Category Archives: Finance

New PF (Provident Fund) Norms Announced For Expats/International Workers

There is some bad news in the offing for all Expats/International Workers, who are currently employed in India, by the EPFO(Employees Provident Fund Organization), which handles provident and pension funds for the organized sector employees in India. The existing norms have been tightened a bit. Earlier, contribution to PF (Provident Fund) and EPS (Employees Pension Scheme) was 12% of the monthly pay, this contribution was made mandatory by Indian Government in 2008. Withdrawals from these PF (Provident Fund) were permitted at the end of an expat’s employment in India. But according to these new regulations, now Expats/International Workers would be permitted to withdraw their accumulated balance only after they turn 58. Now, withdrawals are permitted only in case of Permanent Disability and Total Incapacity to work or in case of these suffering from three major diseases, Cancer, Leprosy and Tuberculosis.

However, an exemption has only been made in case of employees from three countries, Belgium, France and Germany, with which India has signed Social Security Agreements. Further details are available at:

http://timesofindia.indiatimes.com/business/india-business/New-PF-norms-leave-expats-in-lurch/articleshow/7439380.cms

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What is Section 80C Deduction In Income Tax

Whenever we think of income tax, the first thing that immediately comes into our mind is how to save it !! One of the best options for Saving Income Taxes comes under Section 80C.

What Is Section 80C?
It is an investment option to save the tax. Government has specially promoted it for long term savings.

Limit:
The maximum limit of Rs 1 lac can be deducted from your income under Section 80C. However, there is a provision for additional Rs 20,000, solely reserved for Infrastructure Bonds. In this way if you are in highest tax bracket of 30% and you have invested upto Rs 1 lac under section 80C then you are saving Rs 30,000. For example if your salary is Rs 16 lacs per annum but you are investing Rs 1 lac in 80C then your taxable income will be Rs 15 lacs only. Even if you invest more than 1 lac in 80C, you can show only 1 lac as investment in 80C .

Investment:
Following investment options are eligible for Section 80C deduction.

Market Linked:

Fixed Income:

  • Provident Fund (PF) & Voluntary Provident Fund (VPF)
  • National Savings Certificate (NSC)
  • Infrastructure Bonds
  • Public Provident Fund (PPF)
  • 5-Yr bank fixed deposits (FDs)
  • Pension Funds – Section 80CCC
  • Senior Citizen Savings Scheme 2004 (SCSS)
  • 5-Yr post office time deposit (POTD) scheme
  • NABARD rural bonds

Others:

  • Life Insurance Premiums
  • Home Loan Principal Repayment
  • Stamp Duty and Registration Charges for a home
  • Children’s tuition fees.

Sample Calculation:

Example 1
If your Taxable Income is Rs.700000 and your yearly home loans principal repayment is Rs.40000 and you don’t have any other investments, then your Taxable Income for that financial year is Rs.700000 – Rs.40000 = Rs.660000.

Example 2
If your Taxable Income is Rs.700000 and your yearly home loans principal repayment is Rs.100000, then your Taxable Income is Rs.700000 – Rs.100000 = Rs.600000.

Example 3
If your Taxable Income is Rs.500000 and your yearly home loans principal repayment is Rs.140000, then your Taxable Income is Rs.500000 – Rs.100000 = Rs.400000. Because you can exempt maximum of one lac under this section.

So the overall conclusion is the main purpose of 80C is to encourage everybody for long term investment.But there are number of investment options under 80C so we should select the investment options very carefully. Like for younger age person, we should invest more in Market Linked Investment Avenues because by taking risk we can earn much money. On the other hand, for old aged person we should invest more in Fixed Income Investment where there is little risk.

Fixed Or Floating Interest Rate Home Loans: Which One Is Better ?

To take a home loan is a great commitment and one classic dilemma that all home seekers face is ,whether to opt for Fixed Interest Rate Loans or Floating Interested Rate Home Loans ?? Should you pay more premium in Fixed Interest Rate Home Loans or should we enjoy the changes to interest rate owing to fluctuating market in Floating Home Loans ? Should you ensure peace of your mind by opting for fixed home loans or take a risk by going for Floating Loans ?? These are some of the classic questions, most home-buyers have. This blog-post tries explaining the Pros and Cons for both, Fixed Interest Rate as well as Floating Interest Rate Home Loans.

So the first thing is to understand what is a Fixed Home Loans and a Floating Home Loans ??

Fixed Home Loans:
As the name suggests, we repay the loan amount at fixed interest rate with fixed EMI (Equated Monthly Installment). Interest Rate remains constant during the entire loan-tenure and does not change with market fluctuation.

Pros Of Fixed Home Loans:

  • A rise in interest rate will not affect your loan repayment amount or your monthly EMI (Equated Monthly Installment)
  • It allows you more freedom and peace-of-mind to plan your financial liabilities accordingly, as you have to pay a fixed EMI, even though market (and hence interest rates) could be fluctuating. Thus it also gives a sense of financial security.

Cons Of Fixed Home Loan:

  • The interest rate for Fixed Home Loan is usually 2 % more than the interest rate of Floating Home Loan for same tenure.
  • If the interest rate in market decrease by any chance, Fixed Rate Home Loan borrowers will not get any benefit out of it.

Floating Home Loans:
It is also called Adjustable Rate Home Loans. In this scheme, the interest rate is dependent on market and fluctuates according to economic situation in the country.

Pros Of Floating Home Loans:

  • If interest rate in market is reduced,you will get immediate benefit of it and you have to repay lesser loan amount than earlier.
  • Floating Rate Home Loan is availed at lower interest rate than Fixed Rate Home Loan.

Cons Of Floating Home Loans:

  • If inter­est rate rises, the bor­rower has two options : The first one is to increase the EMI, keep­ing the tenure constant or to keep the EMI con­stant, thereby increasing the tenure. Irrespective of which option you choose for, you are essentially shelling out more money from your pocket.
  • There is always an element of uncertainty surrounding your loan amount, especially during volatile market scenarios. So financially you run the risk of repaying an amount, more than you may originally have planned for.

Conclusion:
The first thing that we should keep in mind is, this is not a one time decision whether to go for Fixed Rate Loans or Floating Rate Loans. Most of the banks and financial institutions allow their customers to change it afterwards, if they want to. So if you are having a Fixed Interest Rate Loan, you can switch to Floating Interest Home Loan and vice-versa. But, it is not free and there is a cost associated with the same, So it is always better to take a thoughtful decision at the start i.e, at the time of applying for the loan. Try to compare the interest rate that your Bank/Financial-Institution is offering for Fixed and Floating rate home loans and weigh it against your loan-tenure. If you are going for a long tenure and don’t want to take any risk, then a Fixed Rate Home Loan is recommended. But if you go for short tenures, then you should opt for Floating Rate Home Loans. In the short term, interest rates may not fluctuate much, so paying a 2% (or more) premium for a Fixed Rate Loan is not a very good idea. At present, over 90% of the home loan borrowers opt for Floating Rate Home Loans.

ICICI Bank New Home Loan Scheme Launched

Festive season has come, but the great reason for our happiness is that the ICICI Bank which is country’s largest private sector lender, has come into festive mood and introduced a 1 year and 2 year fixed cum floating interest rate scheme for home loan.


The new ICICI schemes at a glance:

Loan Amount

Fixed Rate of Interest (%)

Upto 25 lakh

10.50 – 1 yr

10.75 –  2 yr

25 – 75 lakh

11.00 – 1 yr

11.25 –  2 yr

Above 75 lakh

11.50 – 1 yr

11.75 –  2yr

The  current base rate for ICICI bank home loan is 10% but the problem for customer is it’s increasing day by day, so these both schemes are very lucrative.

1 Year Scheme:
In this scheme, Interest Rate will be fixed for first 1 year, after completion of which which it will be same as current market rate.  Interest rate also depends upon the home loan amount. For loan amount up to 25 lakhs  the fixed rate of interest is 10.50% and for 25 to 75lakhs the  interest rate is 11% whereas for above 75 lakhs loan amount  it is 11.50%.

2 Year Scheme:
It is similar to 1 year scheme. In this the interest rate for loan amount up to 25 lakhs is 10.75 % for 2 year and 11.25 % for 25 to 75 lakhs whereas it is 11.75 % for the above 75 lakhs.

If we compare the interest rate across both these schemes, interest rate is more than current market rate, but we should also keep in mind that, rates are not steady and in fact are increasing gradually, so Fixed Interest Rate will help you save your money.

But some financial advisor as Suresh Sadagopan, principal planner, Ladder7 Financial Advisors has said “Borrower should definitely go for One Year fixed Rate Scheme, as there will not be any significant shift of rate cycle in the next one year. However, the Two Year Scheme does not look very lucrative for a home loan buyer. Rates may fall below fixed rates in next two years, as rates are expected to come down after a year, after witnessing a year of unprecedented interest-rate hikes”

So celebrate your festival and save your money by availing these attractive Home Loan Offers 🙂

How To e-file Income Tax Return-Online Income Tax Filing-Advantages And Disadvantages Of e-filing Of Income Tax Return

Sahaj & Sugam – New IT Return Forms. Can download from the website www.incometaxindiaefiling.gov.in and print as per colour specifications. Due date – 31st July 2011.

I am sure, most of you must have got this group-message via email, which was sent by Indian Government to all tax-payers, whose had their mobile numbers updated with Income Tax Offices. Now we all are making our loan-payments online, paying the electricity bills online, so why should filing Income Tax Returns be an exception? Yes, You heard it right, you can e-file your income tax return !! No need to seek an appointment with a CA(Chartered Accountant) or standing in a long queue outside Income Tax Offices, you can do it sitting right inside your home. This article lists out the complete process on how to go about filing your income tax returns online.

E-FILING PROCESS:

  1. First of all, You have to select an appropriate type of Income Tax Return FormIt varies from individual to individual depending on whether you are a Salaried Individual or Business-Owner or a Partner in a Partnership Firm etc.
  2. Once you have selected the right type of Income Tax Return Form, please download the corresponding Income Tax Return Preparation Software. Please fill the Income Tax Return Form with all relevant details regarding your Income/Taxes/Losses etc offline. Once you are done, please validate your entries by clicking on “Check Form” button, provided at the end.
  3. Once you are sure about your Income Tax Return Form, that you filled offline, proceed to generate an XML File out of it by clicking on “Export to XML” button, provided at the end.
  4. If you are e-Filing your Income Tax Returns for the first time, you will have register as a user on https://incometaxindiaefiling.gov.in. Once you are registered by creating a user id and password, please log into the portal using your credentials. Please browse to select the XML files (generated out of your offline Income Tax Return Form) and upload it on the same site. Now you have to attach the digital signature for yourself. Once you do that, your return gets filed !!In case, you don’t have a Digital Signature of yours, you need to generate a PDF file for your Income Tax Return Form and send it via courier to to Income Tax Department – CPC, Post Bag No – 1, Electronic City Post Office, Bengaluru – 560100, Karnataka(You can check out the details of IT offices, where you need to submit your Income Tax Return Forms on the same website). The post can be sent by ORDINARY POST OR SPEED POST only and that too within 120 days of transmitting the data electronically.

So this way, your e-filing process gets completed. As you can see, this is very easy to use and time saving at the same time. In case, you get into any problems, you can always contact the PRO(Public Relation Officer) of the Local Income Tax Office.

Advantages And Disadvantages Of e-filing Of Income Tax Return: As you know, earlier tax-filing used to be a very tedious process. You have to stand in long queue but now it is faster and efficient process because of e-filing. In e-filing chances of getting error is also lesser than physically filed.There is no postage charge also,so it is money  saving also.

Thus it is faster,efficient and money saving process but it has also a black hole that is security concern. There may be chances of hacking of computer system and unauthorized access to taxpayer’s files. But, I am sure those concerns have been raised elsewhere too. We are hoping that huge usage of computer and internet will make e-Filing of Income Tax Returns grow as mushroom.

Last Date of e-filing your Income Tax Return Form has been fixed as 31st July 2011

Track Your PF Provident Fund Account Balance Online

As you already know, it is too difficult and involves a lengthy process to enquire about your own PF (Provident Fund) Account. I have already mentioned it at length in one of my earlier blog posts. But, finally some good news for PF account holder. After first announcing it almost 2 years back, EPFO (Employee Provident Fund Organization) has finally said that starting 1st July 2011, PF (Provident Fund) Account related information is just a mouse click away from you, as it will be available online via an SMS to your mobile. PF(Provident Fund) related information will also include the latest transaction regarding your PF account like settlement/transfer-in/transfer-out, your current balance, employer’s contribution etc. However, this facility will be available only for a certain region of the country, at present it is available for Delhi North, Delhi South, Bangalore, Gurgaon, Laxmi Nagar (Delhi), Faridabad and Karnal.  Although, they have announced that very soon this service will be available for remaining PF offices as well.

For knowing the PF account details, please follow the following set of steps.

  • Go to site http://www.epfindia.com/MembBal.html.
  • Select the regional PF office, where your account is maintained.

  • Enter the establishment code (maximum 7 digits), extension field and account number(maximum 7 digits). If there is no extension it can be left blank.
  • Now enter the name and mobile number and submit. Once done, all the relevant information with regards to your PF (Provident Fund) Account will be sent to you by SMS.

Hopefully, this initiative will please the PF Account Holders, who for long have been crying for more transparency and accessibility from government offices, in this case EPFO (Employee Provident Fund Organization)

PF(Provident Fund) Claim Process Track Your PF(Provident Fund) Claim Status

Every time, you plan to purchase an Empty Land or a Constructed House/Apartment and think of your finances, the first dilemma, that you face, is whether it is better to withdraw the money from your Provident Fund(PF) Account or to take a new Plot Loan/Home Loan. I was also in a similar situation, so before taking the final decision, I thought it’s better to go to EPFO (Employee Provident Fund Organization) Regional office, Bangalore in order to get full details, regarding the same.

I went to PF office and was surprised to see that that PF Office Name was written in Hindi. The other thing, that caught my attention was a big sign-board, which had Tomorrow Is Holiday written in bold letters, which is fair enough, given that this was a government office. After all Govt. employees are more interested in holiday than work 😉

I started searching for the Enquiry Counter, but obviously I couldn’t find it myself.  So I entered inside the building and saw few people talking to some officials in a corner. Some of them were carrying their application forms also. I knew, I was in right place. I had a list of questions to ask and gentleman at the counter promptly answered all of them. At times, I found their answers somewhat cryptic and too-brief to understand completely. But whatever information I got from PF Office, I would like to share with you.

PF Claim Eligibility:
You should have completed your service for more than 5 yrs.

Reasons for claiming the PF:
Almost every reason !! You can withdraw the PF(Provident Fund) money for purchasing the plot or flat, constructing the house, family members’ illness, marriage, post matriculation education, property damaged by natural calamity, member’s physically handicapped, financing of member’s life insurance policies.

PF Form:
You have to fill the Application FORM 31 in which you have to mention the purpose,amount and other details to withdraw the money. A Declaration Form also needs to be submitted along with Application Form 31 for purchasing a dwelling site/house/flat or reconstruction of dwelling house or for addition/alteration of the dwelling house.

Track your PF claim: 
You can track the status of PF(Provident Fund) Account Transfer and PF(Provident Fund) Money Withdrawal claims online or on mobile phone. For more details, you can refer to one of my earlier blog “Track Your Provident Fund Claim

Maximum Amount of PF that can be withdrawn:
It varies from reason to reason for which you are applying to withdraw the money. In most of the cases, you can withdraw up to 80-85% of your PF(Provident Fund) Account Balance.

How long does it take to process the PF Claim ??
 When I asked Bangalore EPFO’s Employee, I was told that it will take 2 months to process the claim. This was due to the huge backlog of pending PF forms, which need to be cleared first, before the new claims are processed. But again, it may vary depending on location of Regional EPFO Offices, where your PF Account is managed.

Inquiry about PF Balance:
You need to go to EPFO office where your PF Account is maintained, fill an application to Assistant Commissioner, in order to get details of your PF account.

Conclusion:
Before taking a decision to withdraw your PF money, you should bear in mind that you are earning about  9.5% interest rate on PF money, which is a very good, safe and guaranteed return on your investment, when compared with other investment avenues. As I have mentioned earlier, you can cite almost anything as a reason for withdrawing your PF money.  So you should always think twice before deciding to withdraw. Just think of some critical situations, for example, loosing your job due to market recession or having caught a critical disease, which is not covered by your medical insurance policy.  In such cases, banks will not oblige you with a loan, but your Provident Fund will be your savior.