Tag: Intermediate Level

10 things to check before buying a home or Property in India

Posted on by Jagoinvestor

Buying a property is a one time decision for many. Its a moment when you are excited, stressed and many a times in hurry!. You look at some properties and one of those properties give you that feeling of “that’s my dream home”. You get attached to something special about the property and every other aspect looks fine to you. On top of it, you feel you want to block the property as soon as you can and get into the process of arranging for booking money, down-payment and finalizing home loan.

parameters to investigate before buying property in india

But, its not the time to rush, but slow down. You should step back for some time and calm down yourself because its a decision which will impact your overall family, life and finances. And you should not be regretting it later.

Just like a detective investigates a case and goes deep down analyzing a situation and then comes up with a conclusion, you should also do some important investigations before you finally take decision of buying a property. So we have come up with 10 things you should look at and think hard about them. These 10 points can also become a comparison tool for you to compare two or more properties, which we will look at in the end, but before that lets see what are those 10 parameters you should investigate before buying a property

10 things to check before buying a home or Property in India

1. Goodwill of the Builder and overall Brand
Before you buy a Property, its important to have a look at the builder profile and his overall history. How many projects he has already delivered, How much delay was there, Go to te website of builder company and check old projects and ongoing projects. Search on internet with the previous project name and you should be able to find some important information about it. See what people are talking about the builder and property.

2. Connectivity to your Work Place

An important parameter to look at before buying a property is the distance between your workplace and the property. Its something you have to deal with everyday. A property which is 3 km away from your workplace is very different from the property which is 12 km from your workplace. Long Distance might mean inflated fuel cost, time lost in travelling and getting frustrated and burning out each and every day for many years to come.

3. Connectivity to Schools, Hospitals, Transport, Markets etc

You should check how far are schools, colleges, hospitals, markets , shopping places and bus/train stations from the property. It should not happen that to save the money on property, but then spent on travelling your kids every day to school. The access to other important places is also very important.

4. Resale Potential in Future

When we buy a property, we are attached to it thinking that we are going to live there for next few decades, but no one known when you would be packing your bags again to move to some different location because of various reasons. At that time, if you realize that the property was suitable for you, but not to someone else, its going to be very bad situation. So you also have to think about the “resale” potential of property you buy. Will the property appeal to someone else ? Think about it again. For example, you might be looking at the property which has common parking, but what about future at the time of selling , every one you talk to wants a dedicated covered parking ?

Also, Most of the people who are buying under-construction properties are very far from core city. So its an important point to check about the future development around the area. Find out whats the future development plan for Roads ,Flyover, proposed malls, and other things which might come up in next 4-6 yrs. If the place is not yet properly connected to main city, there might be future plans for it.

5. Rental Potential

A lot of times, people give their property on rent and move to some other location. At that time, if you realise that the property is not that attractive from rental point of view, you will regret your decision. I am not saying this is going to be a deciding factor in your decision, but still just keep it in mind and have a look at property from this view point only. If property is near colleges or centrally located, or close to commercial places, you will never find issues finding people to rent your property.

6. Air & Lighting

Air and Lighting is something which will determine your living experience on daily basis. The flat you live in should have good enough lighting (natural light) and proper air. Also you should check how the air flows from various angles. In my current flat, the way wind flows is amazing. So when you look at property, check if some other buildings are blocking the air and lighting or not. Which side the terrace or balcony faces and the view outside.

7. Amenities Offered

You should also check what kind of amenities are offered along with property. Things like club house, parking, lift, power backup, swimming pool, gym are some of the amenities. Now you might be a simple person who wants minimal things, but if you want to make sure the property has very good resale potential, you might want to look at these things. After all, all these things will matter to you or people connected to you and if not anyone, may be the next buyer from you will look at all this.

8. Construction Quality

When you go to look at properties, check the construction quality. What we mean by it is check the walls, their overall look and feel, how is the finishing done, Does it look premium or the paints look like as if it will come out very soon. Check the wiring, fitting, tiles quality etc etc. If its a under-construction project, the only option you have is to search on internet about the builder and its past project experiences and what previus buyers are saying about it . Just put builder name or any previous project name along with “+ construction quality” words on google and you will be able to get some ideas – like this project in chennai

9. Road Conditions Around Property

I saw one property which was a little inside the main road. The road was not straight , but was in zigzag fashion and was not that wide. It was a inside road and not the main road, so there was no future potential of getting better road. Travelling each day with same road will frustrate you in long run, but might not be on daily basis. Also its not that safe in night. So when you look at any property, check the overall roads conditions atleast upto 500 meters from the project.

10. Locality and Kind of people living around

You should also check the overall locality and who all are living around. Are you comfortable there, will your family be ok ? Will it be safe in night ? will you wife/mother be able to go on a walk for an hour in-case they wish to ? These are some questions you need to answer before buying the property.

Compare two or more properties based on these 10 parameters

If you look at these parameters, it can be a great benchmark points to compare two or more properties and come at the conclusion of which one to prefer over another. So I have created a simple excel based tool, which has these 10 parameters and you can choose up-to 4 properties and compare them on these parameters. It will give you a ranking based on your comparison and tell you which property scores over another. the tool will also point out which is the best option to explore as you keep running the tool. Below is a simple demo of the tool, you can download it for FREE.

DOWNLOAD THE EXCEL – CLICK HERE

Let me know if you loved this article and will it help you for finalizing your property search and also help you compare two or more real estate properties.

Get your Income Tax Return Prepared by TRP at Home for FREE

Posted on by Jagoinvestor

Do you know that Income Tax Department offers your tax filing services at your door step with help of a trained and certified professional who can help you with tax filing and in many cases totally FREE of cost or at a small fees ? Let me introduce to the concept of TRPS (Tax Return Preparer Scheme) . Just like you have CA , you have something called as TRP or “Tax Return Preparer” trained by Income Tax Department for helping a tax payer in preparing and filing his income tax returns.

TRPS Tax return preparer scheme

What does a Tax Return Preparer (TRP) do ?

Mainly a TRP (Tax Return Preparer) helps a person to file his income tax returns. But lets see it in detail. Mainly a TRP shall

  • Prepare the return with due diligence;
  • Affix his signature on the return prepared by him;
  • Furnish the return with the Assessing Officer having the jurisdiction over the concerned assessee or to any other officer or agenc as may be directed by the Resource Centre with the approval of the Board;
  • Hand over a copy of the return to the person whose return is prepared and furnished by him;
  • Retain a copy of the acknowledgment of having furnished the return;
  • In respect of returns prepared and furnished by him during a month, maintain record of the following, namely
    • the name of assessees whose returns of income have been prepared and furnished by him during that month;
    • the permanent account number of such assessees;
    • assessment year;
    • date of furnishing the return;
    • acknowledgment number;
    • jurisdiction of the Assessing Officer;
    • amount of income declared in the return;
    • amount of tax payable;
    • amount of tax paid;
    • The fee charged and received by him

How to Find a TRP for yourself ?

Note that you can find a TRP in your home town or near you and he will visit your home/office and do all the work for you. You can visit this webpage and find out a TRP in your city. Or you can fix an appointment by filling up this form and a TRP will call you back to confirm your appointment. Even if you are doing everything on your own and want some help on filing your ITR (download this ITR FAQ guidebook), you can tax online help by asking question here and you will get back a call for help.

You can also call the helpline at 1800-10-23738 or mail to [email protected]

How much does a TRP charge as Fees ?

Now this is a little interesting and you should know this. Income Tax Department knows that most of the individuals do not file their ITR, because they have no idea how to do it and hence they either dont pay tax or just keep delaying it. So if someone knows that he will get help in filing the Income Tax Return (ITR) at his door step, the chances are many people will give it a try and hence the tax revenues will go up for Govt.

So Income Tax Department pays incentives to TRP for every returns filed by them. The amount of incentive depends on how many tax returns you have filed till now . If you are filing it for the first time, then the incentive is 3% of the tax paid . If a person is filing his returns for 2nd time in life, then its 2% incentive and for 3rd time its 1% . The higher incentive is given when someone files his return for the first time, because its his entry into tax filing world and generally people shy away from that first time only. A TRP will not get any incentive from govt if a person has already filed his returns more than 3 times. So in a nutshell, TRP’s incentive is directly linked to how many more tax payers they can add to the pool of tax payers.

Upto Rs 250 as charges 

However TRP’s are also allowed to charge upto Rs 250 from the income tax payer if he wants to . So some TRP’s charge the fees and some dont if they know that their incentive will cover their charges.

To explain to you with an example. Lets say if a person has paid Rs 20,000 as income tax. Then as an incentive , a TRP will be 3% of 20,000 – which is Rs 600 . Now a TRP might not charge you directly because he anyways is going to get it from govt, or if he feels – He can still ask your for some money as fees (subject to maximum Rs 250) .

However lets say your income tax payable is just Rs 2,000 , in which case 3% of 2,000 is just Rs 60 and surely the TRP will ask you for his fees . However its always a good idea for you to know how he is being paid so that you can tell him and get it negotiated. But I think if they do a good job, there is nothing wrong in paying their small fees , at the end they give you door step service.

Note that these TRP’s are actually trained by Income Tax Department with help of third party companies like NIIT. This step was taken by Income tax department to raise awareness level of tax filing among tax payers, to give them door step services and at the end help in generating self employed through this scheme. There are various TRP’s who have filed tax returns for thousands of individuals and now serve a big client base.

Should you become Priority Banking Customer? Are their any advantages ?

Posted on by Jagoinvestor

Have you ever thought of applying for Priority Banking with your bank (also called as Preferred banking)? A lot of banks offer something called “Priority Banking Solutions” to their customers who qualify the eligibility criteria. A priority banking customer is treated in a more special way and is taken care of priority by the bank. Let us talk about it in detail and does it make any sense for you as a customer to apply for priority banking customer or not?

Priority Banking India

Why does a bank have a Priority Banking Model?

The first question to understand is why do banks have a Priority banking model at all? The reason is very simple, to treat different levels of customers differently. If you want to harshly put it, then its just a way of keep a separate list of High Net-worth Individuals and focus on them more and service them in a better manner, because one customer who is eligible for priority banking will give 100 times more business/profit to the bank compared to a normal customer. A preferred banking customer will have a few eligibility criteria to honor, which is generally linked to his bank amount balance.

When I looked at HDFC Priority Programme, its eligibility criteria mentions this –

You are eligible for the HDFC Bank Priority Programme ** if you:

  • Hold at least one Savings or Current account, sole or joint, with HDFC Bank.
  • Maintain a minimum Average Monthly balance of Rs. 15 Lakhs across all your accounts (Savings, Current and Fixed Deposits*)
    OR
  • Maintain an Average Quarterly Balance of Rs. 2 Lakhs in your Savings account.
    OR
  • Maintain an Average Quarterly Balance of Rs. 5 Lakhs in your Current account.
  • The requisite balance can be maintained over your accounts and over those of your immediate family members.

In the same way, other banks also keep criteria for maintaining a high balance in saving bank account. That simply means that the bank would get lots of cash to use for their own business and naturally they can treat these customers very well. Check out this survey on the best banks in India.

Facilities provided to Priority Banking Customer

A Priority banking customer has few advantages over normal customers and gets more features. Some of the most common one’s are

  • Separate queue for in the bank so that you don’t wait
  • No charges on NEFT and RTGS transactions through Net banking
  • Free “At Par” cheque book payable at any Bank branch across the country, so you do away with the need to ask for demand drafts
  • Charges waiver for DD cancellation, Cheque return, Duplicate statement charges, Demand Draft Charges, Discount in Locker Charges,
  • Cheque pick-up facility
  • No charges on balance inquiries and cash withdrawals if you transact on Other Bank ATMs in India.
  • Many other benefits
  • Premium Credit Cards

However, all this is not so real and true

While banks list down these facilities on their website, on the ground level – there are many real-life customers who say that at the end of the day, you never get what is promised from these banks. There are a lot of things just on paper. Most of the banks just use the Preferred banking route to attract high net worth customers and finally end up calling then for investment products. A relationship manager keeps in touch with you (the target), he has all the information on how much money you have and when money comes and goes out of your account.

Here are 2 real-life experiences related to Priority banking from our questions and answers forum. Hope you get some good ideas from it.

Case 1 – Yogesh Shares his experience

There are no major benefits for being Classic or even Priority customer except some savings in NEFT charges and cheque book requests. I was HDFC classic customer for last 10 years. Around 9 months back they changed my status as Priority customer without taking a consent from me (same reason..as I opened some FD the bank) I just received letter that I am now Priority customer.

I did not notice any big difference of status being Classic or Priority customer.

The facilities they have are actually only on paper. Despite of a lot of follow up locker facility when one new branch had recently started and lockers were available, I did not get it. I was told to take some Young star policy in case I want locker. I denied this condition and the result was they did not allocate locker to me. So 50% discount is on paper. In last 10+ years I even did not meet personal banker for more than 5 times. My experience is personal banker keeps on changing periodically (on an average 2 years for each PB) and sometimes you need to trace who is your PB !

Question one may ask why I am still continuing with HDFC bank as classic customer. The simple reason is the bank is closer to my residence and with very less crowd.

In the last month I broke my FDs because of some reason and immediately they put my account into ‘Others’ category and again without informing me ! I could know that after they started charging me for account statement, signature verification/wife’s name change for mutual funds, NEFT transactions etc. So now I have instructed them to update my account as to ‘Classic Customer’ status as I still meet those criteria. Important thing to note…my Personal Banker did not take action immediately this time. That person told me s/he will forward my request to relevant department. Also at the same time this Personal Banker asked me to send request to know new Personal Banker !

Case 2 – Ayush Shares his experience

In my opinion there is no harm in being a Priority or privilege customer and using benefits offered by the bank (if they are of any use to you and are saving you time and money)

The main drawback here is, your name will go into their database as a customer with more money than some (or say lot) of others. This may result in some unwanted call such as credit card / loans / insurance or other banking products. When it comes to the actual banking needs there is nothing big that you will get. The relationship manager may keep calling you with information on new products.

My personal experience being a classic customer with HDFC is not so encouraging when the genuine banking needs are there. For example, I requested that I need a safety locker in HDFC branch but just like other customers I am on waiting list. In case I am lucky enough to get a locker, I have to pay only half the annual fee but will I get a locker is the question, that remains. You can save a few Rs. by saving on DD charges (to a certain limit), NEFT charges etc. but nothing big.

I am continuing just because I have all my banking /investment etc through HDFC and do not want to change and this classic banking is an added thing on to that account.

Conclusion

Most of the people have very basic banking needs, especially after Internet banking and mobile banking has arrived, your dependence on cheque books, Demand Drafts, and any physical visits to banks has reduced. For most of the people, anyways banking is just a small part of their financial life and they get most of the facilities and what they need from their basic banking account only. For them, it does not make a lot of sense to apply for priority banking . However, there are many investors who are heavily into banking due to personal reasons or for their professional needs.  For many of them, few features which come with Priority banking might mean a very big thing. If you are one of them, just see how much of it will be eventually used by you and then take a call.

What do you think about it? Would you like to become a Priority Banking customer or not ?

8 things in Real Estate Regulations Bill which can affect Property Prices

Posted on by Jagoinvestor

It has been 5 yrs when the first draft of the Real Estate Regulatory Bill came and then there were many amendments in it over the years. However on 4th June 2013, it was passed by cabinet and now the next step is to table it in parliament this monsoon season and if our country people are really lucky, it will finally become an ACT of law.

real estate regulation bill

Real Estate Sector is hugely unorganized and against buyers

We all know that the real estate sector is so much unregulated and unorganized. There are no proper guidelines on any thing and builders use this to make maximum out of the situation and take buyers for the ride at every level. Builders and Politician nexus are very known and from last 10-15 yrs, the real estate prices have crossed the level that a common middle-class family would never afford their own house.

In this scenario, the real estate regulations are not just a requirement, but a big need of the industry if our economy and society need to some stability over the long term. In this article, we will discuss all the major points in real estate regulations. There are many good points in the regulation and it will help the industry, however like any other law, this bill also has many loopholes and many rules can be exploited by the builders. This bill whenever becomes the final act, will only be applicable to new real estate projects, not the ongoing and completed projects.

From the last few days, there has been a great number of discussions over various news portals and discussion forums on how these regulations will be a great thing and how it is just another failure. So let’s see major highlights of the regulations

1. Mandatory to acquire all clearances before the launch

As per the bill, it would be mandatory to acquire all the required clearances from relevant authorities and govt bodies before formally launching the project. Right now builders launch the project when there is nothing more than plain land on the site and have no permissions for anything. They give rosy pictures to investors, start taking the money from the public and then start the overall process of acquiring the land, getting approvals, and coming up with the structure. This means there will be obvious delays and lots of confusion and frustration for investors.

With this, the concept of “pre-launch” offers will vanish and you can expect the prices of the property to be high on launch. A lot of people are saying that because of this, there might be a slowdown on the supply side because right now a builder keeps launching new projects. Another requirements is that these permissions taken are to be displayed on the website of the developer.

2. Use of Photograph of actual site for advertisements

As per the bill, the builders will have to use the actual sire pictures or the actual construction work pictures for advertisements for the project. Right now builders do not use the actual pictures for promotional purpose.

It’s easy to create an illusion by using graphics and shiny pictures and that is what happens most of the time. Builders use the classic graphics image of the project site which is full of greenery and nature around it and the feeling it gives you is that its an opportunity one cant miss. However, in reality, the project site is quite different. It might happen that there are buildings around it and no trees or any natural habitat. The roads around might be bad and the elevation of the project site might be high or low than the normal.

If a builder is found to be putting up misleading or wrong advertisements, then there can be a jail term of up to three years, if it’s done repeatedly.

3. Sale of property as per prices linked with Carpet Area

The bill says that any sale proceedings should be using the prices which are linked with carpet area and not super built-up area. Generally, builders use “super built-up area” as the parameter and define the per sq ft price as per that. Carpet area is the net usable area which can be used for living purpose (imagine you lay down carpet, then how much area it will cover), however super built-up area (or salable area as called by many builders) is combination of net usable area, area covered by walls, doors, parking area, staircases, temple in side the project, gym, garden and everything you can imagine which is part of your package (divided per buyer). So super built-up area becomes high and the per sq ft price looks small, however, if you divide the whole cost by the carpet area, then you will realize how much you are paying.

You should also know that even in agreement, only the carpet area is mentioned. However, builders quote the pricing only on super built-up area.

4. State Level Regulators and central appellate tribunal to be set up

The bills also say that a central appellate tribunal should be set up as a central body and each individual states should also have state regulators. This means that there would be some central guidelines for the real estate sector and builder and each state will focus on regulating their states real estate builders. There might be few rules different from states to states. I personally feel that there might be some confusion due to this.

5. Real Agents/Dealers need to register themselves

Right now, real estate agents and dealers are not at all registered with any central/state body and hence due to highly unregulated environments, they do not have any code of conduct or service standards defined. Now they will have to register themselves and will have clear responsibilities and functions. Consumers will be able to demand their rights from agents and dealers for the amount of commissions paid to them.

6. Separate bank accounts for every project

As per the bill, A builder will have to maintain separate bank account for each and every project and up to 70% of the funds for that project has to be there in that same bank account. In the previous drafts, this number was 100% (means no money for Project A can be used in Project B) , but looks like the builders and politicians lobby has been successful in diluting the quality of the bill wordings and in new draft now the number is 70% or less. It does not serve the protection of buyers because builders will still be able to divert 30% of the funds from one project to another.

Right now, the way it works is that a builder when faces a severe cash crunch launches a new project and uses the money collected in another project to complete the old project and this cycle goes on. This creates a lot of issues for home buyers because there are huge delays at times. Firstpost did an excellent article on this topic and concluded that real estate is a kind of Ponzi scheme

7. Builders cant take more than 10% advance without a written Agreement

A builder will not be able to take more than 10% advance money from buyers without a written agreement. Right now a lot of dealings happens by paying huge advances and the agreement part is delayed by many. In many cases, agreements happen after many months or years, as lots of transactions happen on a trust basis. This might help in curtailing some part of black money transactions. However only you guys can tell some real-life cases which this clause might not help and fail.

8. Full refund with interest, if property not handed over time

As per the bill, the builder has to refund your money along with the interest, if he fails to deliver the project on time. At this moment, this point gets added in the agreement and almost all the times, builders make sure that this point is omitted in the agreement and if it’s not there, you have to file a consumer court and after a long time, you are rewarded your right. However, the bill will make it a standard rule or clause.

The Bill rules apply to project over 4,000 sq meters in size

The biggest worry about this bill is that it’s applicable only to projects which are of 4,000 sq meters and above size overall and if a project is bigger than 4,000 sq meters, the bills allow to break the whole project into different phases and see each phase as different project. Now this clause itself destroys the protection layer for consumers. Because a builder can always break the whole project into different phases and show them as a separate project. Many builders anyways run various projects under different companies’ names to save on tax. So running two or more sub projects on different names (which are actually just one project side by side).

The old draft of the bill had this number at 1,000 sq meter, but this current recent bill has it at 4,000 sq meter, so again someone has been able to influence the bill.

No Single Window Clearance for Approvals

One of the major challenges and problems builders face is about the govt clearances and various approvals. This takes a lot of time and opens up the gate for bribes and bureaucracy, the bill does not address this problem at all. It would be great if there would be a separate govt department which would have a single-window clearance. This would help in defining the project completion time with more accuracy.

Will all this reduce the property prices or not?

This is the million-dollar question which is in every body-mind, that with this bill, will the prices of real estate come down or not, which is the biggest issue common man is facing right now, compared to any other issue. Delays and consumer exploitation is all fine if prices are normal and affordable, but if prices itself are so high that its out of reach of common man, then every other problem is secondary.

Here is a copy of the Real Estate Bill which I got from Moneylife article

There are many implications of this bill and tons of factors and variables which can affect real estate prices. Some are saying that prices might go up and some are saying pricing might come down. But It would only be clear when the bill becomes a reality.

However, we would like to hear what you think about this real estate bill and how it might impact the real estate prices?

How you become a loser when you pay in black for your real estate property ?

Posted on by Jagoinvestor

Naresh recently visited a new residential project in Pune which was ready for possession. The property cost was in his budget and he was about to finalize the deal. The total cost of property was around Rs 40 lacs. Stamp duty and Registration cost was to be paid separately which would take total cost to around 43 lacs. This was a bit heavy on Naresh pocket, so out of his regular habit, he inquired if there is any trick by which he can save some money on the deal ?

Bought house by paying in black

The builder was quick to give him a great saving advice – “Sir , You have to pay 6% stamp duty and 1% registration cost on the agreement price. Which comes to 7% of 40 lacs, thats 2.8 lacs additional, thats the reason the total cost comes around 43 lacs . Now if you want to save money, what you can do is pay some part of the deal in cash to us (means pay in black) and we will reduce the agreement cost by that much, that way – we will also save our tax on the black money part and you will save 7% on that cash amount. Like if you pay us Rs 10 lacs in Cash, then we will make the agreement for Rs 30 lacs only and you will have to pay stamp duty and registration cost on only 30 lacs which will be 2.1 lacs, and it will save you Rs 70,000 without doing anything extra ! . Cool na ! .”

The offer was tempting and Naresh fell for it, how cool is saving Rs 70,000 , all you need to do is pay some part in cash and lower the agreement amount in records. But do you understand, what is your loss in long term because of this kind of deal ? Let me break some hearts today, who have already done this mistake while buying their properties.

Stamp duty and Registration Costs

First understand that stamp duty and registration costs vary from one state to other state. For example – In Maharashtra, its 6% + 1% = 7% in total , so whatever is your total agreement cost , you will have to bear additional 7% on that amount as stamp duty + registration costs. Given the huge amount involved and the financial crunch every buyer faces at the last moment of the deal and hunger of builders to save every bit of tax, makes sure that buyers fall for this trick of paying huge amount in CASH (black money) and register the property at lower price just for few thousands (actually sizable if you look at it). This looks like win-win situation to buyers and they are pretty happy about it, however truly speaking, this is a loosing deal for the buyers in a very long run (if you are going to sell the property later) and only benefits the builders and let me now explain you why is it so ?

At the time of selling – The cost of house matters

I hope you are very clear that when you sell your property in future , you pay the tax on the profits made. And the profit is decided by your COST of the house and the sell price. So lower the cost of your house, the higher the profits on paper for you in future. You might be aware of the fact that indexation is applied in case of real estate transactions and 20% tax is paid on the profit.

Now lets take this same example we are discussing and see how much you save at the time of purchase and how much you loose at the time of selling , which can be in distant future. See the working below and try to understand the whole situation

How paying black money in real estate transaction can lead to loss in long term

In the example above you can clearly see that by paying Rs 10 lacs in cash, a person is able to save Rs 70,000 instantly. However they are not able to look beyond the obvious and visualize the kind of loss they will incur in future when they decide to sell the property. The same person will pay 3.4 lacs of additional tax in future because he/she paid Rs 10 lacs in cash years back.

Now there are few points which can be debated here like there can be changes in laws in future, or one can save the tax by investing in another real estate properties (which again depends on future laws) , but the point here is to educate you on the long term implications    of this. Now if you fully understand the message of this post, you can take your decisions with full responsibility.

Whats your take on this ?

Is your Company Depositing your EPF money ? Are you Sure?

Posted on by Jagoinvestor

I don’t want to shock you, but there are tons of cases where employer happily deducts your EPF amount from your salary, but they do not deposit it with EPFO. This goes on for years and one day you come to know that you are stuck ! , because there is no EPF money for you. Your employer has severe cash crunch or is about to shut down and now you have to run pillar to post to claim your money. The whole situation gets ugly and you feel cheated, because your company never deposited the Employee Provident Fund amount. Now you go to Police and file a case against employer. But this all can be avoided if you are careful a bit, from starting itself.

Employer not depositing EPF money

How about making sure your employer is depositing your provided fund  money into your EPF account ? Before I tell you, how you can do that, let me first share with you some REAL LIFE cases where employer failed to deposit EPF money and employees are suffering ! . These are some of the examples shared by readers of this same blog over comments section in various of EPF related articles.

Case 1 – How Abha’s company didnt deposit EPF money for 2 yrs

Dear Manish,

Thanks for such an informative post. At last i do see some hope. Here is my situation:

Worked for this company A for almost 4 years and left them in Nov 2011 as they were downsizing…yes it’s been more than a year and half of torture they have given me thus far. Company is kind of closed now as I don’t get any proper response from them, CEO is just not bothered. Company first asked us to wait for 2 months to file the claim as it is a rule, did that patiently. Later came the story of change of PF office from one (under which it was originally registered) to another and that went on for several months

They kept saying PF offices are not coordinating among themselves, the real reason was even shocking and more disappointing, PF guys were not updating because this company didn’t not deposit our PF amount for long time (2 yrs appx), they however kept deducting the same from our salaries (was surprised how come there was no annual audit by PF office and how this company could continue doing so for this long), anyways they cleared things in January this year and said we have applied again. When filed a grievance online, PF person says we haven’t received any claim whereas this X employer says they have already applied. Don’t know what the real truth is but on the basis on experiences I have… most certainly it is the X employer at fault.

Another strange thing is, when I checked by balance online in January this year it looked fine (updated up to 2012… I do have SMS proof) but from last 2 times it saying updated up to 2010, I am worried if this employer has dome some mischief here too, is it possible for a company to take back money from an employee’s PF account or it is the issue with PF website?

I don’t want to apply for my claim via options you suggested above unless I see the balance updated. Thank you so much for reading thru my query/concern. Appreciate your feedback.

Regards,
Abha

(Direct Link)

Case 2 – Balaji Company asked him to Wait till they deposit the Employee Provident Fund money

Hi Manish,

I switched jobs in August this year. Before I quit the job, I had submitted form with my previous employer for withdrawing the amount in my PF account. I had not received the amount due till December. When I called my previous employer, they told that they have not yet deposited the money and I will have to wait till March 2013.

My question is, is what my employer did legal? How frequently should the employer deposit the PF money with the EPFO? I have been working with the organisation for little more than a year now.

Thanks for clarifying.

(Direct Link)

Case 3 – Sarabjeet Kaur company not replying her because they did not deposit EPF amount

I worked in an organisation for 2 years. They have not deposited the PF amount which they used to deduct it from our account. Its been 1 year I am asking them to refund the PF. They have stopped replying to the emails and have stopped answering everybody’s call. Is there any ways I can withdraw the amount? The firm is based out in Mumbai and I used to work in Delhi Branch.

(Direct Link)

Employer can be Jailed if they do not deposit EPF money

An employer has no right to deduct the employee share from salary and not deposit it with EPF. There can be any excuse or justification for this, because its employee hard earned money. Once the employer deducts the Employee Provident Fund money from the employee salary, its their duty to deposit it with EPFO , and if they fail to do so for any reason, its a crime.

Whatever is the case, you can always complain about it with the EPFO department and the concerned officer has all the rights to proceed the legal complaint against the Employer and in the worst case, employer can also go to jail, because what they did is a criminal offence under section 405/406 of IPC .

Here is a real life case Shrikant Bangur And Ors. vs Shree Synthetics Shramik Union – where employer did not deposit the EPF money and there was legal battle going on . Here are the 3 things which you can do against your employer.

1. Complain to CVO officer – You can also email your situation and case to the CVO (chief vigilence officer) at EPFO, who is appointed by Ministry of labour for EPFO to look after these kind of irregularities. You can email them at [email protected] . More at this link

2. File a Police Complaint – You can also file a criminal case, against the employer in police station which comes under the jurisdiction of your working office (not the registered one) . All you need to show them is the salary slip, which shows the EPF deducted, note that its always better to mail CVO about it anyways, so that the chances of local authorities influencing the matter will reduce.

3. Complain to  Regional Provident Fund Commissioner (RPFC) – You should also complain about the matter to the RPFC officer if under the EPFO office, which will be investigated by him/her.

How Employers Deposit your EPF contribution to EPF account ?

How exactly your EPF money gets deposited in your EPF account ? Here is what I found on this website

Employees’ PF a/cs are maintained under these two different methods are –

1) All accounts are with O/o the RPFC

Every registered employer remits the Employee Provident Fund contribution by challans to the RPFC’s Bank a/cs. which in turn gets accounted in the respective A/c No.of every such employee. And the employer submits monthly returns to the RPFC showing the details, employee wise of contribution thus remitted.

Every such money is maintained by the RPFC who in turn disburses, thro’ the employer towards refundable loans, F & F settlements together with accrued interest to the respective employees. Once in a year a ledger sheet showing the transactions of any employee for one full year is issued to the concerned. Similarly from the PF contribution pension contribution is divided and remitted to the Pension a/c. of the employees thro’ a separate A/c. code. This method is the largest.

2) The other method is called “Exempted Establishments (PF Trust)”

An employer/company who employs more 100 employees on roll is eligible to apply to the RPFC for “exemption” from maintaining the EPF under the above said (1) method. RPFC grants the “exemption orders” under certain conditions after examining various aspects. After which the Employer sets up a EPF Trust to be run by Employer (employer’s nominees & Employees’ representative (Union nominees) which manages all the contributions of employees & employer (excepting Pension Fund which is never maintained by the Trust). A set of Bye laws, in the lines of EPF Act & Rules is prepared & duly approved by the RPFC for running the Trust.

This PF Trust money is invested in the Govt.approved securities for earning the assured interest from which accrued interest to the employees’ PF a/cs is credited. The Trust once in a year prints the Employees’ PF ledger a/cs and distribute to the concerned. The Trust accounts are audited by the CA and submitted to the RPFC. RPFC also periodically inspects the Trust a/cs and oversee. Monthly, annual returns in the Forms have to be submitted. The convenience under the Trust is quick disbursement of loans, withdrawals and F & F settlements to the employees. Surplus, if any never distributed but any shortfall is made good by the employer.

(Source)

How to find out if your employer is depositing your EPF contribution or not ?

Let me share with you some steps you should follow, to find out if your company is depositing your EPF contribution properly or not.

1. First thing is the do not rely on hearsay’s here and there. It might happen that you come to know from some one that your company is not depositing your EPF money, but it might not always be true . Delays happens at times .

2. Every month on 25th , your employer is suppose to send few documents to EPFO department to intimate them on

  • Form – 2 (for new member during the month)
  • Form – 5 (detail of new joinees during the month)
  • Form – 10 (detail of left employees during the month)
  • Form – 12 – (Details of money deducted from employees salary)

3. The best thing is to first contact your employer and ask them for a copy of these forms for last 2-3 months, do double check if they deposited the money or not.

4. As per my opinion, the best way for a common man and most convenient option is to file a RTI against EPFO and ask them all these questions . Mention your EPF account number, your employer Code and simply ask if your employer has been depositing your contribution or not.

Conclusion

Mostly the big size employers might be depositing the Employee Provident Fund money properly on time, but some of the companies which are small sized or whose owners and management teams are unethical might be into these illegal activities of not depositing employees hard earned money. Its always a good idea to spend some time to be assured, in-case you feel your company is one of those who are not depositing EPF amount with EPFO 🙂

Do you know of any case like this ? Also Please share this article with more and more people

The Biggest and Most Detailed Guide on – Income Tax Return Filing FAQ’s (ITR)

Posted on by Jagoinvestor

Do you have some doubt on Income Tax Return Filing Process or some question whose answer you are not getting anywhere? This post might be the end of your struggle.

Few weeks back, we ran a survey and asked investors to send us their queries and doubts on Income Tax Return Filing, whatever it may be. We then picked up some of the most asked and common doubts which investors face and thought of creating this comprehensive guide which will act like the bible to your ITR related queries.

income tax guide

Nobody in this world likes the annual exercise of filing Income Tax Return. Yet due to legal responsibility, everybody has to file his Income Tax Return. Now before understanding the Income Tax Return filing, let’s understand few common things first, which will help you to resolve your queries on ITR.

1. Permanent Account Number (PAN)

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application. PAN enables the department to link all transactions of the “person” with the department.

These transactions include tax payments, TDS/TCS credits, returns of Income/wealth/gift/FBT, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the “person” with the tax department.

A typical PAN is AFZPK7190K

First three characters i.e. “AFZ” in the above PAN are alphabetic series running from AAA to ZZZ
Fourth character of PAN i.e. “P” in the above PAN represents the status of the PAN holder.

  • “P” stands for Individual,
  • “F” stands for Firm,
  • “C” stands for Company,
  • “H” stands for HUF,
  • “A” stands for AOP, “T” stands for TRUST etc.

Fifth character i.e. “K” in the above PAN represents first character of the PAN holder’s last name/surname.

Next four characters i.e. “7190” in the above PAN are sequential number running from 0001 to 9999.

Last character i.e. “K” in the above PAN is an alphabetic check digit. (More Details on PAN)

PAN CARD

2. Tax Deduction Account Number (TAN)

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates. (More Details on TAN)

3. Financial Year

In India, the Financial Year is defined as a period starting from 1st April of a Calendar Year & ending on 31st March of the next immediate Calendar year. All the income earned by a tax assessee has to be accounted for segregation on the basis of dates in different Financial Years.

4. Assessment Year

The applicable Assessment Year for a given Financial Year is the next +1 year. For example, if a FY is 2012-2013, the relevant AY ‘ll be 2013-2014. All the income earned by you in a FY and taxes paid by you in that FY ‘ll be assessed only in the relevant AY.

5. Form-16

It’s the statement of your yearly income provided by your employer to you after the end of FY. This includes your gross income, deductions claimed by you, net income, tax liability there on, Tax deducted by your employer, any tax liability or refund.

The most important thing to be remember in form 16 is the TAN of your employer should be written clearly & so do your own PAN.

6. Form-16A

Form 16 is issued by the Tax deducting authority where the TDS is applied on your investments (say FD in banks) or non salary cases. Say TDS applied by tenant against rent paid to landlord. Here again TAN & PAN quotation is must.

7. Types of Income

As per Income Tax Act 1961, the income can be classified only under the following heads.

1. Income From Salary or Pension

2. Income from House Property – Rental Income

3. Income from Business or Profession – Say Income to a Doctor or an Agent or Advocate or a Shopkeeper

4. Income from Capital Gains – Income arising out of sell of capital assets like Property, Gold, Art, Coins, Mutual Fund Units, Equity, Precious stones

5. Income from other sources – Any income which can not be classified in the previous 4 categories, comes under this head. Interest income, winning amount in Lottery or Quiz show (example KBC), Horse racing winning, Amount received as Gift from non relatives are some examples.

Now from the above list you can identify that you are having at least 2-3 income sources. Income Tax Deptt. has created different types of Income Tax Return Forms for the combination of different income sources.

Before Discussing Income Tax Return Forms, let’s discuss Income Tax Return itself.

8. What is the importance of Income Tax Return

If your income exceeds the zero tax limits, it’s mandatory for you to file an Income Tax return. During your income earning in the whole FY, there may be a situation that the tax deducted from you is more than the actual liability or there are some losses or deductions which you could not claim during the income earning phase or you paid less tax than the actual liability.

In all such case, you can only save yourself by filing an Income Tax Return. Actually your Income Tax Return form is the account statement of your income, tax liability there on & the tax paid by you. If there is excess tax payment, you ‘ll get refund. If the paid tax is less than your tax liability you w’d have to pay the difference amount.

Below is the official version for Income Tax Return filing essentially.

“The filing of income tax/wealth-tax return is a legal obligation of every person whose total income and wealth tax during the previous year exceeds the maximum amount which is not chargeable to income tax or wealth tax under the provisions of I.T.

Act, 1961 or Wealth Tax Act 1957, as the case may be. The return should be furnished in the prescribed form on or before the due date(s). Penalty of Rs. 5000 is imposable for non-filing of return within the assessment year.

Interest is also chargeable for non-filing or late filing.”

Watch this video to know why you should file income tax return:

9. Types of Income Tax Assessees

As there are multiple source & types of Income, so are types of Income Tax Assessees. Here are few examples –

  • Individual
  • Hindu Undivided Family
  • Firm
  • Limited Liability Partnership
  • Association of Persons
  • Company
  • Trust
  • Body of Individuals
  • Artificial Judicial Person
  • Local Authority

10. Types of Income Tax Return Forms

On the basis of the income combinations as well as Assessee types as discussed above, the Income Tax Deptt. has issued multiple Income Tax Return forms. these are numbered as ITR-1, ITR-2 ……. ITR-7.

Here is a table to understand the combinations of types Incomes for Individual Assesses & the applicable ITR form. Please do note, ITR-5, ITR-6 & ITR-7 are used by assesses other than Individuals & HUFs, hence not discussed here to keep this matter relevant for general public & common Individual assessee.

which ITR form to be filled

Majority of common individual tax payers fall in ITR-1 & ITR-2 category.

11. Online & Offline filing of Income Tax Return

The Income Tax Department is slowly transforming itself. Earlier all the returns were only offline mode. First non Individual & non HUF ITRs were made online filing compulsory. After that for Individuals & HUFs having income more than 10L Rs. were made online filing compulsory.

Now From AY 2013-2014, the income limit has been reduced to 5L Rs. for online filing. So we can safely assume that from next AY i.e. 2014-2015, the online return filing ‘ll be compulsory for each & every tax payer.

12. How to file online ITR

It’s quite easy. Now a days, a person can e-file either self by logging into the official site of e-filing. Apart from this, there are many other private online portals who are helping you to e-file your ITR. (Taxsmile, Taxspanner, Taxyogi, Cleartax are few examples)

Frequency asked doubts on Income Tax Return Filing

We hope that you are very clear about the basic information which every tax payer should be aware about. Now lets see some of the most commonly asked questions on Tax Filing. We collected these questions from one of our surveys and just categorized them into 13 questions. Here are they –

1. I forget (or could not produce in time) to claim HRA/Savings/Home Loan/LTC/Medical Bills etc from my employer. What to do?

Please relax. For all such cases, where either you could not claim on time or forget all together, your return filing is the time to tell the Income Tax department about the same & now you can claim the refund for the excess tax deducted from you. Note that the declaration given to employer is just to make sure that your TDS cut by employer is inline with your plans in a financial year. Incase something does not match, It can be finally done at the time of tax returns filing.

2. Where should I produce Bills/papers/receipts of the things related to Q. 1 above

Please do note that current ITR forms are ‘annexure less’ forms. Which means, that you need not produce any support documents to the Income Tax Department at the time of filing. Just keep the documents safely with you, so that you can produce the same if Income Tax people demand it from you in future. Documentation should be surely done by you, because incase there is a scrutiny case in future, you should have to documentary evidence.

3. I could not file my previous years income tax return on time or forget it .

It happens ! . There are penalty provisions if you do not file your due Income Tax Return on time. To correct the mistake, please file a delayed return now if you have not filed the previous years return. For ITRs related to previous years, please take help of a Tax professional to do the same. Filing late is better than not filing at all. Just contact a CA or tax filing portals, and they will be able to help you. Read this article on Late Tax Filing for clarity

4. I did not get the refund order/cheque . What to do ?

First check your refund status here. In case your refund status is available as cheque issued & the same is not received by you. Please contact at the E-mail or Phone nos. in the shared link. Also you read this article on how to Check your Income tax refund status online & Learn how to use RTI

5. I received the Refund cheque but I misplaced it/delivered at wrong address/wrong bank account number.

A lot of these issues happens because the address you provided at the time of filing returns years back is not the same where you are residing now, and the cheque goes back. For all such cases, you should contact your Jurisdictional Assessing Officer for offline filed ITR or CPC Bangalore for online filed ITRs. For online filed ITR, there is a link within your login window for Refund Reissue Request, use this for refund reissue.

6. How can I calculate my tax liability arising out of capital gains

Relax. You just need to punch in the required data in the excel sheet for ITR e-filing available at the e-filing portal. The sheet ‘ll calculate your tax liability on it’s own. Or you can refer to this article which will guide you on how to calculate capital gains.

7. How can I pay my due taxes as per calculation done by me or ITR excel sheet

Paying your due taxes is very easy. There are 2 ways to it. a)  Use your net-banking account . b) Use the Official Portal . Please do note for self payment of Income tax, the applicable challan number is 280.

8. I fall in 20-30% tax slab. Bank deducted TDS @ 10%. Should I pay more Tax

The answer is yes. Bank has merely done it’s legal responsibility. Your Tax liability is more than the work done by bank. So please calculate your actual tax liability by adding the interest income into your gross income & pay your due taxes. Here is a full article on TDS related issues. 

9. I forget to put in some data or wrong data was put in during my original return filing. How to rectify it ?

No problem, you can file a revised return to rectify these mistakes. The revised return can be filed before the assessment year is over for your original filed return. Here one important point is that the original return must be filed within due date. Just note this point, that if you have filed your returns and if there are any issues or errors, you can always file a revised return later.

10. I own a house in the same city & reside in a rented accommodation. Can I claim HRA & Home loan benefit simultaneously ?

The answer is YES. If you are actually residing on rent due to your Job or any other issues & the home loan house is also in the same city, you can claim both HRA as well as Home Loan benefits. Read this article for more on this

11. I was earning salary earlier. But now there is no income due to break or because I have become NRI with no Indian Income. Should I still file my ITR for zero income ?

The answer is no. if you do not have income or income is within the zero tax slab, you need not file your ITR. Yes in case, some TDS was there, you w’d have to file your ITR to claim the refund of this TDS amount..

12. My wife is a home maker & investing small money into direct Equity & earning some income. Which ITR should she use ?

First of all make sure her income is under zero tax slab or more than it. In case she is earning more than zero tax slab, she should file her ITR. Now the quantity of trades done by her to earn that income ‘ll decide the applicability of ITR. In normal situations, such earning ‘ll be Capital gains (Here it’s assume that gains are short term in nature due to holding less than 1Y) & she should use ITR-2.

For a very high quantity of trading activities, the applicable form ‘ll be ITR-3.

13. I worked with 2 employers in a FY. How to handle & file my ITR ?

First of all please collect form 16 from both of your employers. Now consolidate the income from both employers & check for an pending tax to be paid. Pay it now. Once all this is over, please file your ITR.

We hope all your queries about income tax return filing is solved in this article. If not, please post your doubts over comment section.

This article is contributed by Ashal Jauhari . A key member of Jagoinvestor community and a Tax expert . He writes on his blog here

SBI MaxGain Home Loan Review – With FAQ’s

Posted on by Jagoinvestor

In this article we are going to share SBI Maxgain Home Loan review with you. Now a days many home loan borrowers are opting a particular type of home loan from State Bank of India which is called Max Gain because it has many advantages compared to other kind of home loan scheme’s. In this SBI Max Gain home loan, an Overdraft (OD) account is assigned to the customer’s home loan & any amount parked by customer is treated as loan repayment for the purpose of interest calculation, for the days, the amount stays there in that OD account. As on date following banks are offering similar types of home loan to their customers. I would like to thank to Mr. VKS Nathan who gave the Idea of this article.

sbi maxgain home loan review

SBI, IDBI, CITI, HSBC & Standard Chartered. Punjab National Bank can also be added in this list but it’s offering a combo of normal loan + Overdraft. In this article, we are going to discuss only SBI Max Gain as in OD linked home loan, the maximum business is with SBI & the most discussed topic on Jagoinvestor Forum is also related to SBI Max Gain Scheme

What is an Overdraft account?

Before we discuss Max Gain, first understand, what is an Over Draft Account? All of us are well aware of functioning of an ordinary saving bank (SB) account. Here account operates between zero to positive & positive to zero. As we deposit our money, it’s used by bank & we get interest on our money from bank. In case of an OD account, bank first ask for a security & then assign a credit limit on the basis of the market value of that security. This security may be Fixed Deposits, Insurance Policies, National Saving Certificates, Shares, Mutual Fund units, house/commercial property etc. Now when we are using this assigned credit limit, the amount is going from zero to negative zone & when we are repaying, it’s coming from negative to zero. As we are using bank’s money in this case, the interest ‘ll be paid by us to bank. That’s how an OD account works.

So what is the correlation between Max Gain home loan & Over Draft account?

For Max Gain borrowers, State bank of India opens an Over Draft account where the Credit limit as discussed above is equal to the loan value assigned to the borrower. Here underlying security is the home you have purchased or constructed from that loan amount. Now as & when you are parking any surplus amount into this OD account, the parked amount is treated as payment towards loan (effectively you are bringing down your loan liability from negative towards zero position) and thus the interest ‘ll be charged only on the difference amount i.e. total loan amount – parked surplus amount.

What is the primary benefit of SBI Max Gain Scheme?

Well the primary benefit of MG is to keep your liquidity intact & still bringing down your interest outgo. To understand it better, please imagine a situation you are running a home loan of 30L Rs. & now you do have 2L Rs. with you to prepay. In normal home loan, your 2L Rs. ‘ll be accepted by bank & adjusted towards home loan & your amount is gone forever so no liquidity for you of that 2L Rs. amount. On the other hand, if you are MG customer, simply park those 2L Rs. in your MG account & your interest outgo ‘ll be lower from that month itself till those 2L Rs. or a part of it is there as surplus in MG account.

What is Drawing Power ?

Drawing Power is nothing but your as on date actual outstanding loan amount. Before final disbursal or start of loan repayment, it’s your sanctioned loan amount. Once your EMI starts, it’s your as on date actual outstanding loan amount. Please check Image below, Drawing Power here is 1867053 Rs. as on date. (Click here to understand it better)

What is Available balance?

Before final disbursal, it’s the sum of undisbursed amount + parked surplus & post final disbursal, it’s your parked surplus amount which is available to withdraw. Please check Image below, Available Balance here is 1084177.72 Rs. as on date. (Click here to understand it better)

What is book balance?

It’s the adjusted loan amount arrived after deducting the Available Balance amount from Drawing Power. In your account statements it’s shown with a negative sign. Please check Image below, Book Balance here is  – 782875.28 Rs. as on date. (Click here to understand it better)

Is there any extra interest for Max Gain?

No, the interest for home loan is same in SBI be it for normal home loan or for Max Gain.

I’m an existing SBI home loan customer. Can I convert my old term loan to Max Gain?

Yes, you can. Please contact your loan serving branch or RACPC for the required paperwork to be done. This may be an outdated info so please do check with your loan serving branch for current day rules on conversion.

I have taken the Max Gain for an Under Construction Property. Can I park surplus amount to save on interest outgo?

The answer is yes & no both. Yes you can park your surplus during under construction phase but do remember SBI is disbursing partially at this juncture & in case due to any emergency you want to liquidate your surplus, SBI ‘l not allow the same. so park only that much surplus, you feel you ‘ll not need even in an extreme emergency.

If I’m parking some money on monthly basis or in lump sum, will my loan term come down or EMI go down?

No. Neither your EMI ‘ll come down nor your loan term. The only saving is in terms of interest outgo. To understand it better, Let’s assume a test case of loan amount 30L Rs. @ 10% Rate of Interest for 20Y term. The normal EMI for these nos. ‘ll be 28951 Rs. The break up of your EMI for first month ‘ll be 25000 Rs. interest & 3951 Rs. for principal repayment.
Now if you do have 2L Rs. surplus in the very first month & prepay the same as below –

Case – 1 Normal home loan

Your 2L Rs. is gone & outstanding loan amount ‘ll come to 2796049 & interest outgo ‘ll still be 25000 Rs. but the no. of months ‘ll come down from original 240 to 198 months.

Case – 2 Max Gain home loan

Your 2L Rs. are parked in that OD account & the interest for the very first month ‘ll be calculated on 28L Rs. & thus it ‘ll be 23334 & thus there‘ll be an interest saving of 1667 Rs. which‘ll remain available in your OD account as surplus along with your parked surplus 2L Rs. so for next month, the parked surplus amount ‘ll be 201667 Rs.

Please do note in case 2 above, Your loan term is still 240 months but the saving of interest ‘ll keep on increasing on mly basis from the parked surplus & of course the liquidity of those 2L Rs. is there.

How can I calculate my saving in Max Gain?

To know your actual saving, first of all please demand a loan amortization schedule from your loan serving branch & now for each month compare the scheduled interest outgo as per your loan amount. schedule & the actual interest outgo.

What should I do to maximize the savings in Max Gain?

If you are paying your EMIs from SBI’s SB account, you can maximize your benefits. How? here it goes. Say 15th is the EMi date on which EMi amount is debited from your SB acct. Now in a normal home loan, people ‘ll keep at least 2-3 months’ EMI amount as buffer in SB account. but in case of Max Gain, you do not need to keep buffer in SB account. Keep this buffer amount also in your MG account along with your routine surplus amount. now use the power of net-banking of SBI for your own good & create a schedule transaction of your EMI amount 28951 Rs. (in the above example) to be transferred on 13th of every month from MG account to SB account. At a time you can schedule for next 12 months by using standard instruction. So it’s technology that’s helping you.

I can transfer to MG account from my existing net-banking enabled SB account but reverse is not happening. why?

The answer lies in the fact that Net-banking transaction rights on your MG account is not enabled yet by your loan serving branch. if final disbursal is done, you can apply for transaction rights. if only partial disbursement has been done, sorry, you can’t apply for transaction rights till final disbursal.

Is it mandatory to purchase property insurance & life insurance along with Max Gain?

Having property insurance as well as sufficient life insurance is compulsory but purchasing the same from SBI’s sister cos. like SBI General ins. & SBI Life ins. is not at all mandatory. if you feel that policies are being cross sold to you to exploit your position (home loan seeker), please contact the AGM of your local RACPC where your loan application is under processing.

Is SBI charging higher processing fee for Max Gain?

No, as on date there is no differentiation in fee for term loan & Max Gain but SBi reserves the rights to charge different fee.

Can I claim section 80C principal repayment benefit for the surplus amount parked in Max Gain?

The answer is NO. Only the regular principal repaid by you from your EMI as part of your loan amortization schedule is available for tax benefit under section 80C. the parked surplus amount is liquid money & you can withdraw it any time, hence it’s not considered as actual repayment of loan & thus not eligible for tax benefit.

Can I avail cheque book & ATM card for my Max Gain account?

Yes, as & when you‘ll demand these, SBI ‘ll offer you the same. In case you are already holding an SBI SB acct. linked ATM card, you have the option to link your MG acct. also with this existing ATM card.

Can I enroll my MF SIPs in Max Gain?

Yes but do note, there should be a surplus balance i.e. available balance on the date of SIP, else your ECS or SI mandate ‘ll bounce.

Can i pay for my utility bills, credit card payments, online shopping from Max Gain?

Yes, you can do all this & more. In fact it’s in your best interest that you treat your MG account as your primary money parking account & route all your transactions through it so that money is lying there for maximum possible time & thus helping you to bring down your interest outgo.

I used my MG account ATM card to withdraw cash from other bank’s ATM & I was charged the money very first time in the month. Why?

The reason is, as per RBI’s circular 5 transactions on other banks’ ATM are free only for SB account & in this case, you forget the point that your MG account is not SB account. it’s an overdraft account.

For an imaginary situation, my loan amount is 30L Rs. & parked surplus amount is also 30L Rs. Does it mean, my loan is closed & I can claim my property papers from SBI?

No, your loan is not closed. Only interest outgo ‘ll become zero & EMi ‘ll remain continue as it is. Yes the interest part of your EMI ‘ll keep on accumulating in your MG account. If you want to close your loan at this point, you w’d have to inform SBI in written & now SBI ‘ll adjust your parked surplus amount towards the outstanding loan amount. you ‘ll lose the liquidity of your money but loan ‘ll be over & now you can get your property papers back.

How can I transfer my loan from other banks to SBI Max Gain?

For loan transfer, first of all contact your existing lender & ask for following things.

  • Loan Account statement from day one.
  • List of Documents, which were submitted by you at the time of availing original loan. In day to day language of bankers, it’s called LOD.
  • As on date outstanding loan balance with applicable interest, penalty & any other fee to close the loan.

Now contact, the nearest SBI Branch (if you do have an existing SB account with SBI, it’s advisable to contact there for ease of operation). Inform in that branch that you want to transfer your loan from existing bank to SBI Max Gain. fill the application form, submit the necessary papers & SBI’s RACPC ‘ll do the back ground job.

Once SBI is ready to accept the transfer, it ‘ll issue you a sanction letter of the loan amount & ‘ll ask you to go for loan related agreement documentation work with SBI. If you are not having property insurance, SBI may ask to purchase one. Same ‘ll be the case for your life insurance. Once legal documentation is over, the cheque of the loan balance ‘ll be issued directly into the name of the bank in question. After the amount is credited to your existing bank, within next 20-30 days, you ‘ll get the original documents submitted by you, from the existing bank. Now you w’d have to submit these documents to SBI. In some states like Gujarat, Maharashtra, Karnataka, SBI may ask to go for registration of mortgage deed on your property in the office where your property was originally registered in your name. 

 

SBI Max Gain

Normal Home Loan

Liquidity of your part prepayments is there

No Liquidity. Money is gone for ever, once you prepay.

A bit complex to understand

Easy to understand

For people who can generate regular surplus amounts

For people who can only manage regular EMIs

 

Click here to know the real life example of Mr. Sudhir S for SBI Max Gain.

Do you feel, this article was able to answer your all queries related to SBI Max Gain? Was this article helpful for you to understand the overall concept of SBI Max Gain home loan? Please feel free to ask for more help

This article is written by Ashal Jauhari, who manages a great facebook group on investments and also is one of the most active and helpful member of our Jagoinvestor forum. This article was written by him and reproduced from this blog here

Top up & Super Top up Health Insurance Covers – How they work ?

Posted on by Jagoinvestor

What do you do when you want to take a very high health insurance cover like 20 lacs? Is the only option a regular health insurance plan? In this case, you can use top up health insurance plans, which are one of the best ways to enhance your health cover after a certain threshold? In this article lets understand how top up and super top up health plans work and how they benefit you. So we will understand both “top up health insurance” and “Super top up health insurance” in this article, but let’s understand first what the meaning of “Top up” is, in general.

What is the meaning of “Top Up” Cover ?

A top up cover actually covers you after a “threshold limit” is already exhausted or used. To give you an example lets say you have a top up health cover of Rs 10 lacs sum assured with the threshold limit of Rs 5 lacs, in which case the policy will only cover your expenses beyond Rs 5 lacs only. If your claim amount is Rs 8 lacs, then it will only pay you Rs 3 lacs (8 – 5), and NOT Rs 8 lacs total. That’s the main difference between a regular health cover policy and a top up cover.

So now if you already have a health insurance cover of Rs 5 lacs sum assured, then you can take a top up cover up to Rs 10 lacs with threshold limit of Rs 5 lacs, that way you will be covered up to 10 lacs. The first policy will cover you up to Rs 5 lacs, and the top up cover will cover you for the 5-10 lacs range. You can understand that more clearly with following image.

Suppose you have following 2 policies.

  • Policy A –  Regular Health Insurance Plan with Rs 5 lacs sum assured.
  • Policy B –  Top up cover of Rs 10 lacs with threshold limit of Rs 5 lacs.

top up health insurance plan

Now let’s take this same example and try to understand how Policy A (Regular Health Insurance) and Policy B (Top up health insurance) will pay you in 3 different scenarios, just to make sure you fully understand how top up health insurance policies work.

Scenario 1 – Claim of Rs 3 lacs

In this case, the first policy will cover you for full Rs 3 lacs, as your policy itself is for up to Rs 5 lacs.

Scenario 2 – Claim of Rs 8 lacs

In this example, the first plan A, will cover you up to Rs 5 lacs, but if your hospitalization expenses go to say Rs 8 lacs, then the first policy will only pay Rs 5 lacs, but the second policy (B) will cover you for the rest of  the Rs 3 lacs, which is above the threshold of Rs 5 lacs.

Scenario 3 – Claim of Rs 12 lacs

In this case, first policy A will pay you Rs 5 lacs, and the second policy B, will pay you next 5 lacs only, because you have taken a top up cover of up to Rs 10 lacs only. So the Rs 2 lacs extra, you will have to pay from your own pocket.

What is Super Top up Cover ?

Just like a top-up cover, there is something called as Super Top-Up cover, with a very small difference. A top-up cover will pay you only if your claim amount (bill for a single hospitalization) is above the threshold. Like, in our example above, the top up cover will help you only when your bill is above Rs 5 lacs each time, only then it will come into picture, like in the case of the Rs 8 lacs bill, then the top up cover will pay you an additional Rs 3 lacs. But if you have two bills of Rs 4 lacs each, then the normal Top up cover will not help because no single bill amount is above the threshold limit of Rs 5 lacs.

That’s where Super top up plans come into picture, which takes into consideration the TOTAL of the bills in a year and not just the single instance. So in case of two bills of Rs 4 lacs each, your total bill is Rs 8 lacs (above threshold limit of Rs 5 lacs), then Super top up cover will pay you, where a Top up cover will not.

Let me clear that with a more detailed example by using the chart below

difference between top-up and super top-up health insurance cover

Companies Offering Top up and Super top up plans in India

Companies offering Top up

  • Apollo Munich OptimaPlus
  • Bajaj Allianz Extra Care
  • Bharti Axa High Deductible Health Insurance
  • ICICI Lombard Healthcare Plus
  • Star Health Super Surplus
  • United India Top up Health Insurance

Companies offering Super Top up 

  • United India
  • HDFC Ergo Health Suraksha (offering to bank and credit customers, currently)

Let me give you a comparison chart of the current Top up health insurance plans in India at the moment. Not many Super top up plans, so they are not in the chart while comparing.

top up health insurance policies comparision

Super Top up Cover for Employees having group cover from Employer

A lot of salaried employees already have a group cover from their employer and they feel that they should not waste their money in a separate health insurance policy (which is not quite a right way of thinking, and you can read this article to know why I say that.) A top up cover is a very useful way for those employees to extend their cover beyond a point.

Lets say you already have a 5 lacs cover from your employer, but you feel that it’s insufficient and you wanted to have a cover up to Rs 10 lacs. Now, one way of doing it is to take a separate cover of Rs 10 lacs, but you can take a top up cover of up to Rs 10 lacs with threshold of Rs 5 lacs (as you are already covered from your employer up to 5 lacs). This way you will be covered up to 10 lacs. But understand that in that case you will have to claim your expenses multiple times.

Additional Health Insurance cover or Top up cover – Comparison

Just give me pointers, I will write about it, or just send me an example where we are comparing a 10 lac cover with A 5 Lac cover + top of 5 lacs

When does a top cover policy makes sense – Hear from experts

So is topup or super top up cover the best option to upgrade your health insurance coverage ? No !. Here is what Mahavir Chopra, a health insurance expert suggests –

Most Insurance advisers recommend a top-up plan to upgrade your coverage. In terms of convenience of purchase and claims, we would recommend upgrade of the same health insurance policy, as the best option. This is of-course, provided you are happy with the policy terms and services.

The second best option would be to compare available options of Super Top-up with option of Additional Mediclaim Policy. If the premium is more or less the same, we would recommend additional policy more than a Super Top-up.

After all the above options, look for the option of a simple top-up to increase your cover. Be sure you are aware of the fact, that this option is more useful in the very long term (6-10 years), since it will trigger only when your one claim goes above the threshold/deductible mentioned in the policy.

Features of Top up Health Insurance Plans

Let me tell some more points and features about the top up plans so that you are more clear about it and if its useful for you or not

1. Cheaper than regular health insurance plans – You have already seen that they are cheaper than the regular health insurance plans because they cover you only beyond a threshold, the probability of which happening is very less.

2. You can buy it from anywhere – You can buy a top-up cover from any company, there is no compulsion that you need to have another cover from same company. In-fact there is no requirement that you should have another health cover at all. You can just take a top up cover even if you do not have any other health insurance product.

3. Available with the option of individual and Family Floater Cover – A top up cover is available as individual cover and also as a family floater. So you can extend the cover for your entire family. Just that some policies might consider parents into family floater and others might not.

4. Concept of Pre-existing illnesses and Exclusions – Just like a normal health cover policy, even a top up cover can impose the restrictions on the pre-existing illnesses and exclude the diseases which they feel they do not want to cover. Also some top up covers might not cover pre and post hospitalization expenses. Some policies like Bajaj Allianz Extra Care provides continuity for already existing main policies. For instance, if you have a policy for 10 years with say New India Assurance, and you are buying a Top up from Bajaj Allianz, you will get continuity for the 10 years on the top-up and hence the waiting periods will not apply to you.

5. Tax benefits under Section 80D – You can get the tax benefit under sec 80D for the top up cover policies

6. Cashless facility would be difficult – I am not sure on this one, please guide! You need to follow the same cashless procedure, when your hospital bill exceeds the sum insured of main policy. If you are aware in advance about the high hospital bill, ensure you intimate at the time of admission itself.

Are you looking for extending your health insurance cover using a top up or a super topup cover ?

Virtual Credit Card – Create Instantly & Use for Online Transactions

Posted on by Jagoinvestor

Are you scared of using your credit card online on some website because you feel there might be  fraud or a security threat? If that’s the case, then welcome to the world of Virtual credit cards, which I will explain in today’s article and also how it can be useful for you.

Virtual Credit Cards in India

A virtual credit card (VCC) is an add-on credit card issued on your primary credit card; only it’s virtual and does not have any plastic existence. You can instantly create it, using your net-banking facility by providing your credit card or debit card details. All relevant details like the card number, the ‘VALID FROM’ date, the expiry date and the CVV number are visible online to you and this virtual credit card enables you to transact online with a credit limit of your choice. Also the virtual card does not have any fee associated with it and comes for FREE!

The key details of your VCC like the card number, expiry date etc. are used when you transact online, but your primary card details are never shared with the merchant online, so you never have to be worried about losing your card or having to carry it ‘safely’ in your wallet. There are tons of banks which offer these instant virtual cards these days. Some of them are

  • ICICI VCC
  • HDFC NetSafe
  • Kotak netc@rd
  • SBI-Virtual Card
  • Axis Bank e-wallet card

Validity of the virtual card ?

The virtual credit card is valid only for a single use and automatically expires within 24 hours if the virtual credit card is not used, which means that the chances of credit card fraud or misuse are significantly lower than a real credit card. Also understand the if you hold a VISA card, then the virtual card which you will get will be VISA one and if it’s Master Card, then it’s going to obviously be a Master card.

Is virtual Credit Card only for Online Use ?

Yes, as a virtual credit card is not a physical card, it can be used only for online transactions, for which all you need is credit card number, CVV number and Expiry number. Once used the card expires and can’t be used again. If you want to execute another transaction, you will have to generate another virtual card. The maximum limit of your virtual credit card can be as high as your actual limit on the real credit card. When you make the payment on some website using your virtual card, it will appear on your physical credit card statement itself.

Most of the banks issue a card which is valid internationally and you can use them on the websites outside India, however some banks like SBI bank still issue virtual credit cards which are not valid outside India. You will have to check with your bank if it is valid internationally or not.

Can you create Virtual Credit Cards using a Debit Card?

The answer is Yes for most banks. Even if you just have a debit card and not a real credit card (Check out the best credit card in India as per our survey), you can still use your debit card to create a virtual card. There are many people who want to transact online at times, but do not hold a credit card. Now they can create a VCC and use that to transact online. However I just checked my ICICI account and when I want to create a virtual credit card, it asks for my credit card number, so it seems like ICICI bank doesn’t allow VCC creation via a debit card. Anybody created one using debit card in ICICI bank? Let us know!

Real Life Situations when you can use Virtual Credit Card ?

  • When you are transacting on a website, where you do not feel very confident about security, but still you have to transact anyways due to some reason. Check out this fraud
  • When any friend of yours ask you for your credit card, where you want to “NO” , but still can’t say NO. You can now create a virtual credit card and give the details to him.
  • When you do not have a real credit card, but only have a net-banking facility, you can still create virtual credit cards and use them.
  • You can also use these virtual cards where you just want to try out the service , but by default the website starts charging the card on renewal basis. If you use virtual card, it will anyways get cancelled after one use and there will be no renewal charges later – Here is a real experience.

Do you feel virtual credit cards to be of any use in your life? Are you already using virtual credit card or planning to use them? Please share it with others!