Financial Planners in Bangalore
Your World of Finance Matters made Easy
Tax planning and tax saving options
Financial Planners in Bangalore
Your World of Finance Matters made Easy
Tax planning and tax saving options
One of the most integral part of financial planning is Estate Planning. It ensures that in the event of estate owner’s death, the survivors get access to his/her assets without any disputes and legal issues, in the proportion decided by the estate owner. Wills and Trusts are important vehicles for effective estate planning.
A will is a written document of the desired way of distribution of wealth among loved ones after one’s death. A few pointers about a will:
A trust is a three-party financial arrangement where one party (the author) gives a second party (the trustee) the ability to hold assets or property for a third party (the beneficiary). A few pointers about trust:
Difference between a Will and a Trust?
Need for setting up trust in Estate Planning:
Who can form a Trust ? / Parties to a Trust
Any competent individual person over 18 years of age and mentally sound can create a trust for any legal purpose(s). A trust can be created by or on behalf of a minor with the permission of a principal civil court of original jurisdiction. Apart from an individual, a company, firm, society or association of persons is also capable of creating a trust.
What are the different types of trust?
Generally, there are two types of trusts in India, private trusts and public trusts. While private trusts are governed by the Indian Trusts Act, 1882, public trusts are divided into charitable and religious trusts.
A private trust is one in which beneficiaries may be definite and ascertained individuals and a public trust is one in which beneficiaries are unascertained individuals.
(i) Revocable Trust: When the settlor establishes a trust and retains the right to amend, modify or revoke the trust at any time, however if the author is deceased before the expiry of tenure of the trust – the status of the trust automatically changes to irrevocable.
(ii) Irrevocable Trust: When the settlor establishes a trust and the settlor effectively gives up his control over the assets – the trust is irrevocable in nature.
Without a will who gets all the assets?
In absence of estate planning, if one dies intestate (in absence of will), assets are than distributed amongst the family members (legal heirs) as per succession laws of the religion that the person belongs to (the intestacy laws of the state where the person reside). Assets include any bank accounts, securities, real estate and other assets owned at the time of death. A few examples of succession laws applicable as per religion are Hindu Succession Act, Parsi Succession Act, Muslim Shariat Laws etc.
How living trusts avoid Probate?
When setting up a living trust, a person transfer assets from his/her name to the name of the trust, which is under his/her control — such as from “Mr Rajesh and Bina Sinha, husband and wife” to “Rajesh and Bina Sinha, trustees for Rajesh and Bina Sinha trust dated (month/day/year).”
Legally the estate owner no longer owns anything; everything now belongs to the trust. So, there is nothing for the courts to control when the owner dies or become incapacitated. The concept is simple, but this is what keeps the estate owner and the family out of the courts.
“Living Trusts,” are an effective estate-planning tool for avoiding the costs and hassles of probate, preserving privacy and preparing the estate for ease of transition after one dies.
Debalina Roy Chowdhury
From the Research Desk of Dilzer Consultants Pvt Ltd
All Course fees are approximate average fees per year unless specified.
The costs mentioned are taking into account the current costs in Metros like
The costs were derived comparing various courses offered across Indian and Overseas.
|Sl. No.||Education||Category||Duration||Govt / Public||Private Colleges||Exam fees and other Miscellaneous costs|
|1||BBA/BBM||Management||3||Rs. 50,000||Rs. 1,00,000||Rs. 75,000||Rs. 5,00,000||Rs. 10,000|
|2||Bachelor in Engineering||Engineering||4||Rs. 1,00,000||Rs. 9,00,000||Rs. 1,00,000||Rs. 15,00,000||10,000-25,000|
|3||B. Science , B . Commerce ,B. Arts [Full Time]||Bachelor||3||Rs. 10,000||Rs. 8,00,000||Rs. 50,000||Rs. 10,00,000||10,000-25,000|
|4||Bachelors Hospitality and Travel||Hospitality||3||Rs. 70,000||Rs. 4,00,000||Rs. 2,00,000||Rs. 7,00,000||10,000-30,000|
|6||Bachelor in Law||Law||5||Rs. 20,000||Rs. 11,00,000||Rs. 50,000||Rs. 13,00,000||Rs. 20,000|
|8||Medicine – MBBS||Health||6||Rs. 5,00,000||Rs. 90,00,000||Rs. 12,00,000||Rs. 1,50,00,000||50,000 – 1,00,000|
|9||BDS – Dental Sciences||Health||4||Rs. 10,000||Rs. 1,00,000||Rs. 2,00,000||Rs. 40,00,000||50,000-1,50,000|
|10||Bachelors in Pharmacy||Health||3||Rs. 40,000||Rs. 2,50,000||Rs. 1,50,000||Rs. 11,50,000||20,000-75,000|
|11||Bachelors in Physiotherapy||Health||3||Rs. 40,000||Rs. 2,50,000||Rs. 1,50,000||Rs. 8,00,000||20,000-50,000|
|12||Graphics and Animation technology [Full Time]||Design/Visual Arts||6 mts – 2 yrs||Rs. 25,000||Rs. 1,00,000||Rs. 1,00,000||Rs. 3,00,000||50,000-75,000|
|13||Mass Communication , Media ,Journalism||Communication||3||Rs. 20,000||Rs. 75,000||Rs. 40,000||Rs. 7,00,000||10,000-15,000|
|14||Marine Studies||Engineering||4||Rs. 75,000||Rs. 12,00,000||Rs. 2,00,000||Rs. 15,00,000|
|15||CA/ICWA||Finance||NA||Rs. 50,000||Rs. 4,00,000|
|16||Fashion Design||Arts||3||Rs. 35,000||Rs. 10,00,000||Rs. 5,00,000||Rs. 12,00,000|
|17||Nursing||Health||3||Rs. 25,000||Rs. 1,50,000||Rs. 7,50,000|
|18||Teaching [full time]||Science||1-2 yrs||Rs. 75,000||Rs. 20,000||Rs. 1,50,000|
|19||Aviation (BBA)||Science||3||NA||NA||Rs. 2,50,000||Rs. 8,00,000|
|20||Humanities and Social Sciences (BA/ BSW)||Science||3||Rs. 15,000||Rs. 60,000||Rs. 1,00,000||Rs. 4,00,000|
|Sl. No.||Education||Category||Duration||Government/Aided||Private Colleges||Exam fees and other costs|
|3||Executive MBA Full time||Management||1||5,00,000-27,00,000||60,000-36,00,000||20,000-1,00,000|
|4||Online MBA||Management||1-2 yrs||20,000-3,00,000||15,000-5,00,000||20,000-1,00,000|
|Sl No.||Country||Course||Duration||Avg Cost per year||Living Cost||Visa Fee|
|1||US||Under Graduate(B Tech, etc)||Rs. 21,20,000||Rs. 8,00,000||11,000|
|1||US||MS||2||Rs. 19,00,000||Rs. 8,00,000||11,000|
|1||US||MBA||2||Rs. 22,00,000||Rs. 8,00,000||11,000|
|2||UK||Under Graduate – BE / B Tech||3||15,35,000||Rs. 4,81,000||30,000|
|3||Australia||Under Graduate||2.5-3||15,00,000||Rs. 6,00,000||30,000|
|4||Singapore||Under Graduate||2.5-3||13,00,000||Rs. 2,90,000||2000|
|5||Canada||Under Graduate||2.5-3||12,50,000||Rs. 5,00,000||8500|
|6||Germany||Under Graduate||2.5-3||2,50,000||Rs. 3,50,000||6000|
|7||France||Under Graduate||3||3,50,000||Rs. 3,50,000||13,000|
|8||Sweden||Under Graduate||3||10,00,000||Rs. 2,50,000||8500|
Do you want to leave your wealth and let your loved one’s fight with each other to get their shares?
We guess not! If you nominated someone in all the financial products you bought and thought that it will be passed to them legally without any issues, you are having a misconception. You need to create a Will to distribute your wealth in the manner you want to.
A Will can be made by anyone above 21 years of age in India. You can make the Will on plain paper in India. It’s not legally necessary to make the Will on stamp paper. It is advisable to write your Will in your own hand writing, as the same can be verified later in case of any doubts raised by relatives.
It might happen that according to your family structure and your preferences, you want to divide your wealth unequally or make a provision for a close friend or a faithful servant. This isn’t possible if you die without a Will.
A lot of us feel that talking about “Making a Will” is pretty morbid, and hence, we don’t look at it with right attitude.
We usually ignore estate planning and do not add it to our priority to-do list. We also fail to understand that life is packaged with risks, which can catch us unawares. Changing time and technology have facilitated wealth creation and there has been an interesting shift from inheritors to entrepreneurs and professionals in the past two decades, which has implications on planned succession. This implies the importance of a Will. The following are the 10 reasons why every person should have a will of their own.
In the first paragraph, you have to declare that you are making this Will in your full senses and free from any kind of pressure. You have to mention your name, address, age, etc at the time of writing the Will so that it confirms that you really are, in your senses
The next step is to provide list of items and their current values, like house, land, bank fixed deposits, postal investments, mutual funds, share certificates owned by you. You must also indicate, where all these documents are stored by you. In all probability, these are in your bank safe deposit box.
Even the Will should be stored in there! Make sure, you take the details from the bank manager, about the procedure and rules of releasing your will from the safe deposit after your death. Make sure you communicate it to the executor of the Will or your family members.
At the end of the Will, you should mention who should own your assets items and in what proportion, after you have gone. If you are giving your assets to a minor, make sure you appoint a custodian of your assets till the individual you have selected, reaches an adult age. This custodian obviously, has to be a trustworthy person.
At the end, once you complete writing your Will, you must sign the Will very carefully in presence of at least two independent witnesses, who have to sign after your signature, certifying that you have signed the Will in their presence. The date and place, also must be indicated clearly at the bottom of the will.
Make sure you and the witnesses sign all the pages of the Will. One important point while choosing witness, is that they should be your friends, neighbours, or your colleagues and not the direct beneficiaries in the Will. They only certify, that you yourself have signed the Will in their presence and are not a party in making the Will in India.
The envelope has to be sealed after completing all the formalities and the seal must bear your signature and the date of sealing. The witnesses need not sign on the seal of the envelope.
If possible, have the two witnesses be a doctor and a lawyer. A doctor signing a Will, won’t raise any question of you, being of unsound mind. The lawyer, will vet the Will and make sure you don’t make silly mistakes at the time of writing and signing it.
The attesting witness and his or her spouse should not be a beneficiary under the terms of your Will. This might create vested interests and sometimes make your Will invalid. Also, make sure the witnesses are younger than you and not very old as your will might be in effect for several years! And you want them to be present in this world
Write your Will on good quality thick white paper so it doesn’t get spoiled over a period of time. It should be stored in a plastic envelope in full size, without folds.
Note that you should keep just one more copy of will and stored separately from the original will. The Will must be stored very safely in your bank, in safe deposit box. You must also inform your next of kin, as to where you have stored your will. Do not make many copies of your Will.
In case of Hindus, it should be clearly stated if the property is inherited or not, because it makes a huge difference, as no ancestral property can be assigned to any person through a Will. All rights on inherited property are acquired by birth. So if you inherited a property from your Father, you cannot say in a Will, that you want to assign it to person X only! It will go to all your legal heirs as it is “Inherited”
A Will must always be dated and if more than one Will is made, the one with the latest date will nullify all the previous ones. In fact, there should be a statement in your Will, nullifying all other previous Wills. The pages should be numbered to avoid fraud.
The value of assets often fluctuates, so it is better to mention how much each beneficiary will receive, in percentage terms rather than absolute numbers. Unless it is pure cash.
A will is so important that it should be the first step taken towards financial matters. It should be clearly written so that the intention of the testator is brought out unequivocally. One should not shy away from writing a will in fear of complisancy. Also, timely modifications to the Will are necessary whenever you have purchased or sold a property, if there is any new inclusion of family members (spouse or children) and so on.
Dilzer Consultants Pvt Ltd
In today’s world of soaring prices and rising inflation, some find it hard to make ends meet while some others struggle to maintain a good lifestyle with their limited source of income. This has made people keen to look for other alternative sources of earnings. While investment seems a lucrative option for an extra income, most people remain clueless about the various options available. Every investor has his or her own appetite for risk and any rash and untimely decision can prove to be costly. We need to choose from several asset classes having varying degrees of volatility and risk-return potential.
But again, looking at too many available options on the market, it is really a tough job to choose the best among them. Though most of the people tend to earn money out of different investment avenues, each of these has its own pros and cons which one must analyse before venturing into it. While at times, due to negligence, people tend to lose their money or end up with meagre returns.
Thus, simply investing does not help, rather, a thorough research and analysis before making the investment is a must for getting good yields. Therefore, one has to weigh the pros and cons before zeroing in on the asset class to invest in. We have multiple options in terms of investing such as Stocks, Mutual funds, Real Estate, Gold etc.
There are different types of investment products available in the market. But, most of the investors want to make investments in such a way that they get sky-high returns as fast as possible without the risk of losing the principal amount. And this is the reason why many investors are always on the lookout for top investment plans where they can double their money in few months or years with little or no risk.
However, it is a fact that investment products that give high returns with low risk do not exist. In reality, risk and returns are inversely related, i.e., higher the returns, higher is the risk, and vice versa. So, let’s look at the most commonly used arenas of investment available in the market.
When you buy shares of stock of a company, you are buying a piece of the company, thus becoming one of the owner of the company. This type of investment is also called as owner’s equity, where you share a little part of ownership of that company. When the company makes profits and increases its market capitalisation, the value of your share increases. Whenever the company make excess profit, then that will be shared among the shareholder as dividends. So, when the share value increases you can sell your shares for a higher price and make profit out of it, vice-versa is in the case of loss. There are possibilities that you may even lose the capital as you are the owner of the company.
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities and share the profit arising from it. In other words, a mutual fund is a mixture of different securities which is pooled together by professional fund managers so as to reduce the investor’s risk while giving higher return than the market it operates. There are three type of mutual fund Equity funds, Debt funds and Hybrid funds depending on the type of securities used for investment.
When you are investing in real estate, you are typically buying physical land or property. You are becoming the part or sole owner of that property. With the increase of market demand and other factors, if the price of the property increases, then you can sell the property and make profit out of the investment. The real estate investment also gives interim returns in the form of rent or lease of the property. The Real Estate Investment Trust (REIT) also comes under this investment.
This is one of the oldest and the most commonly used investment option in India. In this type, people buy gold ornaments or coins/bars and sell them in a future period. The investors use the price fluctuations of gold in the market to make the profits out of this investment. Recent reforms have given rise to a different ways of investing in gold than the conventional method of holding it in physical form. This comprises of Gold ETF and Sovereign Bonds which are more transparent and fetch high returns as there will not be any loss at the sale of this investment.
The process of depositing your savings in the bank for a fixed period of time, so that the investment will give a return as interest is commonly known as Bank deposits. The period is pre-determined at the time of investment and the interest rate will depend on the time of investment. In this type of investment, the bank takes the liability of paying out the Fixed Deposit on the date of maturity or as per the investor requested.
Each of these investments is different to one another and has its own pros and cons. So, there are different factors that have to be considered before selecting and investment option. Following are the top five factors that the investors will analyse frequently before selecting an investment option.
ROI measures the profit made on an investment as a fraction of the cost of investment. Before making any investment, it is extremely critical for an individual to look at the ROI on that investment. Different indices in stock market allow us to scientifically measure the rate of the return of stocks and mutual funds. In the case of gold and other investments, there are certain past performance data which will help us to evaluate the returns, for e.g. the Gold Index in case of gold and past interest rates in case of Bank fixed deposits.
But, when it comes to real estate, the job is a lot harder. Specific cases in certain locations have generated far higher returns that others across land, residential, retail and commercial spaces across the country. At the outset, it must be mentioned that ROI calculation for real estate investment has more variables than stocks hence, not as straightforward. With real estate, a number of variables including repair/maintenance expenses, and methods of figuring leverage, the amount of money borrowed (with interest) to make the initial investment comes into play, which can affect ROI numbers.
For any option, there is a cost involved in making the initial investment which has to be factored and deducted from the return. The Bank Fixed deposit is the most affordable investment with literally no cost of investment. In the case of direct equity investment, it bares the costs of brokerage which tends to be around 0.5% of the transaction value. In an equity mutual fund, it’s the fund management fees which can be a maximum of 2.5%. In the case of Gold, there will be making charges which will vary from 2.5% to 15% depending up on the make. But, in the case of real estate, you need to factor in stamp duty, registration, society charges & maintenance & brokerage. These costs vary from state to state and from transaction to transaction.
The diversification of the portfolio help us to reduce the market risk by putting the investments in different industries. This is very much possible with the investments in Stocks and Mutual funds by investment in different types of securities. But in the case of real estate, gold and other investment the possibility of diversification is not there, as the total investment goes to a particular investment.
Liquidity means the time taken for an investment to be converted to liquid cash. Gold is the most liquid asset which can be converted into cash instantly. The next is Fixed Deposit. Stocks are less liquid that the previous two investments, but it is much more liquid than real estate which means that you have easier access to your funds. You can exit your equity investments online instantly and have access to the funds in two days after the transaction. Exiting a property investment could take upwards of 6 months. Besides this, if you have Rs.1 lakh invested in equity, you could, if necessary, liquidate Rs 30,000 at a time, while the rest continues to remain active. It is an option unavailable to real estate.
All equity investments held for over a year in India are tax free till a gain of Rs.1,00,000 on that financial year, more that this will attract a tax of 10% whereas less than one year investment attract an 15% tax and there are no restrictions on reinvestment. Real estate investments attract short-term capital gains tax as per the income slab if held for less than 3 years and long-term capital gains tax of 20% with indexation if held for longer than 3 years. The only way to avoid this tax is to reinvest the money in residential property or in specific bonds.
There are other factors like Stability, Control, Involvement, Tangibility, Initial investment etc. Which have to be checked before selecting an investment option. While all the asset classes have their own merits and demerits, selecting the right investment should depending up on your risk appetite then only the investor can make the maximum risk adjusted return in long term.
Dilzer Consultants Pvt Ltd
Raman, a 40 year old software professional wants to build a retirement corpus and build funds for his only daughter’s education and marriage. For this purpose, he has invested in some fixed deposits and post office schemes and also wants to buy a second property worth Rs 60 lakhs as an investment. He wants to use his accumulated savings for the down payment of the second house. Based on his income and expenditure patterns, he could easily get a loan of Rs 48 lakhs from any financial institution.
Raman will retire in 20 years and opts for a 15-year loan on the new property. But once he pays off the down payment Rs 12 lakhs and starts paying the EMI he is left with no investable surplus.
He decides the last five years prior to retirement will be sufficient time enough for him to generate retirement savings. He also assumes the property will grow in value by the time he retires and, the rental income would be sufficient to take care of household expenses post-retirement.
Disadvantages of Raman’s existing financial plan
Pitfalls of linking financial goals with real estate assets
In recent years there have been many instances of investors having increasing allocations to real estate as an asset class. It is important to understand how this over exposure might have pitfalls for them. The drawbacks are stated below:
Illiquid Nature – Considering liquidity as an important parameter in investment decisions, the fact that real estate investments are high value and big ticket in fact leads to illiquid assets. This actually means not being able to use funds even though the investor may have a high net worth, mainly due to illiquid nature of this asset class. Thus, it would be difficult to sell property immediately when there is a need for cash for a financial goal. Moreover, regulatory and transparency issues in the sector also pose risks to liquidity and jeopardise the investment .
Too much affinity towards physical assets – Indian Investors have a bigger emotional connect with physical assets such as real estate and gold as compared to financial assets. However there are two kinds of corrections that assets can undergo – price correction and time correction. The real estate markets are at present experiencing a time correction, where values have remained same over a long period of time, giving investors an impression that the valuations of their holdings are intact. This comes in the way of investors making rationale decisions to exit investments in real estate.
High absolute values – Many a time we hear stories as to how property bought a couple or more years back has grown and multiplied to worth crores of rupees. If one calculates the growth rate for this investment made in terms of today, the rate of return would be in the range of 10-12% per year. Assuming a long term horizon say 30 years in the Indian stock markets, one could have got much better results.
Easy availability of leverage – With the lowering of interest rates and attractive financing schemes, Indian investors are finding it easier to fund real estate purchases. As buyers usually have to put down only 20% of the cost, the balance 80% being funded by lenders, property purchase has become easier for investors.
However, investors need to be aware that since this is an unregulated market currently, they should not fall for any false promises and /or funding schemes which they do not understand. This may lead investors to get into a negative cash flow situation especially if the EMIs that they have committed to are high. As under construction projects may not be completed in time, there may not be any rental inflows and hence the burden of EMIs may not be comfortable for investors.
Too much real estate investments just because of taxation impact – The tax rules currently make it mandatory that the capital gains made from sale of property to be reinvested in real estate and/or capital gain bonds. To avoid taxation, gains from sale of property thus flow back into buying more of this illiquid asset class , thereby creating an overexposure of investor portfolios into this asset class. The other option of capital gains bonds offers a 6% rate of return which is less attractive to investors, thus making them go back to real estate, yet again.
Real estate purchase does not allow portfolio re balancing – Real estate purchase does not allow portfolio re balancing to happen from one asset class to another. For investors that are planning re balancing from real estate to debt or equity may find that they may be in a fix after exiting from real estate as they either need to go back to real estate or to debt in the form of capital gain bonds.
Debalina Roy Chowdhury
If you are a non-resident Indian (NRI) planning to buy a property in India, time could not have been better for you to do so. While India’s real estate sector has seen a price correction in the recent past, buying property in Indian has also become more lucrative with favourable currency rates.
India has emerged as a lucrative spot for international capital. Overseas investments have surged 137 per cent, from USD 3.2 billion during 2011-13 to USD 7.6 billion during 2014-16. According to a survey, almost 30 per cent of the total global real estate transactions in India, will be cross-border.
NRIs have a variety of investment options in India. But real estate still remains to be one of their favourite options, not just because of high returns but also because of nostalgic attachment and the dream to come back to a safe and world-class retired life in their homeland.
In addition, many NRIs are also interested in several Indian metros considering high growth prospective of the real estate segment in the country having attractive options including apartments, villas, plots and pent houses with world-class facilities.
As per RBI an NRI is “ A ‘Non Resident Indian’ (NRI) is a person resident outside India who is a citizen of India.”
And POI is – A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, A PIO will include an ‘Overseas Citizen of India’ cardholder.
Though RBI has given general permission to the NRIs to purchase immovable properties in India, the permission does not grant power to acquire any and every property in India. The NRIs are allowed to purchase only residential or commercial property. So NRIs cannot purchase any agricultural land or plantation property. Since it is fashionable to own a farmhouse, be clear that under the existing dispensations, NRIs cannot purchase a farmhouse in India.
This way as long as the investment being made by NRIs in India is either in residential property or commercial property, they are not even required to intimate RBI about such purchases, even post conclusion of the transaction. Moreover there is no restriction as to the number of residential or commercial property an NRI can acquire.
The payment can’t be made in foreign currency. NRIs can make the purchase using Indian currency, the Rupee, through funds received in the country by means of normal banking channels. These funds have to be maintained in a non-resident account under the foreign Exchange management Act (FEMA) and the Reserve Bank of India (RBI) regulations.
The payment for purchase of permitted property by an NRI can be made by way of remittance through banking channels from abroad or from money lying in their NRE/NRO or FCNR account. NRIs are even allowed to finance the purchase with home loan in Indian Rupees. The home loan can be granted by the Indian employer of the NRI employee for the purpose of financing of the property.
As far as payments of EMI for the home loan taken in Indian Currency in India is concerned, the same can be done either by direct remittance from abroad or from the money lying to the credit in NRE/NRO/FCNR account of the NRI. In addition to the above sources, the home loan can even be serviced out of the rents received from such property or money transferred to borrowers account from the account of relatives of such borrower.
In case the NRI is buying the property for the purpose of his own residence, the NRI can even take loan against deposits lying in their FCNR or NRE account upto an amount of Rs. 100 lacs for the purpose of servicing the home loan.
Not really !
When an NRI sells a property in India, TDS (tax deducted at source) calculation is done at the rate of 20.6 per cent on long-term capital gains and 30.9 per cent on short-term capital gains. However, the final taxation rate is similar for NRIs and resident Indians. If an NRI has a lower tax slab applicable to him, he can apply for a refund of the TDS by filing their income tax return.
There are certain guidelines for repatriation of funds. An NRI or Person of Indian origin (PIO) may repatriate the proceeds from the sale of immovable property in India on the conditions mentioned below:
A citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran must seek specific approval from the RBI for repatriation of sale proceeds.
Apart from the above-mentioned points, an NRI is given the same treatment as applicable to any other Indian resident.
Some general tips –
NRI investors should avoid projects by unknown developers. Numerous buyers have fallen into difficulty, by putting their funds in projects that lacked mandatory clearances and fell short of even the minimum standards of quality.
Plan your visit to India and evaluate projects, opt only for reputed developers. In all cases, NRIs should strictly verify points, such as the track record and brand visibility of the developer, the social and civic infrastructure available in the location, the amenities in the project and the timelines for possession, in the case of under-construction projects.
A project that is targeted towards NRIs, is no different from other offerings in the market. A property should be evaluated, purely on the basis of its location and amenities on offer, the legal validity of its title and the developer’s brand image.
Besides exercising necessary due diligence, NRIs also need to adhere to certain specific laws and regulations, while buying, selling, or renting out real estate in India
Dilzer Consultants Pvt Ltd.
A home is a ‘once-in-a-lifetime’ investment for many of us. It is natural that we want to make it as big and better as practically possible. But the shooting cost of property nowadays makes it difficult to acquire your desired property. No doubt, having the possibility of availing a home loan has improved affordability. It is difficult to buy a dream house entirely with our savings. Availing a home loan not only increases our affordability but also give us a huge savings in our tax liability too. The home loan is one of the most efficient tax saving instrument, which not only helps us to acquire an asset, but also gives the tax benefit on the principal as well as the interest amount we re-pay to the loan. There is no other loan like home loan which gives this much of tax befit to an individual, especially to the salaried class.
So, let’s look at what are the tax benefits an individual can enjoy by availing the home loan.
Our government has always shown a great inclination to encourage citizens to invest in house. Many schemes like Pradhan Mantri Awas Yojana are flashing green light on the Indian housing sector by striving to bring down the issues of affordability and accessibility. And when you buy a house on a home loan, it comes with multiple tax benefits too that significantly reduce your tax outgo since home loan is eligible for tax deduction under different sections of Income Tax Act (IT ACT). The tax benefit from a home loan can be availed in two ways:
Tax benefit on registration and principal repayment. Under Sec (U/S) 80C
On the registration of the property: – Whenever you buy a property, it has to be registered in your name to transfer the rights of the property from the builder/seller to you. For registering a property in India, you have to pay a certain percentage of the value of the property to the government as the stamp duty and certain expenses in respect of the registration. Stamp duty & registration charges and other expenses which are directly related to the transfer are allowed as a deduction under Section 80C. The maximum deduction amount allowed under this section is capped at Rs.1,50,000. This deduction can only be claimed in the year the actual payment is made towards these expenses. If you buy the property on 15th Dec 2017, then you can claim this deduction U/S 80c only in the FY 2017-18.
The principal Repayment:- As a home loan buyer, Sec 80C can bring you relief as you are required to pay hefty Equated Monthly Instalments (EMI). The EMI paid by you every month has two components – principal and interest. The principal portion of the EMI paid for the year can be claimed as a deduction from gross total income under section 80C before calculating the net taxable income. The maximum amount that can be claimed is up to Rs 1.5 lakh. One can get a loan certificate from the lending bank’s branch or go online. The certificate will show how much of the total EMI paid in a year was repayment of the principal amount borrowed.
But Sec 80C (5) also states that in case the assesse transfers the house property, on which he has claimed tax deduction under Section 80C, before the expiry of 5 years from the end of the Financial Year in which the possession has been obtained by him, then no deduction and tax benefit on Home Loan shall be allowed under Section 80C.
The interest payment towards the home loan usually arises in two situations
Pre-construction:- When you pay the interest only on the home loan when the property is under construction.
Post-construction:- When you pay the interest along with the regular EMI after the completion of the property.
Pre-construction (Under construction):- This is the time when your property is under construction and you pay only the interest for the portion of loan you have availed. This is otherwise called as Moratorium period in the loan terms. The interest paid during this period cannot be claimed for tax deduction on that Financial Year (FY). But, your eligibility to claim interest on the home loan as a deduction begins only upon completion of construction or immediately if you buy a fully constructed property. The income tax law provides deduction for such interest in five equal instalments starting from the year in which the property is acquired or construction is completed. The maximum eligibility remains capped at Rs.2 lakh per FY.
Post-construction:– The income tax act provides tax deduction on the interest portion of your EMI which you pay towards your home loan. The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs.2 lakh under Section 24. For Assessment Year 2018-19, maximum deduction for interest paid on Self Occupied house property is Rs.2 Lakh. In case of a let out property, there is no upper limit for claiming interest. For claiming this benefit, the loan must be taken for the purchase/construction of a house and the construction of the house must be completed within 5 years from the end of financial year in which loan was taken. You can claim this deduction for interest repayment on loans taken from anyone provided the purpose of the loan is purchase or construction of a property. You can also claim deduction for money borrowed from individuals for reconstruction and repairs of property. It does not have to be from a bank. “For tax purposes, the loan is not relevant, the usage is”. This Deduction can be claimed from the year in which construction of the house is completed.
The Section 8EE of the income tax provides the first time home buyers a further deduction of Rs.50000 in a FY over and above Sec 24 towards the interest payment on home loan EMI. The section also says that the deduction will be available only if the individual met the following conditions.
As per the income tax law, the processing charges paid for the home loan are considered as interest and therefore deduction on the same can be claimed. “Under the Income Tax Act, Section 2(28a) defines the term interest as ‘interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation)’. This includes any service fee or other charge in respect of the loan amount.
If you have purchased the property jointly, the co-owners can claim these expenses in their respective income tax returns based on their share in the property. Each of the loan holders can claim a deduction for home loan interest up to Rs.2 lakh each under sec24 and principal repayment under sec 80C up to Rs 1.5 lakh each in their individual tax returns. To claim this deduction, they should also be co-owners of the property taken on loan. So, loan taken jointly with your family can help you claim larger tax benefit.
For Eg:-Mr. Sharan Shetty have taken a home loan of Rs. 35,70,000 along with his wife Gauri. When they generate the home loan statement for the FY2017-18, the total principal payment towards home loan amounted Rs.71051 and the interest amounted Rs.300724. For this financial year along with above they have a pre-construction interest of Rs. 55565 also. The property is owned jointly with 50% ownership each.
The following are the deductions available while computing the income tax.
The total deduction availed by both of them jointly is Rs. 427340. In the same case if Sharan was the only owner then the maximum deduction they can avail will be limited to Rs. 271051. So, it will be better if you can avail the home loan jointly and if the co-owner is a women you will get interest reduction also.
Once the loan is fully paid and the borrower gets the complete ownership, it becomes an asset that can help to guard from future troubles. So, now a days investors started seeing home loan not only as a loan but also as a great tool to create asset and save tax on his hard earned money.
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Product Categorization as per SEBI Rule – Research Desk Dilzer. Dear Clients some of your schemes have undergone product categorization changes. We are aware of this change and will need to see if firstly there is a category and attributes change in the scheme and also monitor its performance and suggest changes if it does not fall in line with the stated objective, and your goals. We will revert to you individually should there be a change after monitoring the scheme attributes.
Dilzer Research Desk