KEYMAN INSURANCE

I am a partner in a registered firm along with my father and brother. We are all working partners and get remuneration regularly from the firm. My LIC agent recently approached me for keyman insurance of all the partners. He says that insurance premium is a deductible

Jitubhai Zatakia, Via e-mail

A keyman insurance policy provides for an insurance taken by a business organisation on the life of an employee or a director (keyman), to protect the business against the financial loss which may occur from the employee's premature death. This insurance policy is taken for that keyman, whose services are perceived to have a significant effect on the profitability of the business. As the LIC (being an insurer) is willing to issue a keyman insurance policy to your partnership firm, in which you/others are active partners, there should not be an issue. Further, the premium paid by the business organisation on the keyman insurance policy is allowed as business expenditure, while computing its taxable profits.

INVESTMENT DILEMMA

I want to invest Rs 2 crore. Please suggest whether it is the appropriate time to invest, or shall I wait for some time. Further advise whether should I invest the funds in bank FD, gold, real estate, equity, or combination of one or more of these assets, and advise allocation of funds between these capital assets. I can invest the funds for a period of two to three years. Another Rs 50 lakh I am looking to invest in the next six months.

Vipin Jain, Via e-mail

Please note that there cannot be a straight forward, one jacket-fit all advice, in case of investment decisions. Your investment decision will depend upon many factors including your age, risk profile and the liquidity requirements in the near-term, mid-term and long-term future requirements. Depending upon your requirements a combination of the following may be looked into. First from the long term perspective, you may consider investing a part of your funds in property - residential and/ or commercial. Second, from mid-term perspective a combination of direct equity and mutual funds may be considered. From short term perspective, you may consider bank deposits and liquid funds.

Besides, traditionally, in India gold has been considered to be a good investment both from liquidity as well as ornamental perspective for different occasions like marriage. Even though you have not mentioned about insurance, if you have some spare funds, it may be the right time to get insurance (pure life insurance policy) by paying a single premium for a long term insurance policy. Last but not the least, follow the golden rule - do not put all your eggs in one basket, irrespective of how lucrative a particular option looks like.

Vikas Vasal, partner, KPMG India

(These comments are based on the limited information provided by the investors. The advice may vary subject to actual facts and circumstances of the case)