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Suppose,you took a loan of R 10,000 with a flat rate of interest of 10 per cent over five years,then you would pay R 2,000 + R 1,000 (ie,10 per cent of the loan) = R 3,000 every year. Over the tenure of the loan,you would end up paying R 15,000. If instead of a 10 per cent flat rate,you were charged a 10 per cent annual reducing balance rate,you would pay R 1,000 as interest in the first year,R 800 as interest in the second year,Rs 600 as interest in the third year,R 400 as interest in the fourth year and by the last year you would only pay R 200 as interest. That is,over the tenure of the loan you would end up paying R 13,000 ie,R 2,000 less than you would have paid with the 10 per cent flat rate. Do remember that an X per cent flat rate is always more expensive than an X per cent annual reducing balance rate. So insist that the bank quotes you a reducing balance rate for all kinds of loans.

In case I am not able to file taxes by August 31,can I carry forward the losses incurred this year for exemption in the next year?

—Neha Manucha,Delhi

Irrespective of the fact that whether you have outstanding taxes due or not,in case the return is not filed on time,the losses incurred in this year cannot be shown for offsetting income,so as to get exemption,in the next year. For such individuals it becomes mandatory to complete the process of tax filing before the deadline to the advantage of tax benefit in the subsequent years. The only exception in this clause is losses incurred on housing property where one can carry forward the losses even if the return is not filed before the deadline.

Is a premium waiver rider useful in a child insurance policy?

—Shankar Narayan,Pune

In the case of a child insurance policy,where you are ensuring your child receives a sum of money at a certain pre-defined age,ensure that the premium payment is continued,so that your child receives the money at the pre-determined date. Imagine if you do not opt for this and end up in a situation,where you are unable to pay your premium and the policy lapses. Then it would be no good to anybody. So to have this drawback plugged,it is better to pay up the additional cost to ensure continuity in the premium payment.

—The expert is CEO,Bankbazaar.com

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