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Personal finance
Transferring existing home loan to another lender
Investor
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Tax planning for women
Jayesh Shroff
Let us look at some of the characteristics of the way women think about their investments:
Considering these aspects, financial planners and advisers should customise financial solutions for women. It is said that money saved is money earned. Thus when it comes to investments one must plan in such a way that the returns on the same are maximised by saving as much tax as possible. When we talk about return on investments, one has to look at post-tax return on investments. An 8% return on normal investment is much lower than the same 8% return on tax-free investment. This is because at full tax rate, as applicable in India under current tax laws, an 8% return on taxable investment yields you only about 6.6% of net tax-free return. This is where ELSS schemes from mutual funds score over other avenues of investments. In today’s era of high inflation, any woman cannot afford to put all her savings in fixed deposits/debt instruments as the returns from those assets will not even cover the rise in cost of living forget earning returns on top of inflation. Thus it is essential to have some part of savings in equities and within that ELSS schemes offer the best option. This is because ELSS schemes offer upfront tax benefit up to maximum of Rs 1,00,000 per investor under Section 80C of the Income Tax Act. Second, equity as an asset class delivers superior returns over long term and because ELSS schemes have a lock-in period of 3 years the probability of earning superior risk adjusted returns is higher. Third, all future gains in the form of dividend and long-term capital gains that one earns out of investment in ELSS schemes is tax-free in the hands of investor. To conclude, in a rapidly growing economy like India, any investor, more so any young investor, should not stay out of equity as an asset class. This is because returns generated out of equity or equity related products not only help you to maintain but upgrade your standard of living. Second, in today’s world women share equal responsibility of ensuring family’s prosperity and therefore they need to plan in such a way that her investments generate maximum risk adjusted returns with minimum tax liability. The author is Fund Manager, SBI Mutual Fund. The views expressed in this article are his own
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Transferring existing home loan to another lender
Balance transfer is basically getting your existing home loan refinanced by another lender, probably at a lower rate of interest with savings in EMIs and ultimately resulting in savings on interest component of the loan. To begin the process, first of all you need to do is ascertaining whether the interest rate charged to you is in tune with the prevailing market rate. At any point of time if you think that you are paying anything higher than average interest rate prevalent in the market, you can consider the option of switching your loan to another lender. To get a better deal from another lender, you will need to have a good track record of payment of your EMIs on time. Once you make up your mind to transfer your outstanding home loan amount to another lender, you need to shortlist 4-5 new lenders that can offer you most competitive rates at lower cost. You can take the help of online market places to compare the price and features of the home loan products offered by various lenders to select the best suitable product for your requirement. After getting desirable offer from the new lender, you can approach your existing lender with a request to transfer your balance loan amount to a new lender. The existing lender will provide you with an NOC/consent letter along with the statement of outstanding balance and the list of property documents held by them which will be released after they receive the balance amount. Normally the outstanding balance is mentioned as of future date so that the borrower gets time to make arrangement for the payments. This amount will also include prepayment charges, which is presently applicable only on fixed rate or dual rate loans when they are in fixed rate stage of the loan. Remember that even if the clause in your agreement copy mentions about foreclosure penalty on floating rate loan, it will not apply to you now as the RBI and National Housing Bank, which govern the housing finance companies, has issued circular banning prepayment charges on all floating rate home loans. After getting the consent letter you can approach the new lender and they will sanction the loan on the basis of you satisfying their eligibility criteria. The payment will be released to your existing bank, which will then forward the property documents to the new lender and issue a loan closure letter to you. Hence if you are on floating rate of interest you don’t have to pay any prepayment charges to the existing lender but may have to pay some processing fee to the new lender. Most lenders will agree to take over your loan from existing lender without any significant processing fee. So effectively there will be no charge for shifting the loan to another lender. If you are currently on fixed rate or dual rate of interest, you need to consider the prepayment charges, which are approximately 2.25% (inclusive of service tax) of your outstanding loan amount. The cost and benefit analysis of saving in EMI and the switching charges (prepayment charges to existing lender + processing fee to new lender) will help you in deciding whether it is worth switching to the new interest rate slab. But before you decide to transfer your existing home loan to new lender it is advisable to approach your existing lender and ask them if they are willing to drop the rate for you on payment of a small fee which is normally in the range of 0.28% — 0.56% (inclusive of service tax) of the outstanding loan amount. This will avoid the logistics of transfer of documents from one lender to another. Last but not the least, remember that all this is possible only if you a have good repayment track record on all your credit obligations. The author is Product Manager, Apnapaisa.com. The views expressed in this article are his own
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Investor
guidance
Reimbursement
by an employer up to Rs 15,000 of actual medical expenditure incurred by
an employee is not taxable as income. You will have to, however, produce
original bills for reimbursement of the expenditure incurred. In the
absence of original bills, the amount would be taxable in your hands at
your normal slab rates. I purchased some shares on March 25, 2013 and
sold them on March 26, 2014. Would it be short term or long-term
investment for the computation of capital gains and taxation? What if I
were to sell these shares in July 2014? — Deepak The shares having
been held for more than a year will be treated as long-term capital
asset and any gain arising on the sale of such shares shall be treated
as a long-term capital gain. In case shares held by you are equity
shares and the transaction in respect of sale thereof is through a stock
exchange and securities transaction tax is paid thereon, the gain if
any, on such a sale would be exempt from tax. In case the sale takes
place in July 2014, it will be a case of long-term capital gain, the
position would remain same as indicated hereinabove. My wife received a
gift of Rs 2 lakh from my elder brother’s daughter. What would be the
tax implications? — Rajat As per Section 56 (vii) of the Income-tax
Act, 1961 (The Act), if an individual receives any sum of money that is
more than Rs 50,000 or any property with a value above Rs 50,000 from
any person other than from a relative, the sum shall be taxable in the
hands of an individual. Relative in case of an individual include spouse
of the individual, siblings of the individual, siblings of the spouse of
the individual, siblings of parents of the individual, spouses of the
siblings under all three categories and any lineal ascendant or
descendant of the individual or the spouse. In your case, the gift has
been received by your wife from her niece which relation is not covered
in the definition of the term ‘relative’. Accordingly, the amount
received by wife would be taxable in her hands as income from other
sources.
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Today women play an active role in economy, business and politics as
much as men. The role of women in today’s world is no longer
restricted to that of being a home maker but they also play a role of
bread earner in the family. While it is important to earn money, it is
equally important to save and invest that money judiciously. And with
more and more women opting for the role of bread earners in the family,
it is important for them to plan their investments well with a balance
between risk and reward and also invest in the most tax-efficient ways.
Are you one of those borrowers who are experiencing somewhat similar situations listed below and are wondering what to do next? Don’t worry. Now you can transfer your existing home loan to another lender without worrying about the cost of transfer.
I work in a private firm and am
entitled to reimbursement of up to Rs 15,000 for medical expenditure
incurred by me. Will the amount be taxable in my hands? — Ravi