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POW :: Tax saving season is here: These are the best ELSS mutual funds
Suresh KP | Feb 15, 2017, 05.48 PM | Source: Moneycontrol.com
Investing in tax saving ELSS mutual funds would help you to save tax u/s 80C as well as giving superior returns.
Many of the tax payers are looking for various options to save income tax u/s 80C. While there are several options to save tax, one of the attractive ways is to invest in tax saving funds, technically known as ELSS.
What are tax saving funds?
Equity Linked Saving Scheme (ELSS) or tax saving funds provide tax exemption u/s 80C along with higher returns compared to any other tax saving option. Investments in ELSS upto Rs 1.5 lakh bring in tax deduction under section 80C.
Compared to other tax saving schemes like Tax saving FD, PPF, NSC etc, ELSS offers higher returns. However, a point to note is that these returns are not guaranteed. These ELSS have low lock in period of 3 years. Other instruments have lockin period ranging between 5 years to 15 years.
After taking into account these benefits lets look at five ELSS that can be considered as good investment options to save tax and create wealth.
1) Reliance Tax Saver Fund
This MF scheme objective is to generate long term capital appreciation from a list of stock portfolio and invests predominantly in equity and equity related instruments in India. This scheme has provided 20.3% annualized returns in last 5 years. Even in last 3 years, this scheme provided 30% annualized returns. This scheme is ranked by Crisil as Rank-3 (1 is vergy good performer and 5 is weak performer)
2) Axis Long Term Equity Fund
This tax saving scheme aims to generate regular long term capital growth from a diversified portfolio of equity and equity related securities in India. This mutual fund scheme is the top performer in the ELSS funds over five years time frame. This scheme has provided 21% annualized returns in last 5 years. Even in last 3 years, this scheme provided high returns of 24.9% annualized returns. This scheme is ranked by Crisil as Rank-4 (1 is vergy good performer and 5 is weak performer)
3) DSP BR Tax Saver Fund
The mutual fund scheme aims to generate medium to long-term capital appreciation from a diversified stock portfolio of equity and equity related securities along with tax savings. This mutual fund scheme is the top performer in the ELSS funds.This scheme has provided 20.4% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 26.6% annualized returns. This scheme is ranked by Crisil as Rank-1 (1 is vergy good performer and 5 is weak performer)
4) Birla SL Tax Relief 96 Fund
This mutual fund scheme aims for long term capital appreciation by investing upto 80% in equity and balance in debt related instruments. This scheme has provided 19.1% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 25.6% annualized returns. This scheme is ranked by Crisil as Rank-2 (1 is vergy good performer and 5 is weak performer).
5) Franklin India Tax Shield Fund
The MF scheme aims medium to long term growth of capital along with income tax rebate. This scheme has provided 17.5% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 24.3% annualized returns. This scheme is ranked by Crisil as Rank-3 (1 is vergy good performer and 5 is weak performer).
Smart investors would invest in a good ELSS mutual funds which helps them to save tax and also provides high returns compared to any other tax saving options.
The author of this article is founder of Myinvestmentideas.com.
Source:https://goo.gl/MxYfdc
ATM :: Second home loan tax benefits
A second home loan may seem daunting, but if implemented correctly, can lead to a great deal of savings on income tax
By: Harshil Mehta | Updated: December 26, 2016 7:27 AM | The Financial Express
An individual who has taken loan for the second house is eligible to claim deduction, under Section 24 for the interest he has paid towards the loan amount.
Many people in India buy a second home for various reasons. It can be as an investment for capital appreciation, for use as a holiday home, to get a regular stream of income by way of rentals or to diversify their investment portfolio. The return on real estate as an investment is second only to equity and this makes investment in real estate a must-have in the portfolio of an investor.
In India, a bulk of the home loan is taken by customers to buy their first home to live in and everyone knows that getting a home loan entails several income tax benefits, but the benefits which follow a second home loan are not talked about as much. So primarily, due to little awareness around the tax implications of the second home, and lack of knowledge of the benefits, most people don’t even consider it. A second home loan may seem like a daunting task, but if implemented correctly, can lead to a great deal of savings on income tax.
Second home self-occupied
You can avail deduction on interest paid towards home loan. An individual who has taken loan for the second house is eligible to claim deduction, under Section 24 for the interest he has paid towards the loan amount. There is also no maximum limit for the exemption on interest paid on the second home loan. However, an individual in this case will not be eligible to claim any exemption under Section 80 C as the second home will not be considered as self occupied property. For example, if an individual has taken a second home loan and he has paid R1 lakh as interest and R50,000 as principal amount for a year, he can then claim income tax benefit on R1 lakh.
Under-construction property
You can avail deduction on interest during the pre-construction period. An individual who has a second home loan for an under-construction property can claim tax deduction on 20% of total interest paid during the pre-construction period. The maximum time limit to avail this tax benefit is five years. For example, if a second home loan tax benefit for interest during under construction or pre-construction period is R1.5 lakh, an individual can claim R30,000 per year for five years and not beyond.
Claim taxes paid to local bodies
An individual can also claim tax deduction on the taxes paid to the local authorities in the financial year in which they are paid. These include municipal or property taxes. It can be claimed on accrual basis and not payment basis.
Repair, maintenance charges
One can also claim tax benefits on repair and maintenance of the property. It is a fixed rebate that an individual can claim irrespective of the expenditures one has actually incurred. It is flat 30% and is allowed after the deduction of property tax for the fair rental value of the property.
A second home loan can bring definitive advantages to individual borrowers. Home loans have enabled dreams of home ownership within the reach of the common man. Various tax benefits have made it one of the most preferred options to fund home buying.
The writer is CEO, DHFL
Source: https://goo.gl/MnRbdn
ATM :: Cash no longer king, realty prices may drop
Prabhakar Sinha | TNN | Nov 9, 2016, 05.58 AM IST | Times of India
NEW DELHI: The government’s decision to withdraw existing currency notes of Rs 500 and Rs 1,000 from circulation will severely impact the real estate sector, especially secondary market transactions where 60:40 – the ratio of legal to black money – had become a norm of sorts.
The primary market, where one buys a house in a project directly from a developer, will not be directly impacted by the measure. But market players said that the impact on the secondary market is set to hit the overall sentiment, which has remained subdued for the past few years.
“The effects of the currency measure will be far reaching and immediate, and will shake up the sector in no uncertain way,” said chairman and country head of JLL India, Anuj Puri.
President of the Confederation of Real Estate Developers’ Associations (Credai) Getambar Anand, however, argued that most of the houses in the primary market are sold on bank finance. “Therefore, the black money element will not have any impact. As the values of units are publicly known, they cannot sell other units at a discounted price in white and the rest on cash payment,” the head of the industry lobby group said. But given the widespread use of cash when it comes to payments to local authorities and politicians in office, a lot of the transactions by developers are conducted in cash, some of which “managing” their own books.
As PM Narendra Modi said, real estate and land purchases are seen as one of the most prominent segments of the cash economy.
In most developed areas in metro cities, the initial transaction is through legal channels. But when it comes to a resale or a secondary market transaction, the seller often seeks cash payment to save on capital gains tax. For the buy er, the attraction of cash deals is that they can report a lower value to the registration office and reduce the stamp duty burden. In addition, this is an outlet of cash lying idle with buyers which cannot be parked in the banking or financial sectors to reap returns.
Because of black money, the value of real estate in many markets in metros have appreciated sharply.
After the PM’s announcement, the expectation is that use of cash will nearly vanish, at least for the next few months, resulting in a sharp drop in prices in the secondary market. This will have an effect on the primary market as well.
Suorce: https://goo.gl/BEXmIr
ATM :: Can You Claim Both HRA And Home Loan For Tax Exemption?
In some cases, the Income Tax Department may question the tax exemption taken on both HRA and home loan, says an expert.
Written by Surajit Dasgupta | Last Updated: October 10, 2016 10:36 (IST) | NDTV Profit
- HIGHLIGHTS
Income tax exemption on both HRA, repayment of home loan can be claimed
However, taxman could ‘closely monitor’ such a situation, says an expert
Income Tax Department may disallow one of the claims, he adds
Yes, you can claim income tax exemption on both house rent allowance (HRA) and repayment of home loan. If you are living in a house on rent and servicing home loan on another property – even if both the properties are located in the same city – you can claim tax benefit for both.
But “this situation could be closely monitored by the Income Tax Department particularly where the amounts are relatively higher and may also disallow one of the claims if sufficient explanations are not available”, says Amit Maheshwari, managing partner at Ashok Maheshwary & Associates LLP.
- Mr Maheshwari cites some cases when the tax department may not raise questions:
When the person may have moved from rented house to own house during the year or vice versa - When the person’s own house could be smaller in size and the person may have moved to a bigger house rented by him/her
- When the children of the person may be studying in the locality of the rented house and during the year it was not possible for him/her to change the school and consequently he/she was not able to move to the new house bought
But in some other cases, the Income Tax Department may question the tax exemption taken on both HRA and home loan, Mr Maheshwari adds.
“Hence, in all such situations, the individual has to ensure that the related documentations (like lease deeds, possession/completion letters, etc.) and justification regarding the same are readily available with him/her if the such query is raised,” Mr Maheshwari says.
Salaried individuals who live on rent can claim HRA to lower taxes. It is partially exempted from taxes. However, if the individual does not live in a rented accommodation, HRA is fully taxable.
The deduction on HRA is the lowest of the following under Section 10(13A) of the Income Tax Act:
- Actual HRA received from the employer
- 50 per cent of (basic salary + dearness allowance) for those living in metro cities (40 per cent for non-metros)
- Actual rent paid less 10 per cent of salary
On the other hand, if you are servicing a home loan you can claim tax benefits on principal and interest payments. Principal repayment, under Section 80C of the Income Tax Act, is exempted up to Rs 1.5 lakh. And on interest repayment, exemption can be claimed up to Rs 2 lakh, under Section 24.
In this year’s Budget, the government had announced an extra deduction of Rs 50,000 on the interest component of home loan for first-time buyers, where the loan does not exceed Rs 35 lakh and the value of the property is up to Rs 50 lakh.
Source: https://goo.gl/SVJdfz
ATM :: Getting a personal loan? Top 7 things to consider
Personal loan is an unsecured loan with one of the highest interest rates of all credit products. To avail one, an applicant must have a reliable credit rating. Do carefully consider the following points and assess which personal loan is the best for you.
By: Adhil Shetty | Published: August 23, 2016 6:04 AM | The Financial Express
Personal loan is an unsecured loan with one of the highest interest rates of all credit products. To avail one, an applicant must have a reliable credit rating. Do carefully consider the following points and assess which personal loan is the best for you.
Eligibility
The eligibility of a borrower varies from bank to bank. The primary criterion is the capability of loan repayment. Other criteria include your age, profile, place of work and lots more depending on the bank’s requirement.
Interest rates
In August, the interest rates of personal loans from some of the leading banks of India ranged between 11.15 and 22%. The better your credit score, the lower your interest rate would likely be while obtaining a loan. A CIBIL score of 750 or more will get you a favourable interest rate. You could also go to a bank with whom you have a long-term association, based on which you could get a bargain.
Tenure of loan
Typically, such loans are of a 12-60 month tenure. Long-term loans may carry higher interest rates than shorter ones, but you can have the option of paying smaller EMIs on a longer term. Evaluate your EMI burden and arrive at an amount you are comfortable with before settling on a tenure. Have the shortest possible tenure to avoid paying a lot on interest.
Flexibility of repayment
Check out if you have the option of making principal payments on your loan at no cost. Some lenders charge a prepayment fee for settling a loan before its tenure. You may want to skip lenders who have prepayment charges since they disincentivise the quick settling of loans.
Loan amount
The amount you would receive from the lender is tied to your income. The higher your disposable income, the bigger the loan you stand to receive. Often, lenders with whom you have a relationship such as a credit card or a savings account, would approach you with a ready-made offer of a personal loan. You should take a loan according to the size of your requirement. Make sure the borrowed amount is used productively and not squandered on expenses it wasn’t meant for.
Fees and charges
Besides rate of interest, banks also charge fees on documentation, processing and pre-closing the loan. Processing fees mostly range from 2% to 3% of the loan amount. The pre-closing fees also vary from 2-3% of the loan amount. If you are good at haggling, you can get the per cent of fees and charges reduced.
Finally, don’t go overboard
Avoid the temptation of applying to too many lenders for a loan. This would reveal you as credit-hungry. Too many inquiries into your credit history could also bring down your credit score, making it tougher and more expensive for you to avail a loan.
The writer is CEO of BankBazaar.com
Source : http://goo.gl/nzxiZe
NTH :: SBI new home loan offers 3-5 years interest moratorium to NewGen
Targeting working professionals, the FlexiPay Home Loan will enable young working professionals to get higher amount compared to their eligibility under normal schemes
PTI | Mon, 1 Feb 2016-11:30pm , Mumbai | DNA India
State Bank of India (SBI) on Monday launched a new home loan scheme offering higher amount and up to five years of interest moratorium, which on the face of it looks like the controversial ‘teaser loans’.
To woo young customers, top lender State Bank of India (SBI) on Monday launched a new home loan scheme offering higher amount and up to five years of interest moratorium, which on the face of it looks like the controversial ‘teaser loans’.
With the “FlexiPay Home Loan”, the bank seeks to boost its home finance portfolio by wooing young borrowers, offering them an interest moratorium for an initial period of 3 to 5 years and then pay moderate EMIs.
When contacted, SBI, however refused to name it as the now-discontinued ‘teaser loan’, saying it is not offering any discount in interest rates or offering more loan to value.
“It is not a teaser loan. There is no change in the interest rates and loan to value ratio. Taking into consideration the net monthly income of a customer, the EMIs will be decided,” Managing Director for National Banking Group Rajnish Kumar said.
Targeting working professionals, the FlexiPay Home Loan will enable young working professionals to get higher amount compared to their eligibility under normal schemes.
“To lower the impact of such additional loan amount on monthly repayments in the form of EMIs, the customers availing home loan under the scheme will also be offered the option of paying only interest during the moratorium (pre-EMI) period of 3 to 5 years, and thereafter, pay moderate EMIs,” SBI said in a statement.
The EMIs will be stepped up during the subsequent years, the bank said, adding the move is a “recognition of the special needs of this growing aspirational segment, and to bridge the gap between affordability and demand for quality residential spaces.”
Last year, SBI chief Arundhati Bhattacharya suggested to RBI Governor Raghuram Rajan to allow sub-base rate loans, which Rajan’s predecessor D Subbarao forced lenders to stop.
Faced with high liquidity in early 2000s, SBI, under O P Bhatt, launched a loan scheme in November 2010 which came to be called ‘teaser loan’. It offered lower interest rates in the beginning but higher EMIs as the loan tenor matures.
Critics had warned this would create a credit crisis and if the overall economy falters borrowers would be overburdened.
Rivals, led by the then market leader HDFC, initially criticised SBI, but soon they, too, followed it up with similar schemes. The teaser loan scheme catapulted SBI to the No 1 slot in the home loan space.
Source : http://goo.gl/IgbvwV
ATM :: How to arrange down-payment for buying your dream home
STEVEN FERNANDES, Proficient Financial Planners | Source: Moneycontrol.com
Take stock of your liquid investments and your monthly income. This will give you an idea of how much you have to arrange. Rely only on safe debt fund to save money for down payment
Life’s biggest financial decision is buying a house and therefore it requires lot of calculated planning in advance to avoid any regrets later on. Considering the escalated property prices, most houses or flats would necessarily have to be purchased with the help of a housing loan. Assuming that the preferred location is identified, the next thing to do is to decide on a budget which should include the price of the property and other charges like stamp duty, registration charges, Vat, etc. Let’s assume that Akash (34) and Avni (33) are presently staying on rent and they have planned to buy an apartment after 2 years in a desired locality costing Rs. 70 lakhs today. Considering a 10% increase in price, the estimated price of this apartment after 2 years will be Rs. 85 lakhs. The couple’s monthly income is Rs. 125000 and they have the following financial assets as of now.
Assets Value (Rs)
Savings account ==> 350000
Fixed Deposits ==> 1000000
Equity Mutual funds> 400000
Total==> 1750000
Monthly Income Rs. 125000
Monthly Expenses Rs. 55000
Monthly Surplus Rs. 70000
1. Deciding the amount of loan that needs to be taken.
While most banks provide loan up to 85% of property value, you need to first check the EMI that you would be most comfortable with rather than decide based on what the bank is offering. For example, in the above case, after taking care of the monthly expenses, the couple have a surplus of Rs. 70000 per month. They can comfortably opt for upto 45% of their net monthly take home salary as EMI which comes to Rs. 56250. This will enable a loan of approximately 52 lakhs for a tenure of 15 years at 10% interest. Now the couple is clear that they need to arrange the down-payment which is Rs. 33 lakhs in 2 years’ time.
In some cases, where people don’t have any substantial investments to make the down-payment, they go for a higher loan component thinking that the higher EMI will pinch in the firsts year but with salary increase expected going ahead, servicing the high EMI will become manageable. They need to be prepared to reduce their lifestyle and rework on their expenses as the salary increase might get delayed. In case you have a good amount of investments, then you could work vice versa and add up your investments to see how much is the gap and then decide on the loan amount.
2. Planning to arrange the down –payment
It is during this time that a list of all the available financial resources is made by most couples and accordingly all the liquid resources like savings account, fixed deposits, gold, mutual funds are considered to make the down-payment. Care should be taken to ensure that you maintain funds separately for at least six months of contingency and any short term goals. Rest of the funds can be considered for the down-payment. In our given example, the savings account balance is maintained for contingency and mutual funds are also maintained separately for interiors and other post possession expenses.
In the above case, fixed deposit can fetch Rs. 12.60 lakhs @ 7% post tax interest and the balance required now is Rs. 20 lakhs for which the couple will have to invest Rs. 78500 per month in liquid funds and recurring deposits (50% each). Budgeting becomes very important during such times and reducing expenses becomes crucial.
Whenever down-payment is to be made in less than three years time frame one should invest on a monthly basis in debt instruments only like liquid funds, ultra-short term funds or recurring deposits. Do not invest in equity funds or stocks thinking that you will get better returns in 2-3 years which will reduce your loan amount. One needs to play extremely safe when dealing with short term investment, especially for a home. Gold invokes a lot of sentiments but for such an important goal, one needs be prepared to use a part of it to shore up the down payment.
3. Borrowing from family/relatives
If you are falling short of down-payment amount by a few lakhs, do not hesitate to borrow from your close family members as most would not even charge any interest on that loan. Secondly you will get some time to pay off the loan as per your convenience. I have come across several people who explored this option and took a soft loan either from their in laws, siblings or close cousins. Take this as the last option.
4. Other things to consider
Since most people utilize their entire life’s savings for buying a house, they could be running low on liquidity in case any adverse event such as medical emergency were to take place. Therefore one should be adequately covered for health and life cover or review one’s existing covers when buying a house.
Steven is a member of The Financial Planners’ Guild , India ( FPGI ). FPGI is an association of Practicing Certified Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards.
Source : http://goo.gl/4YzFkL