PVS (Prashant V Shah)

– Authorized Education Provider of FPSB Ltd. (CFP Coaching and Study Material)

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    Email: pvs.cfp@gmail.com

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    Tax Planning and Estate Planning

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Archive for November, 2012

Sample Paper of Insurance Planning for CFP

Posted by Prashant Shah on November 20, 2012

FPSB has just relaesed a sample paper of Insurance Planning.

Click to download questions: http://www.fpsb.co.in/Upload/CFPSampleQPaper/Sample1to4-RAIP.pdf

Click to download solutions: http://www.fpsb.co.in/Upload/CFPSampleQPaper/Solution1to4-RAIP.pdf

We may have to wait a bit for the sample papers of the rest of the modules.

Posted in CFP, Insurance Planning | 26 Comments »

Employees’ Deposit Linked Insurance for cfp exam 2014-15

Posted by Prashant Shah on November 2, 2012

  1. Central Government with the motive of providing additional social security in the form of life insurance to the family of the deceased member of the provident fund, introduced the EDLI scheme in 1976
  2. Benefit under this scheme is linked to the amount accumulated in the employee’s PF account and now wages are also considered
  3. Scheme applies to all the establishments to which EPF applies
  4. Under this scheme, members do not make any contribution
  5. Employer contributes an amount equal to 0.5% of pay of employee
  6. Additional contribution of 0.01% is to be paid as administrative charges subject to minimum of Rs.2 per month

Method of calculation

Higher of the below mentioned would be paid to the nominee of the deceased:

Payout to the nominee of the deceased would be higher if the average monthly wages drawn (subject to a maximum of INR 6500) during the 12 months preceding the month in which he died, multiplied by 20 times

OR

An amount, equal to the average balance in PF account of the deceased during preceding 12 months period.

If average balance is below Rs.50,000, Rs.50,000 is paid

If average balance is above Rs.50,000, in this case Rs.50,000 + 40% of the balance above Rs.50,000 subject to maximum of Rs.1,00,000 is paid

Maximum amount Payable is INR 130,000

Above this 20% amount is paid ad hoc. Hence maximum amount happens to be Rs.1,56,000

Illustration:

Mr. Shah was working with ABC Ltd., died on 15th April 2011. His date of Joining was 1st April 2008 and his current basic salary was Rs 6500 per month. His average PF balance for the preceding 12 months was INR 150000.

Step-1: Calculation based on wages

12 month average pay = 6500

20 times of the same = 6500×20 = 1,30,000

Step-2: Calculation based on PF balance

Average balance in PF account = 1,50,000

Hence, 50,000 + (50,000×40%) = 70,000

Higher of the two i.e. 1,30,000 is paid as benefit.

Hence, total amount payable is Rs.1,56,000

Taxability

  1. Establishment may not apply the provisions of the scheme, if the life assurance benefits of the scheme in the establishment is more beneficial than the benefits provided under the statutory scheme
  2. Contributions are made by the employer and tax deductible expenditure
  3. Death benefit payable is tax-free

 

 

 

Posted in CFP, Employee Benefits, Retirement Planning | 11 Comments »