Month: March 2021

Tips to reduce your home loan EMI

When you avail a home loan, the interest rate you pay and the loan’s tenure are the two major factors that determine the amount of equated monthly installment (EMI) you will bear. Here are few tips about how a new or current home loan borrower can effectively reduce their EMI load.

For fresh borrowers

The first step in lowering your home loan EMI is to find a lender that provides a loan at a cheaper rate of interest. That being said, figuring out how to get a home loan and from which lender can be difficult. Furthermore, you may not always be able to determine which lender is providing a cheaper home loan bid. Here are a few suggestions that will help you get a decent offer on a home loan and, as a result, lower your EMI payments.

• Going online is also one of the fastest ways for home loan applicants to compare home loan offerings. There are a number of websites and internet portals that provide a summary of the interest rates, charges, and other costs charged by various lenders. As a result, do your analysis before applying for a home loan to obtain the best possible offer.
• When you choose a longer term, you will end up spending more interest on your unpaid home loan debt. Before taking out a home loan, you can still determine the term and interest rate options open to you. Make the most of your EMI payments, but just as many as you can afford to spend per month. So, consider the tenure of your home loan since it will affect the amount of EMI you will have to pay per month.
• Instead of only paying the minimum necessary down payment, you should generate a higher deposit from your own wallet. The more you put down as a down payment, the cheaper your LTV ratio and loan amount needed would be, which will improve your loan eligibility and raise the odds of getting approved. However, be careful not to outlast the finances or jeopardise the accomplishment of other critical priorities when attempting to make a larger down payment.

For existing borrowers

If you already have a home loan and want to lower your EMI payments by getting a higher interest rate, there are several tactics you can use to reduce your EMI and debt load too:

• When you assume you have availed a loan with a high interest rate, you can still consider refinancing it. Banks typically have interest rates dependent on the MCLR system, which varies by lender. In this case, you can turn to a lender that offers cheaper rates.
• Prepaying a portion of your loan reduces the overall loan balance and, as a result, the total interest due. As a result, either the EMI amount or the repayment period will be shortened. Lenders typically allow you to pay in advance your unpaid home loan balance in whole or in part. If you pay in advance a portion of your loan, you can minimize the EMI payments by agreeing with the lender.

Tips to improve your home loan eligibility

Checking the eligibility requirements when comparing home loan plans and rates are a must and first. Check the eligibility requirements when comparing home loan plans. That being said, you may stumble out with a loan that you think is right for you, but not for your eligibility. By following the below-listed tips you can boost your home loan eligibility.

• Just because you have taken out a loan, please ensure you have paid off all the EMIs. Before accepting the loan, the bank will verify to see if you have any other outstanding debts. If the debt-to-income ratio is lower, you’re more likely to be given a home loan at cheaper rates.
• Before approving you for a home loan, the lender will run a background check on you. If you have a poor credit score, the bank will either refuse your home loan application or grant you one with a higher rate of interest. As a result, before applying for a home loan, make sure you strengthen your credit score by paying all of your EMIs, credit card payments, and other bills on or before the deadline.
• When applying for a home loan, it is advised that you choose a longer repayment period. Despite the fact that the overall amount of interest payable will rise, the total amount of EMI you will reimburse will decrease significantly.
• Rather than just taking out a home loan on your behalf, it is advised to take a home loan jointly. It’s definitely a smart idea to have your spouse as a co-applicant if you’re married. It will not only help you improve your eligibility, but it will also provide you with other perks. Taking out a loan with a co-applicant would allow you to get a higher loan amount with lower interest rates. You and your wife will also benefit from the tax advantages that come with paying home loan EMIs.
• If you can reveal that you have a secondary source of income, your chances of getting a home loan rise. In case you generate additional revenue apart from your job, you can use it to increase your eligibility to apply for a home loan plan of your preference.

Taxation on home loan

When you purchase a house with a home loan, you get a lot of tax incentives that will help you save a great deal of tax outgo. We have covered more about the same below.

Tax benefit on interest payout- A home loan must be used to buy a home, and the house must be finished within 5 years of the end of the fiscal year in which the loan was granted. If you’re paying an EMI on a home loan, there are two parts of it: interest and principal repayment. Section 24 allows you to subtract the interest component of your EMI paid for the year from your annual income up to a limit of Rs 2 lakh. The overall deduction for interest charged on self-occupied house property is Rs 2 lakh from Assessment Year 2018-19 onwards. There is no maximum amount of interest that can be claimed on rented property.

Tax benefit on principal repayment- Section 80C allows you to deduct the principal part of the EMI for the year. The amount that can be claimed is limited to Rs 1.5 lakh. However, the house property must not be sold after 5 years of ownership in order to assert this deduction.

Tax benefit on stamp duty and registration fees- Apart from the deduction for principal reimbursement, an exemption for stamp duty and registration fees can also be sought under section 80C, but only up to Rs 1.5 lakhs in total.

Tax benefit under section 80EE– Homebuyers are eligible for an additional deduction of up to Rs 50,000 under Section 80EE. To qualify for this deduction, the loan sum must be less than Rs 35 lakhs and the property valuation must not surpass Rs 50 lakhs. The loan must have been approved between April 1, 2016 and March 31, 2017. And the individual does not own any other property at the time the loan is approved.

Tax benefit under section 80EEA- In the 2019 budget, an additional deduction of up to Rs 1,50,000 has been added under Section 80EEA for home buyers. The stamp value of the property must not exceed Rs 45 lakhs to qualify for this deduction. The loan must have been sanctioned between 1 April 2019 to 31 March 2020 in order to avail this tax benefit.

Tax benefit in case joint holders- Both of the loan holders can subtract up to Rs 2 lakh in home loan interest and up to Rs 1.5 lakh in principal repayment u/s 80C in case of a joint home loan. They must also be co-owners of the house taken on loan to be eligible for this exemption. As a result, if you take out a loan for your family, you will be able to claim a higher tax advantage.

Home Loan Rates

Currently, in the home loan category two banks i.e. Kotak Mahindra Bank with 6.65% and State Bank of India (SBI) with 6.75% are providing the cheapest interest rates which are valid until March 31, 2021. ICICI Bank entered the group, reducing its rates to 6.70 percent for loans up to Rs 75 lakh and 6.75 percent for loans above Rs 75 lakh. For data collection, all mentioned public/private sector banks and HFCs that provide the cheapest rates on home loans up to Rs 75 lakh are considered here. Banks and HFCs are classified in increasing order by the interest rate in their respective segments, with the bank/HFC providing the cheapest rate on a home loan of Rs 75 lakh at the top and the highest at the edge.

Sr No.	Banks & HFCs	ROI in % per annum
1	Kotak Mahindra Bank	6.65
2	State Bank of India	6.75
3	HDFC Bank	6.75
4	Citibank	6.75
5	ICICI Bank	6.75
6	Tata Capital	6.8
7	Punjab National Bank	6.8
8	Bank of India	6.85
9	Central Bank of India	6.85
10	Bank of Baroda	6.85
11	Canara Bank	6.9
12	Punjab & Sind Bank	6.9
13	Union Bank	6.9
14	Axis Bank	6.9
15	UCO Bank	6.9
16	IDBI Bank	6.9
17	Bank of Maharashtra	6.9
18	LIC Housing Finance	6.9
19	Bajaj Finserv	6.9
20	Sundaram Home Finance	6.9

Gold ETFs

Gold ETFs are similar to purchasing gold in an electronic format. These funds are traded on different exchanges, and if you have a Demat account, you can purchase them. You can buy Gold ETFs in the same way you buy stock shares.

How to Buy Gold ETF?

Physical gold bars with a purity of 99.5 percent are used to represent gold ETFs. Prices for gold ETFs can be found on the BSE/NSE website and can be purchased or sold at any time via a stockbroker. Gold ETFs, unlike gold jewelry, can be purchased and sold at the same price throughout India. ETFs that invest in gold are listed on exchanges and can be purchased and sold using a Demat account. Here are some of the Gold ETFs on NSE

Benefits of investing in Gold ETF

The gold’s purity is assured, and each unit is backed by high-purity physical gold.

Gold is a tax-efficient investment since the income gained from it is viewed as a long-term capital gain.

ETFs are a good choice for investors looking to diversify their portfolios since they guarantee returns amid market uncertainty.

There is no income tax, security transaction tax, VAT, or sales tax.

There is no risk of theft since the units are held in a Demat. One also saves on the cost of a safe deposit box.

Loans can be secured with ETFs. No entry and exit load.

How many units/grams can you redeem?

You get the cash equivalent of your gold ETFs when you sell them on the exchange. However, in order to withdraw from a mutual fund, the number of units must be equal to the creation unit value, whether in cash or the form of actual gold.

The minimum quantity of gold or gold ETF units that an investor can buy or sell directly from a fund house is known as the creation unit size.

Since one unit of a gold ETF is usually equal to one gram of gold, the creation unit size is usually 1,000 units. So, if your fund’s creation unit size is 1,000, you can buy and sell in multiples of 1,000.

How to sell or redeem Gold ETF?

Using a Demat account and a trading account, gold ETFs can be sold on the stock exchange via a broker. ETFs are better used as a method to profit from the price of gold rather than to gain access to real gold since they are backed by physical gold. When anyone liquidates Gold ETF Units, they are paid at the domestic gold market price.

If one keeps the equivalent of 1kg of gold in ETFs or multiples thereof, AMCs also allow redemption of Gold ETF Units in the form of physical gold on the ‘Creation Unit’ scale.

You must contact the fund house and submit a redemption request, as well as notify your depository participant (DP) to move the requisite number of units to the fund house’s DP account. Some fund houses use a different procedure, requiring the investor to send a repurchase request number (RRN) through his or her depository partner (DP) in order to relinquish units. The RRN is forwarded to the fund manager.

Who Should Invest in Gold ETF?

Gold ETFs are ideal for investors who wish to invest in gold but do not want to invest in physical gold due to the storage hassles, doubt about the purity of gold, and are also looking to get tax benefits. There is no premium or making a charge, so investors stand to save money if their investment is substantial.

Popular Gold ETFs in India

Name	Symbol
Axis Gold ETF	AXISGOLD
Birla Sun Life Gold ETF	BSLGOLDETF
Canara Robeco Gold ETF	CANGOLD
HDFC Gold Exchange Traded Fund	HDFCMFGETF
ICICI Prudential Gold Exchange Traded Fund	IPGETF
IDBI Gold ETF	IDBIGOLD
Kotak Gold Exchange Traded Fund	KOTAKGOLD
SBI Gold Exchange Traded Scheme	SBIGETS
Quantum Gold Fund (an ETF)	QGOLDHALF

Key benefits of NPS Tier 2 account

Because of the advantages that the account provides, many investors choose to open a Tier 2 NPS Account. Some of the benefits of NPS Tier 2 account are as follows:

• There are no additional annual maintenance fees to cover.
• Since the account provides for quick and efficient withdrawals with no exit load, you can use it to cover your immediate crisis and regular expenses.
• You can transfer funds from your NPS Tier 2 account to your NPS Tier 1 account at any time.
• In the NPS Tier 2 Account, there is no provision to hold a minimum balance.
• In the event of your death, you can nominate someone to receive the account proceeds.
• Tier 2 NPS accounts can be managed in the same way as Tier 1 NPS accounts.

Eligibility required to open an NPS Tier 2 account

The following eligibility requirements must be met in order to open a Tier 2 NPS account:

• You must be a resident Indian between the age group of 18 and 60.
• You must be assigned a Tier I Account and a PRAN number to open a Tier 2 account.
• No requirement of minimum and maximum deposit amount
• For government employees, the NPS Tier 2 account has a three-year lock-in period. Whereas no lock-in period for private-sector employees.

NPS Tier 2 investment choice

When you open a Tier II NPS Account, you have two investment options to choose from:

Active Choice allows you to invest in one of the available investment funds. Auto Choice is a mechanism in which you simply pick your risk tolerance and the scheme allocates your investment to various funds depending on your age and risk attitude. When you get older, your holdings are reallocated so that your equity allocation gradually decreases and your debt exposure gradually increases. This helps you to shield your gain from market fluctuations. Below are the four funds that are eligible for investment:

• Asset Class A is a kind of asset that invests in alternative instruments.
• Except for government securities, Asset Class C invests in fixed income instruments.
• Asset Class E invests in equity
• Asset Class G invests in government securities.

Taxation on NPS Tier 2

For government employees, NPS Tier 2 qualifies for a tax deduction under Section 80C. The Tier 2 account will also have a three-year lock-in period. For private-sector employees, there is no tax exemption for NPS Tier 2, and earnings in NPS Tier 2 are still taxable as per the tax slab limit. That being said, government employees will be able to deduct their contribution in NPS Tier 2 under Section 80C.

NPS Tier 2 contribution rules

There is no minimum or maximum annual contribution to the NPS Tier 2 scheme. The initial contribution must be at least Rs 1,000. You can withdraw funds from your NPS Tier 2 account at any time. However, government employees who participate in NPS Tier 2 to get a tax exemption must contribute for three years. You have the option of selecting your own pension fund manager. After the lock-in period has expired, though, you will be able to choose between the preferred fund managers. The money put into the tax-saving Tier 2 Account will be split between equity limits between 10% to 25%, debt between up to 90%, and cash/money market/liquid MFs up to 5%.

Exit from NPS Tier 2

Further, deposits into a Tier 2 account would be prohibited if a Tier I account was closed within the lock-in period of a Tier 2 account. Following the end of the lock-in duration, the Tier 2 account will be closed as well. By signing in to your NPS account online at enps.nsdl.org, you can apply to close your Tier 2 account. You can also close your NPS Tier 2 account by completing an account closing form and submitting it to your closest NPS Point-of-Presence.

How to make withdrawal from NPS Tier 2 account?

Exiting/withdrawing from the NPS account entails closing the account and getting the account balance. According to the PFRDA, an exit must be for one of the below-listed reasons:

Standard superannuation: Under this, 40% of the corpus must be used to buy an annuity that offers the subscriber pension benefits and the remaining balance as a lump sum is paid to the subscriber. The subscriber can make a full withdrawal if the account’s cumulative amount is less than or equal to Rs.2 lakh on the date of retirement.

In case of death of the subscriber– A limit of 80% of the account balance must be used to buy an annuity that delivers a monthly pension to the spouse, with the remainder paid to the nominee/legal successor as a lump sum. If the account’s total amount is less than or equivalent to Rs.2 lakh on the date of the subscriber’s demise (i.e. a government sector employee, the nominee/legal successor has the option of making a full withdrawal respectively.

In case of premature withdrawal- A limit of 80% of the corpus must be used to purchase an annuity that pays the subscriber a monthly pension, and the remaining balance must be provided to the subscriber as a lump sum. The subscriber would be able to make a full withdrawal if the cumulative balance in the account is less than or equal to Rs.1 lakh on the date of resignation.

How to open an NPS Tier 2 account online?

Follow the below-covered steps to open an NPS Tier 2 account online:

• Visit National Pension system (eNPS) and click on “Tier II activation”
• After selecting Tier II activation, a new window will appear, prompting you to enter required specifics such as PRAN, date of birth, and PAN. To receive an OTP on your registered mobile number, click on the ‘Verify PRAN’ button.
• Click on ‘Continue’ after entering the received OTP in the required space.
• Click on ‘Validate Aadhaar’ upon entering your bank account details.
• On the screen, an acknowledgment number will appear. Make a note of the number and then click ‘OK.’
• Select a Pension Fund Manager (PFM) and an investment option, such as Auto or Active, from the drop-down menu and select ‘Save and Proceed’.
• Click on ‘Save and Proceed’ after entering the nominee’s specifics.
• A scanned copy of the PAN card and a cancelled cheque must be uploaded. Click ‘Upload’ once the documents are ready.
• Make a contribution to the NPS Tier-II account. It’s worth noting that the account’s minimum investment balance is Rs.1,000.
• The payment will be confirmed with a receipt. Now use your Aadhaar number to e-sign the application upon which you will receive an OTP your Aadhaar-linked mobile number.
• Authenticate the received OTP by entering it in the required space and click on ‘Submit’
• After successfully e-signing the application, download it, print it, sign it, and send it to NSDL’s head office in Mumbai via certified post.

NPS Tier 2 Returns

The rate of return on NPS Tier 2 is not set. It generates return by investing in equities, corporate bonds, government bonds, and alternative investments, among other asset groups offered by the NPS. The following return rates are as of March 2021, (source: NPS Trust).

Scheme E Tier 2
Pension Fund	1 Year Returns	3 Year returns	5 year returns
Aditya Birla Sun Life Pension Management Ltd.	32.32%	12.61%	NA
HDFC Pension Management Co. Ltd.	33.12%	13.66%	16.52%
ICICI Pru. Pension Fund Mgmt Co. Ltd.	33.52%	12.71%	15.16%
Kotak Mahindra Pension Fund Ltd.	31.73%	11.79%	15.02%
LIC Pension Fund Ltd.	33.86%	10.93%	13.70%
SBI Pension Funds Pvt. Ltd	32.54%	12.19%	14.92%
UTI Retirement Solutions Ltd.	35.23%	12.58%	15.32%
Benchmark Return as on 05/03/2021	34.92%	13.63%	15.96%

Scheme C Tier 2
Pension Fund	1 Year Returns	3 Year returns	5 year returns
Aditya Birla Sun Life Pension Management Ltd.	8.13%	9.68%	NA
HDFC Pension Management Co. Ltd.	8.61%	10.20%	9.86%
ICICI Pru. Pension Fund Mgmt Co. Ltd.	10.03%	9.81%	9.55%
Kotak Mahindra Pension Fund Ltd.	7.70%	9.51%	9.29%
LIC Pension Fund Ltd.	11.97%	10.71%	9.83%
SBI Pension Funds Pvt. Ltd	8.65%	9.82%	9.42%
UTI Retirement Solutions Ltd.	8.23%	9.59%	9.20%
Benchmark Return as on 05/03/2021	10.89%	10.84%	9.97%

Scheme G Tier 2
Pension Fund	1 Year Returns	3 Year returns	5 year returns
Aditya Birla Sun Life Pension Management Ltd.	5.97%	11.07%	NA
HDFC Pension Management Co. Ltd.	6.06%	11.21%	10.04%
ICICI Pru. Pension Fund Mgmt Co. Ltd.	5.78%	10.87%	9.94%
Kotak Mahindra Pension Fund Ltd.	5.83%	10.73%	9.76%
LIC Pension Fund Ltd.	5.40%	13.01%	11.22%
SBI Pension Funds Pvt. Ltd	5.98%	10.90%	9.98%
UTI Retirement Solutions Ltd.	5.76%	10.89%	9.72%
Benchmark Return as on 05/03/2021	4.46%	10.55%	9.08%