Home         The Pencil Maker took the pencil aside, just before putting him into the box. There are 5 things you need to know," he told the pencil, "Before I send you out into the world. Always remember them and never forget, and you will become the best pencil you can be. • One: You will be able to do many great things, but only if you allow yourself to be held in someone’s hand." • Two: You will experience a painful sharpening from time to time, but you'll need it to become a better pencil." • Three: You will be able to correct any mistakes you might make." • Four: The most important part of you will always be what's inside." • And Five: On every surface you are used on, you must leave your mark. No matter what the condition, you must continue to write." The pencil understood and promised to remember, and went into the box with purpose in its heart. Now replacing the place of the pencil with you, always remember this and never forget, and you will become the best person you can be. • One: You will be able to do many great things, but only if you allow yourself to be held in God's hand. And allow other human beings to access you for the many gifts you possess. • Two: You will experience a painful sharpening from time to time, by going through various problems in life, but you'll need it to become a stronger person. • Three: You will be able to correct any mistakes you might make. • Four: The most important part of you will always be what's on the inside. • And Five: On every surface you walk through, you must leave your mark. No matter what the situation, you must continue to do your duties. Allow this parable on the pencil to encourage you to know that you are a special person and only you can fulfill the purpose to which you were born to accomplish.   Top | Back   A key deciding factor will be to gauge the borrower’s financial capability to pay off the loan. You also need to evaluate objectively whether the borrower can honor such a commitment and not leave you to face the lone battle of paying up their dues in case of a default. If you are confident on both these counts, then you can opt to become a guarantor but not before you completely read and agree to the terms and conditions put forth by the bank in their agreement. What if you are approached by a close friend to become their loan guarantor? Would you say yes without question or would you analyze the situation objectively before making your decision. In money matters objectivity is critical, so we would advise you to opt for the latter. Is being a loan guarantor such a big deal? When you are a loan guarantor for an individual’s loan it means that you agree to be responsible for the repayment of another individual’s debt in case of a default. It implies you are equally responsible for paying off the loan! So, should I never be a loan guarantor? When you provide guarantee for another individual’s debt, it definitely comes with its risks! A key deciding factor will be to gauge the borrower’s financial capability to pay off the loan. You also need to evaluate objectively whether the borrower can honor such a commitment and not leave you to face the lone battle of paying up their dues in case of a default. If you are confident on both these counts, then you can opt to become a guarantor but not before you completely read and agree to the terms and conditions put forth by the bank in their agreement. Am I being approached because the applicant has a bad credit history? While the lack of a good credit record (past repayment track record of previous loans, credit card payments etc.) could be a possible reason for a bank to ask for a loan guarantor, this may not always be the case. It could be based on other reasons such as: The borrower has a transferable job; He has a job that involves frequent overseas travel or the loan is applied at a place other than the applicant’s permanent address etc. If I choose to become a loan guarantor and the borrower is unable to repay, then what happens? When you sign on the dotted line and agree to become a guarantor, you are legally bound to pay off the debts if the borrower defaults. If the borrower does default, then: The bank will approach you for clearing the debts Personal assets such as bank accounts, cash as well as property could be claimed (except for provident fund and agricultural land which cannot be attached under any court decree) and you could turn bankrupt Your credit standing will get affected and the chances of you getting a loan in the future would be slim. Why should my chances of getting a loan in future be affected, when I did not take the loan? It does not matter! Most banks and financial institutions look at the loan that you are a guarantor for, as a loan that you hold. They will therefore deduct that much amount from your loan eligibility. If I agree to become a guarantor, what are the aspects I should look out for? - The bank or lending institution is asking for a guarantor as a means to protect itself from a possible default and have the means to recover the money it is lending. Be aware that the bank can file a case against you and lay a claim to your assets for loan recovery. - It all boils down to what the contract binding you to be the loan guarantor dictates. Hence, check whether the contract indicates the amount you are guaranteeing, make sure it does not exceed a specified limit that is agreed upon between you and the bank, else there might arise a situation where you will have to repay the entire loan in instances where the credit limit is increased on the initial loan borrowed. - The terms and conditions should be clear and precise. Also, you need to make sure there are enough safety clauses in place that ensures you are protected to some extent against certain eventualities. For instance, the notice period that is available before the bank approaches you in case of a default should be clearly specified. Also, make sure you are not held liable if the original loan agreement is changed at a future point in time without you being aware of it.   Top | Back   Careful understanding of food groups is important while planning your child’s meals which should ideally include items from every food group essential for his/her appropriate physical and mental development. So, in order to understand the basics of healthy eating, it is important to know these food groups first. The food guide pyramid, first published by the USDA (United States Department of Agriculture) in 1992, suggests nutritional benefits and provides guidelines for the different food groups. It recommends servings in each category that match nutritional requirements of children, based on their age, weight and physical activity level. In short, the food pyramid is a guide designed to help us chalk out how much of each food category is ideal for your child’s diet. These are the six major food groups covered by the food pyramid: 1. Carbohydrates: Carbohydrates are an ideal source of energy as they convert easily into glucose (or sugar). The basic food items included in this food group are wheat, rice, oats and other cereals and grains. Whole wheat foods like brown bread, chapattis and brown rice are healthier than refined flour products like white flour or maida, white rice and white bread. They are also good sources of fiber and help to lower the risk of obesity, diabetes, high cholesterol level, high blood pressure and coronary heart disease. At least five to six servings of healthy carbohydrates are recommended daily. 2. Plant oils: Cooking oil forms a necessary part of diet and cooking. However, the trick lies in choosing one that is healthy. Healthier cooking oils recommended by experts include canola, olive, sunflower, soyabean, corn and rice oil. Avoid use of dairy fats such as butter and ghee while cooking. 3. Fruits and vegetables: At least six servings of both, fruits and vegetables, are recommended for children every day. Vegetables, especially orange and dark green ones, are good sources of vitamins and minerals. They are low in calories but high in their nutritional value. Fruits are rich in vitamins, natural sugars and fiber. A serving of seasonal fruits everyday helps to keep the body healthy. 4. Beans, nuts and legumes: These are rich sources of protein, vitamins B and E, iron, magnesium and zinc. Beans and legumes form a regular part in our diet in the form of dals. Prepared with a mix of spices, they are low in calories and have a high nutritional value. Unsalted nuts are healthy snack options that can be given to children to have on their way home from school or in between classes. Two servings of dal, each with lunch and dinner, and about 10 – 15 nuts daily should suffice. 5. Poultry, fish and meat: Poultry, fish and meat are rich in protein, calcium, vitamins and minerals, zinc, magnesium and iron. Fish is a good source of protein while eggs supply all the essential amino acids. Children who are non-vegetarians or vegetarians can have three servings of eggs or meat products per week. 6. Dairy products: Calcium is essential for the proper growth of your child's body. Milk, yogurt and cheese are rich sources of not only calcium, but also phosphorus, and vitamins A and D. Two glasses of milk along with a serving of yogurt after meals, and cheese in small amounts, may be recommended. As mentioned earlier, your child's age, weight and physical activity level is important for drawing up a meal plan. But other factors – such as whether your child is allergic to certain foods, has a family history of diabetes, high cholesterol or high blood pressure, or suffers from disorders like asthma or constipation – should also be taken into account. Apart from a healthy diet, children should also be encouraged to enjoy sports and other forms of physical activity to prevent obesity and keep them fit.   Top | Back   Who can claim this additional deduction? Invest in Long Term Infrastructure Bonds to Save Tax 80CCF In the Union Budget 2010, Finance Minister; Pranab Mukherjee proposed a new section 80CCF under the Income Tax Act of 1961. From April 1, 2010, section 80CCF would provide an additional tax deduction, over and above the existing 80C deduction, in respect to investments made in long term infrastructure bonds. Background on Infrastructure Bonds Infrastructure Bonds are not new to the country. They have been used by the government in the past years, for infrastructure projects. These bonds were earlier offered by financial institutions such as ICICI and IDBI, and had a lock in period of 3 years. Section 88 of the Income Tax Act offered tax deductions on investments of up to Rs 30,000, in these infrastructure bonds. However, with the 2005-2006 union budget, section 88 was scrapped. So what does Section 80 CCF offer tax payers? Section 80C currently offers a maximum deduction of Rs 1 lakh, for investments in National Savings Certificate (NSC), Public Provident Fund (PPF), Life Insurance premiums and Pension Plans. The new section 80CCF, will offer a deduction of Rs 20,000, in addition to the deduction of Rs 1 lakh under sections 80C, provided the investments are in notified long term infrastructure bonds. The government has proposed this section to promote investments in infrastructure projects in the country. Who can claim this additional deduction? Section applicable from start of April 2010 and would be issued in the financial year 2010-11. * Deduction limit of Rs 20,000 in addition to the 1 lakh limit under sections 80C. * Investments to be in long term infrastructure bonds as specified by the government. * The long term infrastructure bonds will have tenure of 10 years. * Minimum lock in period of 5 years. * Exit from the infrastructure bond, after the lock in period, will be either through the secondary market or through buyback option, as specified by issuer. * The infrastructure bonds could be pledged for loans from specified banks after the lock in period. * Investments in infrastructure bonds would require PAN to be mandatorily furnished. Section 80CCF is applicable to Individuals and to Hindu Undivided Family (HUF) only. Deductions could be up to a maximum amount of Rs 20,000 from the taxable income, for any amount invested in long term infrastructure bonds from financial year 2010-11. Specified long term bonds that qualify under this section * Bonds issued by the following agencies would qualify for tax benefit under section 80CCF. * Industrial Finance Corporation of India * Life Insurance Corporation of India * Infrastructure Development Finance Company * Any non-banking finance company which has been classified as an infrastructure finance company by the Reserve Bank of India. Currently no information on the interest rates of these bonds has been made available. Also, no fresh bond issues are presently available for investment. Investment in long term infrastructure bonds would give you the following benefits: Tax saving: A long term infrastructure bond offers a tax benefit in the form of a deduction. The amount of tax saved would depend on the tax bracket one would fall under. To illustrate this benefit : For a person in the highest tax bracket, a Rs 20,000 investment in long term infrastructure bonds could save a tax of around Rs 6,000 (Rs 20,000 X 30%) For a person in the 20% tax bracket, an investment of Rs 20,000 in long term infrastructure bonds could give him a saving of around Rs 4,000 (20,000 X 20%). Assured returns: An investment in infrastructure bond assures you a reasonable rate of return. So as an investor you are guaranteed peace of mind over your investment! Concluding thoughts A long term investment with a period of 10 years and a lock in feature could block your money. So take a call after considering your financial situation. Infrastructure bonds offer pre-determined interest rates, which may be lower than other investment options; hence they may not offer much protection against inflation. Borrowing money by pledging infrastructure bonds with banks would fetch you an amount, which would depend on the market value of the bond. Banks also take into account the creditability of the underlying issuer, in their loan evaluation process. The yield of the bond along with its terms and conditions will be specified by its issuer. However it must be understood that the yield of the long term infrastructure bond will not be higher than the yield of other government securities or corresponding residual maturity schemes.   Top | Back   What are riders? Riders refer to covers that are offered by insurance companies in addition to the basic life cover. In other words, they cover risks that are beyond the scope of the main life policy, resulting in more comprehensive protection. What are the types of riders offered by insurers? Rider benefits offered could vary as per the insurance company and the policy purchased by the insured. Typically, riders extended include critical illness (or dreaded diseases) cover, personal accident (or accidental death and dismemberment) and waiver of premium benefit. How do riders help the insured? They help customize the life cover as per the policyholder’s needs. Let’s say a policyholder, the sole breadwinner in the family, meets with an accident resulting in temporary disability. If it forces her to stay away from work during the period of recovery, the life cover will not make good the loss of income. This is where a personal accident rider covering temporary disability could come to the family’s rescue. In such cases, the insurance company undertakes to provide monetary compensation to the insured, subject to the terms and conditions mentioned in the insurance contract. Similarly, for a policyholder diagnosed with a critical or terminal illness, the life insurance cover can provide little relief as it is not capable of preventing the drain on finances during the treatment. A critical illness rider could come in handy in such times. The illnesses generally covered under the include cancer, kidney failure, paralysis, bypass surgery, major organ transplant and so on. The sum assured under the rider is paid upfront as a lump-sum to the policyholder. Therefore, even if you have a health insurance policy in place, this amount can help meet other expenses or act as succor if the insured is unable to resume work during the period. How does one choose the rider best suited for her? The decision could depend on a variety of factors like your age, regular mode of commuting and history of illnesses in your family, if any. For someone who has just started her career and relies on public transport or two-wheeler for daily commuting, a personal accident policy is a must. Critical illness cover, on the other hand, would be of use to policyholders across age-groups. Does one have to incur an extra cost for availing these covers? Yes. The insurer arrives at the additional premium chargeable to the policyholders based on factors like their age, sum assured, premium paying term and the company’s underwriting norms. What are the tax benefits available to those who opt for these riders? The tax breaks depend on the rider chosen. For instance, while tax benefits pertaining to premium paid towards the accidental death rider can be claimed under section 80C, critical illness premium falls under section 80D.   Top | Back   Please do not reply back to this mail. This is sent from an unattended mail box. Please mark all your queries / responses to webmaster@insuregain.com Information provided on this newsletter has been independently obtained from sources believed to be reliable. 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