ATM :: How to withdraw 90% of your provident fund to buy a house

May 12, 2017 | 11:39 IST | SOURCE : Economic Times | Retrieved from Timesnow.tv

ATM

In an effort to make its ‘Housing for all by 2022’ a success, the government has allowed for EPFO members to withdraw up to 90 percent of their provident fund (PF) accumulations to make down payments to purchase a house and to pay housing loan EMIs.

Pre-requisites for PF withdrawal

In order to dip into the provident fund saving, the new rule highlights that the PF holder will only be eligible if he/she has been a contributing PF member for at least 3 years, and is buying property in a registered housing society that has at least 10 members.

Further, the property has to be purchased in the member’s name and cannot be purchased jointly with anybody else, except your spouse.

How the money can be used

The money withdrawn can only be used for an outright purchase, as a down payment for a home loan, for buying plots or for the construction of a house. The transactions can be made through central government, state government and even from a private builder, including promoters or developers.

Can the money be used to buy resale flats as well?

Unfortunately no, EPFO will only make payments directly to a co­operative society, the state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more installments. The rule will not apply to real estate purchases in the secondary market or resale transactions.

Can you withdraw both employee and employer contribution?

An EPFO member can withdraw his own share of PF contribution plus interest as well as the employer’s share of contribution plus interest.

Can you EMI payment through PF?

A PF member can use his PF contribution to pay full or part EMIs for a home loan taken in the member’s name. The EMI will be directly paid by EPFO to the government, housing agency or the bank.

How to apply

A PF member can apply individually or jointly through a housing society to get a certificate from the EPFO.

Through Annexure I form, an employee can ask for the balance and the deposits made in the last three months before applying. This will help the EPFO determine how much EMI can be arrived at.

Also, the employee has to mention the name and details of the bank or housing society to whom such certificate is to be issued.

annexure1

The EPFO then issues a certificate showing the outstanding balance and last three month’s deposit in the account. Alternatively, members can take printouts of their PF passbook downloaded from the EPFO website and submit it to housing agencies or banks.

annexure2

If a member wishes to use PF money to meet EMI’s, then in addition to Annexure I, an authorisation by the member is to be filled in a prescribed format. It will carry details such as PF amount, PF and loan account number, lender name, address etc. One has to get this form authorised from the lender i.e. branch manager of the lender who has sanctioned the loan. Once approved, EPFO will start transferring EMI’s online to the lender’s account.

annexure3

What if an employee leaves his/her job?

The EPFO has made it clear that under no circumstances would it be liable for any default of payments to the lender. The EPFO will not be party to any agreement made between an EPFO member and a society or builder.

In case a member quits his job, the responsibility of repaying the loan would rest with the employee and not the EPFO.

Conclusion

While dipping into your PF account to make a down payment makes your life easier, it is important to remember, your PF is meant to take care of your post­ retirement needs, and depleting it may jeopardise your retirement.

So make sure you have a backup plan to meet post­retirement needs through equity mutual funds or PPF.

Source: https://goo.gl/egUXjH

ATM :: Home loan tax reliefs often missed by taxpayers

By Preeti Motiani | ECONOMICTIMES.COM | May 11, 2017, 10.55 AM IST

ATM

The Union budget of 2017 brought mixed bundle of joy for the taxpayers. While the section 80EE was re-introduced, holding period was lowered which brought cheers for the taxpayers, on the other hand, the individuals claiming a loss on the let out property or deemed to be let out property were left in shock.

Many of you who already own a second house or looking to buy a new house might give a look at the rules listed below to receive the often missed benefits.

1. You can claim tax benefit on interest paid even if you missed an EMI.
Section 24 of the I-T act mentions the word interest payment “payable” on housing loan. It means that even if you have missed the EMI payment in a year you can still claim the tax benefit on it. It can be claimed as a deduction so long as the interest liability is there.

Kuldip Kumar, Partner and Leader – Personal Tax, PWC says, “One should retain the copy of the interest certificate issued by the lender i.e. bank or NBFC specifying the amount of loan, interest due etc. as this will help in case of any questioning from the tax department.”

The principal repayment deduction under Section 80C, however, is available only on actual repayments.

2. Principal repayment tax benefit is reversed if you sell before 5 years.
While the finance minister may have provided a relief by reducing the holding period to 24 months to qualify for the long-term capital gains but if you sell a house within five years from the date of purchase, or, five years from the date of taking the home loan, the tax benefit gets reversed.

“The deduction claimed will be added back to the income of the taxpayer in the year in which the property is sold,” says Archit Gupta, founder, Cleartax.com

However, the loan amortisation calculations are such that the repayment schedule has lower component of principal repayment in the initial years of the home loan and the tax reversal rule only applies to Section 80C. Also, the benefit of lowered holding period for capital gains will apply from April 1, 2018, AY only.

3. You are eligible for tax break only when you are a co-borrower and co-owner.
You cannot claim a tax break on a home loan even if you may be the one who is paying the EMI. For instance, there may be a situation when you’re paying the EMI of a home loan for the property which is owned by your parents or spouse.

“However, when the house is in the joint name and funded by both the spouses by a way of housing loan, both husband and wife can avail the separate deduction for the interest payments and principal repayment of such loan,” says Kumar.

Even if you own a property with your spouse, you can’t claim deductions if your name’s not on the loan book as a co-borrower.

4. You can claim pre-construction period interest for up to 5 years.
Any interest paid on the borrowing during the construction of a house is eligible for tax relief only after you have received the completion certificate.

“Interest paid during the construction period can be claimed as a tax deduction in five equal instalments starting from the year in which construction of the property is completed. The total tax benefit will be annual interest payable + 1/5th of the pre-construction period “says Gupta.

While filing returns for the AY 2017-18, the maximum limit for the self-occupied property is Rs 2 lakh. In the case of let out property, there is no limit.

The union budget 2017 has removed this anomaly and put the cap of Rs 2 lakh on the let out property. The same will be effective while filing the returns for next year i.e. 2018-19.

5. Re-introduction of the Section 80EE
To provide an additional relief to the homebuyers, the section 80EE has been reintroduced with effect from April 1, 2017. The maximum deduction available has been reduced from earlier of Rs 1 lakh to Rs 50,000 now.

However, this deduction comes with certain restrictions which need to be satisfied while availing this deduction. The conditions are:
a) The home-owner/s should be first time buyer even if the property is bought in the joint ownership,
b) The loan value must not exceed Rs 35 lakh and property value should not exceed Rs 50 lakh, and
c) The loan must be sanctioned by a financial institution during the period April 1st, 2016 to March 31st, 2017.

Archit Gupta, Founder & CEO, Cleartax.com says, “If the taxpayers are able to meet conditions for both of section 24 and 80EE, their taxable income can be reduced by 2.5 lakhs in FY 2016-17 return filing.”

6. Processing fee and other charges are tax deductible.
Most taxpayers are unaware that charges related to their loans such as processing fees or prepayment charges qualify for tax deduction. As per law, these charges are considered as interest and therefore deduction on the same can be claimed.

“Section 2(28A) of I-T Act defines interest as interest payable which includes any service fees and other charges in any manner in respect of money borrowed,” says Kumar.

Therefore, it is eligible for deduction under Section 24 against income from house property. Other charges also come under this category but penal charges do not.

Also, any payment made towards stamp duty and registration fees incurred by the individual are also tax deductible as per the section 80C(2) (xviii) (d) of the act.

7. Loans from relatives, friends and employer are eligible for tax deduction.
If you have taken a loan from friends and/or relatives to acquire a house then you can claim a deduction under Section 24 for interest repayment on loans. You can also claim a deduction for money borrowed from individuals for reconstruction and repairs of property.

“A taxpayer would need to obtain a certificate from the relative which would contain the details such as the amount of interest payable, amount of loan taken, specifying the property details for which loan is taken,” says Kumar.

However, one must remember that this rule is only applicable for interest repayment. You cannot avail the tax benefits available on the principal repayment on that part of the loan borrowed from your relatives, friends and employer.

Further, a lender, in this case, your relatives and friends must disclose the interest earned on such transaction while filing their income tax returns.

Source: https://goo.gl/3hozR4

NTH :: SBI reduces home loan rates by up to 25 bps

By Saloni Shukla, Sangita Mehta | ET Bureau|Updated: May 08, 2017, 03.38 PM IST | Economic Times

NTH

MUMBAI: Country’s largest bank, State Bank of India has reduced home loan rates between 10 to 25 basis points, a move that will force other lenders to reduce rates. SBI has refrained from cutting its marginal cost of lending rate (MCLR) which stands at 8% for one year. SBI has the largest share on the home loan market.

The bank will now charge salaried borrowers 8.35% on home loans upto Rs 30 lakhs as against 8.60% For loan above Rs 30 lakhs bank will charge 8.50%, down by 10 bps. The bank will continue to charge 8.60% on loans above Rs 75 lakhs. The rate cut will help only the new borrowers since the existing borrowers are locked into one year fixed rate on interest as per the rule of arriving at lending rates.

The reduction in rates comes within a month of five associate banks merging with the parent bank. Recently SBI cut deposit rates sharply by 50 basis points across different maturities.

SBI has also said that an eligible home loan customer can also avail of an interest subsidy of Rs. 2.67 lacs under the Pradhan Mantri Awas Yojana scheme. SBI said that to supplement the affordable housing push, SBI has also come out with special offerings for construction finance to the builders for affordable housing projects. “This will give a dual push both for construction finance and also for home finance for affordable homes.”

Mr Rajnish Kumar, managing director, SBI said, “We have seen a steep hike in the home loan enquiries recently and reduction in rates will further help millions of home buyers fulfill their dream of owning a home. Individuals can apply for home Loans through multiple channels.”

Source: https://goo.gl/ReoG9P

ATM :: What is Days Past Due (DPD) in CIBIL Report?

Retrived on 08/05/2017 | Creditseva.com

ATM

DPD in the CIBIL Report stands for Days Past Due. This term relates to the accounts section of the credit report. It basically explains the manner in which you have been clearing your outstanding dues related to your loans and credit cards. DPD clearly explains the number of days an instalment for an EMI or credit card bill has been missed or delayed. DPD indicates the number of days a bill or instalment payment has got on a delayed.

A DPD of ‘000’ depicts that there are no payments that are due by you. It basically means that you have cleared all your dues on a regular basis and on time.

A DPD of ‘XXX’ depicts that the lender has not recorded your information for the current month to CIBIL.

It is important to comprehend that if you have a DPD other that ‘000’ or ‘XXX’ on your CIBIL Report, then it is implied that you have not been able to pay the dues related to your credit cards and loans.

If you have been making all your outstanding payments on time regularly, then your DPD will be either “000” or “XXX”.

Impact of DPD on CIBIL Score
DPD impacts the CIBIL Score differently in different circumstances. If the DPD is “000”, then it has a positive impact on the CIBIL Score of an individual. If the DPD is “XXX”, then there is no impact of it on the CIBIL Score. If the DPD is some number instead of”000”, then there is a negative impact on the CIBIL Score.

Correction of DPD entries in CIBIL Report
Borrowers do not default their payments always with an intention to do so. It sometimes happens without any intention. This happens when some unforeseen circumstances arise. These unforeseen circumstances include layoff, divorce, and bankruptcy.

Example: If an individual has lost his job and due to this, he has made a default on the credit card payments that were due in his name. Usually, he would be recommended to close the account. But doing this is not the optimal solution for this problem. In such situation, the most feasible solution is to restructure the total amount that is related to the credit card.

It is very crucial to have a CIBIL report that is healthy so that you have a good track record along with a credit history that is good.

CIBIL Report FAQs:
1. What happens to the DPD value when there is a default on a payment?

In a case of a payment default, the DPD starts getting a negative number.

2. What is the DPD when a cheque gets bounced?

If a cheque has been bounced and when a loan payment has been missed, then there will be one entry of DPD for the respective month. This relates to a value that is 30 and it depicts that the dues for that month have not been cleared.

3. What happens when you have cleared the due payment in the next month?

If you have cleared your last months due payment, then the DPD value in the next month becomes normal.

4. What happens if the due payment is not made?

If an individual has not cleared the payments that are due, then a value of DPD will increase and reach 60. This signifies that you have not cleared your dues from the last 2 months.

5. Can the value of DPD be changed?

No, the DPD value cannot be changed at all. If your lender does not find your DPD to be good, then your loan or credit card application request will get rejected. In such a scenario, you need to wait for a certain period of time until some new information is added to your credit report.

Source: https://goo.gl/a0wWgE

Interview :: Invest cautiously, stocks over-valued: Nimesh Shah

Sidhartha | TNN | May 5, 2017, 06.22 AM IST | Times of India

ICICI Prudential Asset Management Company managing director & CEO Nimesh Shah believes in speaking his mind. While most market players are euphoric about the recent rise in stock market indices, Shah cautions investors against chasing high returns, given that the valuations are high. But he is optimistic about the medium term prospects and insists that mutual funds will be the preferred mode of investment, given the “repair work” in real estate. Excerpts:

What should someone looking to enter the stock market either with cash or via SIP do at this time?
On a price-to-earnings basis, market is over-valued at current levels. Because of the persistent flows from both foreign and domestic portfolio investors, the market is currently running a year ahead given that earnings per share (EPS) is expected to improve significantly by 2018-19. This is because we believe that over the next twothree years, capacity utilisation can increase and so can the return on equity . Currently , the macros are strong but Indian companies are facing various pockets of challenges. But consumption across the spectrum is likely to hold strong. Given this expected improvement, it is likely that there could be a consistent flow of investment from institutional investors, thereby lending a reasonable investment experience over next twothree years. But since the market is already slightly over-priced, one cannot expect abnormal returns.

For those investing via SIP , they can continue with their investments because over the next three years, the investment price will average out, thereby yielding better returns. For someone who is coming in when sensex is at 30,000 level, can consider dynamic asset allocation funds which result in lower equity exposure when the equity level is up and vice versa.

But it gives you conservative returns…
Yes, it does. But it is good to opt for conservative returns when sensex is at 30,000 level.Even if the index were to head higher say 33,000 level, the only limitation here would be that the entire upside is not captured. But when market turns volatile at higher levels, this class of funds can limit downside. As we all acknowledge, there is more pain in losing Rs 5 than the joy in gaining Rs 30.

If you are investing in equity MFs, one should consider large-caps because mid-caps are over-valued at present. Continue investing but invest with caution because returns may not be too high from current levels. Just because banking funds as a category has delivered 40% plus returns, it does not mean everyone should invest in it based on past one-year return.

A few years ago, the government was worried about the huge inflows from FIIs and feared the impact post withdrawal. But now mutual funds seem to have emerged as an effective counter-balance. Has the domestic MF industry matured?
To a certain extent domestic institutions have emerged as a strong counterbalance. Over the last few months, mutual funds and foreigners have pumped in money into stock markets, thereby pushing up benchmark indices. However, even if foreign investors were to withdraw tomorrow, Indian MF and insurance industry which is putting in over $3 billion a month, will be able to balance it out, thereby limiting any adverse shocks. Today , people refrain from investing in real estate, gold and bank FDs, which is currently yielding 6-7% return pre-tax. In such an environment, equities are becoming a TINA factor -there is no alternative. So, we believe that steady inflows may continue.

How much of small investor money is coming into the market?
Mutual fund in India is all about small investors; high net worth individuals form a very miniscule portion. We are opening nearly 120 offices across smaller towns such as Nadiad (Gujarat) and Arrah (Bihar) because we believe that MF is a viable business. We have ensured that we are present pan-India, including North East. If we can give a better alternative to unorganised investment avenues, people can invest. While people in Gujarat who are more evolved investors can move to value investing, in the East, money can be moved into mutual funds from unorganized sector, there by giving us an opportunity to show the importance of well-regulated businesses.

Will the recent change in regulations push MFs?
We are in an infinite market as the MF penetration is hardly 4% in the country . The one major challenge now is simplified onboarding process for investors. Today, 85% of our business comes from existing consumers and this shows that the market is not expanding adequately . As a fund house, we receive several queries on our website, but the conversion rate is disheartening. We have come to realize that investors are wary of the entire KYC process. Like insurance, AMCs too should be allowed to use the bank KYC details, thereby eliminating the duplication of paperwork.

The reason why bank KYC should suffice is because entire industry does not deal in cash transactions. MFs receive funds via bank accounts and at the time of redemption the funds are transferred to the same bank account. So there is absolute transparency .

Source : https://goo.gl/y2MtpW

ATM :: Pick the best NPS funds

Babar Zaidi | May 8, 2017, 03.15 AM IST | Times of India

ATM

Though it was thrown open to the public eight years ago, investors started showing interest in the National Pension System (NPS) only two years ago. Almost 80% of the 4.39 lakh voluntary subscribers joined the scheme only in the past two years. Also, 75% of the 5.85 lakh corporate sector investors joined NPS in the past four years. Clearly, these investors have been attracted by the tax benefits offered on the scheme. Four years ago, it was announced that up to 10% of the basic salary put in the NPS would be tax free. The benefit under Section 80CCD(2d) led to a jump in the corporate NPS registrations. The number of subscribers shot up 83%: from 1.43 lakh in 2012-13 to 2.62 lakh in 2013-14.

Two years ago, the government announced an additional tax deduction of `50,000 under Sec 80CCD(1b). The number of voluntary contributors shot up 148% from 86,774 to 2.15 lakh. It turned into a deluge after the 2016 Budget made 40% of the NPS corpus tax free, with the number of subscribers in the unorganised sector more than doubling to 4.39 lakh. This indicates that tax savings, define the flow of investments in India. However, many investors are unable to decide which pension fund they should invest in. The problem is further compounded by the fact that the NPS investments are spread across 2-3 fund classes.

So, we studied the blended returns of four different combinations of the equity, corporate debt and gilt funds. Ultrasafe investors are assumed to have put 60% in gilt funds, 40% in corporate bond funds and nothing in equity funds. A conservative investor would put 20% in stocks, 30% in corporate bonds and 50% in gilts. A balanced allocation would put 33.3% in each class of funds, while an aggressive investor would invest the maximum 50% in the equity fund, 30% in corporate bonds and 20% in gilts.

Ultra safe investors
Bond funds of the NPS have generated over 12% returns in the past one year, but the performance has not been good in recent months. The average G class gilt fund of the NPS has given 0.55% returns in the past six months. The change in the RBI stance on interest rates pushed up bond yields significantly in February, which led to a sharp decline in bond fund NAVs.

Before they hit a speed bump, gilt and corporate bond funds had been on a roll. Rate cuts in 2015-16 were followed by demonetisation, which boosted the returns of gilt and corporate bond funds. Risk-averse investors who stayed away from equity funds and put their corpus in gilt and corporate bond funds have earned rich rewards.

Unsurprisingly, the LIC Pension Fund is the best performing pension fund for this allocation. “Team LIC has rich experience in the bond market and is perhaps the best suited to handle bond funds,” says a financial planner.

The gilt funds of NPS usually invest in long-term bonds and are therefore very sensitive to interest rate changes. Going forward, the returns from gilt and corporate bond funds will be muted compared to the high returns in the past.

Conservative investors
In the long term, a 100% debt allocation is unlikely to beat inflation. This is why financial planners advise that at least some portion of the retirement corpus should be deployed in equities. Conservative investors in the NPS, who put 20% in equity funds and the rest in debt funds, have also earned good returns. Though the short-term performance has been pulled down by the debt portion, the medium- and long-term performances are quite attractive.

Here too, LIC Pension Fund is the best performer because 80% of the corpus is in debt. It has generated SIP returns of 10.25% in the past 3 years. NPS funds for government employees also follow a conservative allocation, with a 15% cap on equity exposure.

These funds have also done fairly well, beating the 100% debt-based EPF by almost 200-225 basis points in the past five years. Incidentally, the LIC Pension Fund for Central Government employees is the best performer in that category. Debt-oriented hybrid mutual funds, also known as monthly income plans, have given similar returns.

However, this performance may not be sustained in future. The equity markets could correct and the debt investments might also give muted returns.

Balanced investors
Balanced investors who spread their investments equally across all three fund classes have done better than the ultra-safe and conservative investors. The twin rallies in bonds and equities have helped balanced portfolios churn out impressive returns. Though debt funds slipped in the short term, the spectacular performance of equity funds pulled up the overall returns. Reliance Capital Pension Fund is the best performer in the past six months with 4.03% returns, but it is Kotak Pension Fund that has delivered the most impressive numbers over the long term. Its three-year SIP returns are 10.39% while five-year SIP returns are 11.22%. For investors above 40, the balanced allocation closely mirrors the Moderate Lifecycle Fund. This fund puts 50% of the corpus in equities and reduces the equity exposure by 2% every year after the investor turns 35. By the age of 43, the allocation to equities is down to 34%. However, some financial planners argue that since retirement is still 15-16 years away, a 42-43-year olds should not reduce the equity exposure to 34-35%. But it is prudent to start reducing the risk in the portfolio as one grows older.

Aggressive investors
Aggressive investors, who put the maximum 50% in equity funds and the rest in gilt and corporate bond funds have earned the highest returns, with stock markets touching their all-time highs. Kotak Pension Fund gave 16.3% returns in the past year. The best performing UTI Retirement Solutions has given SIP returns of 11.78% in five years. Though equity exposure has been capped at 50%, young investors can put in up to 75% of the corpus in equities if they opt for the Aggressive Lifecycle Fund. It was introduced late last year, (along with a Conservative Lifecycle Fund that put only 25% in equities), and investors who opted for it earned an average 10.8% in the past 6 months.

But the equity allocation of the Aggressive Lifecycle Fund starts reducing by 4% after the investor turns 35. The reduction slows down to 3% a year after he turns 45. Even so, by the late 40s, his allocation to equities is not very different from the Moderate Lifecycle Fund. Critics say investors should be allowed to invest more in equities if they want.

Source: https://goo.gl/oUp9FP

NTH :: Now Transfer Your Home Loan To SBI At Zero Processing Fees

SBI, the country’s biggest lender is charging zero processing fee on home loan takeover till June 30, 2017.
NDTV Profit Team | Last Updated: May 07, 2017 07:45 (IST) | NDTV Profit

NTH

Do you have a Home Loan with any bank or housing finance company at higher interest? If yes, then it may be a good opportunity for you to transfer your existing home loan to State Bank of India, as the country’s biggest lender is charging zero processing fee on home loan takeover till June 30, 2017. Even you can get higher than the amount currently outstanding in your home loan from SBI if you match their eligibility criteria, the state-owned lender said in its website.

Here are the details you need to know:

Home Loan can be taken over from the following Institutions:
Scheduled Commercial Banks (SCBs),Private and Foreign Banks, Housing Finance Companies (HFCs) registered with National Housing Bank (NHB), Borrower’s employers if they are Central/State Governments or their undertakings or Public Sector Undertakings.

Criteria
The borrower should have serviced interest and/or installment of the existing loan regularly, as per the original terms of sanction.

The borrower should have valid documents evidencing the title to the house/flat.

Whether take over with sanction of Higher Loan Amount & extended Repayment Period is possible?
Yes. Based on the merits of the case and requirements/ eligibility of the borrower, the Bank may sanction an amount higher than the amount taken over from other bank/ financial institution for purposes of renovation/ extension/ furnishings. Similarly extended repayment period may be sanctioned provided that at all times the criteria regarding maximum permissible finance and security margin under the Bank’s scheme are not diluted.

What is the procedure for Take Over?
The borrower should address a letter to the bank/ financial institution from whom he has availed the loan asking them to deliver, immediately upon receipt of the loan amount, the title deeds and other securities, if any, direct to our lending branch;

The borrower should give to the branch a request letter for paying to his existing lending bank/financial institution the outstanding amount of his loan by debit to his loan account.

The borrower must give an advice of the actual outstandings (with up-to-date interest) in the loan account from the other bank/ financial institutions; the statement of Account for the entire period of loan or for the last 10/12 months where the loan has run for a longer period;

Confirmation letter from the financing Bank that they have created an equitable mortgage over the property.

Documents required for availing the loan:
Disbursal must be effected only subject to the above information being found satisfactory and completion of formalities as regards

Agreement to create Mortgage, Power of Attorney in the favor of the Bank authorizing the Bank to create equitable mortgage on the borrower’s behalf.

Interim security (Ex: Bank Deposit Receipts, LIC Policies, etc) and the security obtained in the interim period will be released after receipt of the title deeds then the other Bank and creation of a valid equitable mortgage subsequent to verification of the borrower’s title to the property.

Whether pre-payment penalty is funded?
Yes. Total loan quantum, will however, continue to be determined by eligibility criteria based on income, EMI/NMI ratio, LTV ratio etc. applicable to Home Loans scheme.

Whether takeover of Home Loan with Top up loan is permitted?
Yes

Source: https://goo.gl/F7sooH