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Fed meet, RBI policy key for markets this week: Experts
BIZ TALK
Tax Advice |
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personal finance
Retirement: No substitute for individual planning
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Fed meet, RBI policy key for markets this week: Experts
New Delhi, September 15 The US Federal Reserve will meet on September 17-18 and global markets, including India, are tracking whether the Federal Open Market Committee would reduce the monthly purchases of treasuries, brokers said. India is among the markets that may be affected, at least in the short-term, as capital flows shift to the US as growth there recovers. Outflows would put more pressure on the slumping rupee, they added. Portfolio flows are a key tool to finance India's current account deficit. Over the past week, the BSE benchmark Sensex has added 463 points, or 2.4 per cent, the third week of gains. "We believe that some tapering off is already priced in and to that extent, if the actual amount of taper matches expectations, it may not be taken negatively," said Dipen Shah, head, Private Client Group Research, Kotak Securities. The global financial markets were rocked when Fed Chairman Ben Bernanke said on May 22 that unwinding of the unconventional monetary easing was on the cards if the US economy recovers as per expectations. The Sensex, which was hovering near the 20,000 mark in late May, hasn't been able to sustain gains above that level as market participants have been reluctant to add fresh positions until the Fed takes a call on tapering. Newly appointed RBI Governor Raghuram Rajan, a former IMF economist, postponed the central bank's mid-quarter policy review to September 20 from September 18 as he wanted to consider all major developments, including the Fed announcements and their effects on the markets. While all eyes would be on Rajan's first monetary policy review, the continuing slowdown in both investment and consumption in the Indian economy has recently been aggravated by the RBI's liquidity tightening aimed at stabilising the rupee. The government is scheduled to release wholesale price index inflation data on Monday. "Rate cut hopes are minimal due to pressure on the rupee,” said Rakesh Goyal, senior vice-president, Bonanza Portfolio Ltd.
— PTI The Triggers
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BIZ TALK
The real estate sector is facing weak sentiments due to a slew of factors. Anil Kumar Sharma, president, Confederation of Real Estate Developers’ Associations of India (CREDAI-NCR) and CMD, Amrapali Group, talks to
Sanjeev Sharma about how the Land Acquisition Bill will hurt the sector and the need to lower interest rates to revive demand.
A:
The Bill is definitely the need of the hour given the controversies with respect to forcible land acquisition in the past few years. We welcome the government’s thinking and hope that with the passage of the Bill, at least housing, private industry and public projects will be able to move ahead with fresh supply of acquired land which is essential for large-scale projects. We are disappointed with the finer details in the Bill. In the current form, the Bill makes the process of land acquisition time-consuming with an intentional or unintentional incentive for farmers to delay the process as the longer the delay the higher the compensation (in the form of market rate prevalent at the time of final acquisition). This will impact the real estate sector badly because ultimately the developer will pass on the hike on land rates to buyers. We need to keep in mind that our country is woefully short of housing units. Various reports put this need around 19 million housing units only in urban areas. Going by this ratio and the fact that around 60 per cent of our population live in rural areas, we need to build at least 45 million units. Now, imagine the situation where a developer has to pay four times of same parcel of land. What will be the cost of the same flat which is available at Rs 25 lakh today? Hence, we say that all land acquisitions have to strike a balance between the interest of farmers and the need of the industry to get large parcels of contiguous land. The provisions in current form of the Bill do not address the need of the industry especially large-scale projects. Q: How is demand faring for the real estate industry given the economic slowdown? A:
Market sentiments in the real estate sector are in tune with overall economy. The mood is definitely not what it was at the beginning of this year. Given the lacklustre economy, softening of home loan rates would have lifted the mood of market. But it seems the RBI has had other plans. Q: What can be the revival measures for the sector? A: First and foremost, a little drop in home loans rates will send out right signals for the sector. The government and authorities can do better by not changing the policies frequently. Though, by and large, they have stabilised, there is still a gap which needs to be filled up. Fund availability for real estate projects from banks is still a big issue. We hope the Real Estate Regulatory Bill, once made a law, will provide remedy to many issues this sector is facing. Q: Your views on the new regulatory Bill for the real estate sector? A: We welcome the step of the government for introducing this Bill which was long awaited. This would definitely regulate the fly-by-night builders who harm the buyers. The transparency in real estate sector has been demanded since long and CREDAI has already taken initiative for mission transparency and self-regulation to developers. If there is a regulator, it should not target only the consumers’ problems but parallel emphasis should be given to the developers, so that the industry can move ahead smoothly. Q: What is the impact of the real estate sector on overall growth? A: As per a report by the CBRE, the contribution of real estate sector in GDP is estimated to be 6.3 per cent in 2013. I believe it is not mere statistical figures that matters, but look at the potential of this sector in generating jobs. After agriculture, this sector is perhaps the largest employer of semi-literates and illiterates. It is perhaps the third largest employer after agriculture and Railways. It also contributes in the growth of more than 200 small to large-scale industries. |
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Tax Advice Q. I wish to gift a sum of Rs 2 lakh to my major daughter. Can I transfer the amount from my account to her account directly instead of sending an account payee cheque. Please advise whether it would be considered as a gift and if there is any tax liability. Also clarify whether the transfer entry in her passbook would suffice the purpose of gift. — Inder Mohan A. The gift to a major daughter can be made by direct transfer from one bank account to another bank account. Such a gift would not involve any tax liability. I would, however, suggest that the gift should be made by drawing a cheque in favour of your daughter. A letter stating that a gift of Rs 2 lakh is being made to your daughter should be prepared and enclosed with the cheque. A letter of its acceptance from your daughter must be obtained so that the same can be produced in case any enquiries are made by the department in respect of such a gift. Q. My source of income is interest from FDs and Senior Citizen Savings Scheme in post office. It is around Rs 3 lakh annually. The tax tax payable on my income is around Rs 3,000. The TDS amount is around Rs 20,000. As refund takes a lot of time, I want to know if I can submit Form 15H so that TDS is not deducted. Can I pay self-assessment tax, whatever is due, at the end of the financial year before submitting my I-T return? — BK Sharma A. Form 15H can be filed in case the estimated amount of tax payable by an assessee in respect of his estimated total income for the previous year would be nil. Facts given by you in the query indicate that tax is payable on your estimated total income. It may, therefore, not be possible for you to file Form 15H with the bank in respect of tax deductible at source from the interest income arising to you. Q. My son is working with PSPCL and is now on deputation with the Bhutan government. During financial year 2012-13, he received a salary of Rs 14,60,405 comprising basic pay Rs 3,31,180, Bhutan compensatory allowance Rs 9,34,601 and others Rs 1,94,004. In addition, he has an income of Rs 3,66,000 in India and invested Rs 1,00,000 in PPF. What is his tax liability for the assessment year 2013-14? — RS Saini A. Tax liability of your son working with PSPCL on deputation with the Bhutan Government would be Rs 3,47,920 plus education cess @3% thereon. The total tax liability would be Rs 3,58,358. The exemption is based on the figures of Rs 17,26,405 (14,60,450 + 3,66,000-1,00,000). It may be added that figures of basic pay Rs 3,31,180, Bhutan compensatory allowance Rs 9,34,601 and others amounting to Rs 1,94,004 do not aggregate to Rs 14,60,405. Q. I am an income tax payee. I want to gift an amount of Rs 50,000 to my grandson who is a minor. I wish to give him at his birthday as a gift. Please let me know whether this amount is tax-free for both of us. If not, how the gifted money could be exempted from tax. — Sudesh Chand A. The amount gifted to your grandson who is a minor would not be chargeable to tax in the hands of your grandson. The amount so gifted would not be deductible from your income. However, any income arising on such gifted amount would be included in the income of his parent.
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personal finance
In fact, nowadays most of the lenders have uploaded a format of their Home Loan Agreement on their website which can be accessed by any prospective borrower. So before signing the agreement you can always access a copy of the agreement beforehand and study it carefully. If you find it difficult to understand the terminology used, you can always take a professional’s help or seek clarification from the lender concerned. You should remember that this agreement is legal and once you sign on that dotted line, it becomes binding on you to abide by those terms and conditions. There is a general perception among the borrowers that as long as they don’t default in their repayment they need not worry, which is true to a certain extent as the lenders are normally lenient as far as certain clauses are concerned. So let’s look at those certain clauses that generally create inconvenience or hardship if we don’t understand their implications: Reset clause on fixed rate of interest: Often the borrowers believe that the interest rate under fixed rate is fixed for the entire tenure of loan. So when they receive a communication stating that their interest rate has been revised upward they get a shock of their life. And of course when reverse happens in the rarest of the rare case, it also puts a smile back on their face. There are only 2-3 lenders, which actually provides home loan with fixed interest rate for entire tenure. Most of the lenders have a reset clause of 2-5 years. Force majeure clause/money market condition: In the event of extraordinary or unforeseen events or changes in money market conditions, the bank has a right to unfix and raise the fixed interest rate. Events of default: For a layman, ‘default’ in loans means non-payment of EMIs on time. However, your lender may have a different meaning for the term ‘default’. The home loan agreement of few banks defines default as a case when the:
Additional security in falling property rates: This clause states that the lender is eligible to demand additional security if the price of the mortgage property falls. Even if you have a good credit history, this clause demands a security cover in addition to your loan amount. And if you fail to provide such a security then you may be declared a defaulter by the lender. Other generic clauses
And yes, if you are looking for a clause regarding the communication about changes in interest rate…don’t because as per the NHB and Banking Codes and Standards Board of India (BCSBI) guidelines, banks and housing finance companies can keep borrowers informed about changes in interest rates, charges, terms and conditions through any one of the following:
So don’t be surprised if you fail to receive any communication in this regard Always remember that you have every right to get a copy of the loan agreement that you sign. So be sure to demand for a copy of the agreement for your records and now that you have understood the actual meaning of the terms used, read between the lines. You should be pleasantly amused and not shockingly amused! The author is Product Manager, Apnapaisa. The views expressed in this article are his own
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Retirement: No substitute for individual planning
Inflation has taken a toll on the pension that was not planned by the beneficiary. It was just a part of a conveyor-belt plan by Dr Nandy’s employer. Retirement planning was a barely acknowledged concept in the 1970s; and it is still rare in India, where financial dependence on children is high. Pension plans set up by employers — especially in public sector or state-owned companies — have traditionally served to compensate for the individual’s neglect. But, as the Nandys have realised painfully, there is no substitute for individual planning — considering one’s individual needs and capacity to invest. Individual planning has become even more crucial today, with the nature of employment changing in the developing open economy— self-employment has burgeoned, contractual employment has become more common as has productivity-linked terms of employment. Benefits are no longer automatically on tap. Company pension plans, even in the public sector, are increasingly shifting to a defined contribution model from one based on defined benefit. Even more so than when Dr Nandy was a young man, it’s become incumbent on every individual to make studied choices in retirement planning. Today, retirement planning offers a wide range of options in terms of accumulation and annuity payments, other benefits and subscription-payment schemes, allowing subscribers to plan on the basis of the age at which they plan to retire and the monthly pension they calculate they will require. Even if the plan is to retire at 45, the pension scheme can be structured accordingly! Some offer a spousal retirement benefit which lets you plan for a healthy retirement for you and your spouse, even in your absence. Pension plans from life insurers could be another lucrative option which lets you plan for retirement in a structured, systematic and disciplined manner. These can be purchased on a lump sum payment or payment of regular annual premiums over a period of time. The benefit of income after retirement can be realised immediately upon retirement or deferred wholly or in part; the monthly annuity would be calculated accordingly. Annuity payments could be (chosen) for a life time or for a guaranteed period of time and can be extended to cover the life of a nominee. Today, Dr Nandy would have had the choice of augmenting his government pension with a private pension plan with greater benefit-choices. And, if he could have projected inflation and calculated his dependent’s needs more accurately, life would have been easier.
The author is Head – Products Solutions Management, Max Life Insurance. The views expressed in this article are his own |
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Q: What will be the impact of the Land Acquisition Bill on the industry?
It is such an exciting feeling to know that the lending institute has agreed to extend a loan facility to us to fulfil our most desired dream ‘our own home’ that often in that excitement we forget to read the terms and conditions and blindly sign on those dotted lines without ever trying to understand its implications in the long run which often results in disappointment.
When Dr Amit Nandy (not his real name) retired in 1981, the pension from the public sector company where he had been employed was enough for a comfortable life for him and his wife. His children were employed, the son at a pharmaceutical company and the daughter as a doctor. Today, nearly three decades later, they are struggling to meet their expenses. Too proud to take help from their children, they count every rupee they spend on food; they refuse to subscribe to cable television and have also curbed other expenses.