest wisely to not get trapped by the villain.

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What if banks goof up on TDS on fixed deposits

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I had taken a senior citizen savings scheme for ₹15 lakh with a PSU bank in 2018-19. Due to a clerical error, the PAN was not entered in their system. Accordingly they deducted TDS at 20 per cent on interest and as my PAN was not mentioned, the deduction does not reflect in Form 26 AS. Now, I cannot claim credit for the TDS. What is the solution to this problem?

Murli Krishnamurthy

Since the amount of tax deducted at source (TDS) is not reflecting in your Form 26AS, you may request your banker to file or revise their withholding tax return for the relevant quarter to which the transaction pertains. Once the details of the correct PAN are provided in the revised TDS return by the banker, the amount of TDS deducted will reflect appropriately in your Form 26AS.

The Central Board of Direct Taxes vide its memoranda issued on June 1, 2015, and March 11, 2016, had advised tax officers not to recover the amount of taxes deducted at source from taxpayers if the deductor has already withheld the taxes and failed to deposit the same to the government. The Bombay High Court in the case of Yashpal Sahni ([2007] 165 Taxman 144 (BOM)) held that the tax authorities cannot recover taxes once again from a taxpayer who has suffered deduction and the deductor has failed to deposit such taxes to the treasury.

In view of the said notification and judicial precedents, where your banker is unable to resolve your query immediately (before the due date of filing the tax return) you may claim TDS credit in your tax return.

However, due to mismatch in the credit claimed in the tax return vis-à-vis Form 26AS, your tax return might be processed with an error in claiming the TDS, and demand could be raised to that effect. A grievance petition before the ‘Centralised Processing Centre for TDS return via the e-filing portal could be filed, with supporting documents such as bank statement, statement of TDS (Form 16 A), etc.

The writer is Partner, Deloitte India.

Send your queries to taxtalk@thehindu.co.in

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Bandhan Bank Dips 13% In 2 Days; Analysts See Upto 59% Upside

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Increased provisions and deterioration in asset quality

In the December-ended quarter, the bank took accelerated additional provision on standard assets amounting to Rs 1,000 crore on account of COVID-19.

Bandhan Bank reported a sharp deterioration in asset quality trends with pro-forma gross non-performing assets (GNPA) ratio increasing to 7.1% while collection efficiency in the microfinance institution (MFI) portfolio in its core state of Assam has witnessed a sharp decline, Motilal Oswal Securities said in results update.

“The bank has made higher COVID-related provisions of Rs 1,000 crore during Q3FY21, pre-dominantly towards rising stress in Assam, thus taking additional provisions to 3.6% of loans to manage higher delinquencies in coming quarters,” the brokerage added.

Operating performance remains strong and continues to demonstrate strong deposit performance, led by retail deposits.

The brokerage further said while maintaining a ‘neutral’ rating on the stock on the back of rising asset quality concerns.

Emkay Global bullish on the stock

Emkay Global bullish on the stock

Emkay Global sees an upside of 59% in the share price of Bandhan Bank from its current market price of Rs 315. The brokerage has set a target price of Rs 500 for the bank in the next 12 months.

“We believe that the MFI business is inherently prone to disruptions, be it political or natural adverse events. Being well cognizant of these eventualities, the Bandhan Bank has adopted a strategy to diversify geographically in the MFI business and venture into other products, including relatively secured mortgages, gold loans and so on. However, this transition will take time,” says Emkay Global Financial Services.

The brokerage adds that the bank has been building provisioning buffers on the back of its strong operating profitability to absorb asset quality accidents and reduce earnings volatility.

Fresh blow, but not unexpected

Fresh blow, but not unexpected

Kotak Institutional Equities said Bandhan Bank’s performance on the asset quality front was a “fresh blow, but not unexpected”.

“The long-term growth opportunity, especially outside of microfinance, remains intact, and the bank’s strong liability profile and superior cost structure give it an advantage over its peers,” the brokerage firm said in a note.

The brokerage has cut its price target on the stock by 6%, but retained its ‘add’ rating as it remains positive on the lender’s long-term prospects.

Meanwhile, CLSA Asia-Pacific Markets said that Bandhan Bank’s pre-provision operating profit is the highest among banks, at 9% of the loan book, and will provide a cushion against surging bad loans, but it expects it to struggle on the earnings front in the near-term.

The brokerage firm downgraded the stock to ‘outperform’ from ‘buy’, and cut its price target by a steep 12% to Rs 390.



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Bandhan Bank Dips 13% In 2 Days; Analysts See Upto 59% Upside

Personal Finance

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Increased provisions and deterioration in asset quality

In the December-ended quarter, the bank took accelerated additional provision on standard assets amounting to Rs 1,000 crore on account of COVID-19.

Bandhan Bank reported a sharp deterioration in asset quality trends with pro-forma gross non-performing assets (GNPA) ratio increasing to 7.1% while collection efficiency in the microfinance institution (MFI) portfolio in its core state of Assam has witnessed a sharp decline, Motilal Oswal Securities said in results update.

“The bank has made higher COVID-related provisions of Rs 1,000 crore during Q3FY21, pre-dominantly towards rising stress in Assam, thus taking additional provisions to 3.6% of loans to manage higher delinquencies in coming quarters,” the brokerage added.

Operating performance remains strong and continues to demonstrate strong deposit performance, led by retail deposits.

The brokerage further said while maintaining a ‘neutral’ rating on the stock on the back of rising asset quality concerns.

Emkay Global bullish on the stock

Emkay Global bullish on the stock

Emkay Global sees an upside of 59% in the share price of Bandhan Bank from its current market price of Rs 315. The brokerage has set a target price of Rs 500 for the bank in the next 12 months.

“We believe that the MFI business is inherently prone to disruptions, be it political or natural adverse events. Being well cognizant of these eventualities, the Bandhan Bank has adopted a strategy to diversify geographically in the MFI business and venture into other products, including relatively secured mortgages, gold loans and so on. However, this transition will take time,” says Emkay Global Financial Services.

The brokerage adds that the bank has been building provisioning buffers on the back of its strong operating profitability to absorb asset quality accidents and reduce earnings volatility.

Fresh blow, but not unexpected

Fresh blow, but not unexpected

Kotak Institutional Equities said Bandhan Bank’s performance on the asset quality front was a “fresh blow, but not unexpected”.

“The long-term growth opportunity, especially outside of microfinance, remains intact, and the bank’s strong liability profile and superior cost structure give it an advantage over its peers,” the brokerage firm said in a note.

The brokerage has cut its price target on the stock by 6%, but retained its ‘add’ rating as it remains positive on the lender’s long-term prospects.

Meanwhile, CLSA Asia-Pacific Markets said that Bandhan Bank’s pre-provision operating profit is the highest among banks, at 9% of the loan book, and will provide a cushion against surging bad loans, but it expects it to struggle on the earnings front in the near-term.

The brokerage firm downgraded the stock to ‘outperform’ from ‘buy’, and cut its price target by a steep 12% to Rs 390.



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What to expect after filing returns

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Arjun filed his income-tax return (ITR) in July 2020 by himself, paid the taxes due and was so delighted that he had discharged his civic responsibilities that he added the ‘Proud Filer’ badge to his Facebook profile. In January 2021, he received a demand of ₹5 lakhs for not responding to several notices received from the tax department. He approached his tax adviser, Krishna who guides him on the general steps to be taken after filing the ITR.

Arjun: What is the first thing I should do once

I file the ITR?

Krishna: After the ITR is filed, it should be e-verified, or a self-attested copy of the ITR-V (acknowledgement) should be sent to the Central Processing Centre, Bangalore within 120 days, failing which it shall be treated as an invalid return.

Arjun: What are the initial notices sent by the

department?

Krishna: If the ITR is not accompanied by relevant forms or income proofs (as per Form 26AS),, then the ITR may be treated as defective and notice under Section 139(9) will be sent requesting you to rectify the defect. You can respond by logging into the e-filing portal. If you agree to the defects, a corrected ITR should be filed.

If not, the reasons for disagreeing should be submitted. If you do not respond within the given time, the ITR would be considered invalid.

When there are arithmetical errors or inconsistent information across forms etc., a notice under Section 143(1)(a) is sent, requesting you to respond within 30 days. You can respond by clicking on the ‘e-Proceedings’ tab and selecting the appropriate notice. If you do not agree to the adjustment, you can select ‘Disagree’ and provide reasons.

Arjun: Should I respond to an intimation order?

Krishna: Upon processing of the ITR, the department issues an intimation order under Section 143(1). The intimation order shows a comparison of income reported by you and the one computed by the department. You should check if the amount computed by the department matches with the ITR filed. If there are no differences, it means that the return was processed without any errors and no action is required to be taken in such a case.

If the return is processed with certain differences with additional demand, the same can be addressed by clicking on the ‘e-File tab’, selecting ‘Response to Outstanding Demand’ and then selecting suitable option listed. If you agree with the demand, the tax has to be paid online. If you do not agree with the demand (either partially or completely), relevant reasons and documents can be submitted.

Arjun: How is a refund processed?

Krishna: Once the ITR is processed, the refund is issued after checking for outstanding demand if any, from earlier years. If there is an outstanding demand, a notice under Section 245 is issued to adjust the refund due. If the demand details are correct, you can agree to such adjustment.

If not, you can disagree and furnish relevant reasons. The response should be filed within 30 days of receipt of notice, failing which the outstanding demand will be adjusted against the refund. If status of refund is “paid”, you can check if the refund credited is appropriate along with interest, if any. If the status of refund is “unpaid”, it means the refund was processed but not credited to the bank account due to incorrect account details, non-linking of PAN with bank account, etc. On rectifying these issues, you can submit a refund reissue request by clicking ‘Refund Reissue Request’ in ‘My Account’.

Arjun: Is there anything else I should be aware of?

Krishna: In the current digital era, most of the correspondences shared by the department are via email or SMS. It is, therefore, imperative to provide correct and active contact details so that these critical intimations are not missed. Further, it is important to respond to the intimations in a timely manner to avoid any adjustments or demand.

Mukesh Kumar is Director and

Swetha is Manager with M2K Advisors

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Is mental illness cover worth the money?

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Given the increasing psychological stress since beginning of the pandemic, and treatment for mental ailments being expensive and long-term in nature, it is necessary that each of you have a plan to handle expenses related to mental illnesses.

While all health insurance companies were mandatorily required to cover mental ailments from 1 October 2020, the experience of those suffering from mental conditions and having an insurance cover, is different. Recently, a reader wrote to us saying that public sector health insurers still have mental illnesses under exclusion list and are not offering coverage.

When we checked, we found he was right. Websites of insurers – United India Insurance Company and the New India Assurance Company, had psychiatric and psychosomatic disorders in the exclusion list.

The IRDAI’s mandate to treat mental illnesses at par with physical ailments and remove it from exclusions, has not been implemented by all insurers.

If you are concerned about mental ailments (including depression, bipolar disorder, schizophrenia, anxiety disorders, psychotic disorder and others) and related expenses, do your homework before you sign up for a health insurance policy – go through the policy document and ensure that it covers hospitalisation due to psychological disorders and mental illnesses.

One thing to note is that treatment for mental ailments in most cases is offered as OPD (Out-Patient Department) consultation. Given that most health insurance plans do not cover OPD expenses, and require minimum 24 hours hospitalisation, claims on consultation in OPD, gets rejected.

Cover for mental ailments

To see if at least the private insurers have incorporated coverage for mental ailments in their health policies, we checked a few big players. The policy document for HDFC ERGO’s my:health Suraksha specifically mentions coverage for hospitalisation expenses (it is silent on cover for OPD consultations) to treat mental ailments.

In ICICI Lombard’s Complete Health Insurance plan, mental illness in not in the exclusion list; the policy covers OPD expenses, for additional premium. In Star Health’s Medi Classic Insurance Policy, if the insured person is diagnosed with psychiatric or psychosomatic disorder for the first time and hospitalized for a minimum period of five consecutive days, then the company will pay hospitalization expenses up to the sum insured.

In Manipal Cigna Health Insurance’s ProHealth plan, there is cover for expenses on mental ailments; the policy brochure, though, does not delve into details.

If you are looking for insurance policies that give OPD covers, so that you can claim for OPD treatments and consultation for mental illness, then ICICI Lombard’s Complete Health Insurance plan and Max Bupa’s GoActive plan/Health Premia plan can be considered.

While GoActive covers OPD consultations (with cap on number of consultations), HealthPremia covers OPD treatment (with cap on claim at ₹50,000). Digit’s health insurance plans provides cover for mental illnesses. If the OPD add-on is opted for, then consultations and therapies under OPD are covered too. However, note that this cover comes with co-pay (for first two years) requirement and the maximum benefit one can avail is ₹ 5,000.

Are OPD covers worth it?

OPD covers, when offered either as in-built in the policy or sold as separate riders, are expensive as insurers are certain that the person who buys the cover is going to make claims on it, and there are limited means to cross-check the medical bills they would provide.

So, for the amount of sum insured (SI) they offer, the premium would almost be 70-75%; with section 80D benefit under the Income Tax Act, the asking price will be 50% of the benefit given.

With OPD covers, you also need to note that many a times, the claim will be settled by reimbursement and cashless benefit will not be given. You would also have to note that OPD policies mostly do not cover cosmetic treatments and expenses on vitamins and tonics unless forming part of treatment for injury or disease and expenses on inoculation or vaccination (except for post–bite treatment and for medical treatment for therapeutic reasons).

Keep some free cash with you always for medical emergencies. Even if you have health insurance with OPD cover for mental ailments, the sum insured under the OPD cover may not suffice.

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