are once again in news and there has been given a buy today call given on the counter i.e. at price levels of Rs. 385-390 per share. In the long term, the share price of the PSU lender is expected to scale to Rs. 600, which is an over 50% run.
This PSB Stock Has The Potential To Offer Up To 50% Return
S&P’s Saurabh Jain is of the view that SBI share price has been edging higher ever since the Budget 2021. This is owing to Narendra Modi’s government’s focus on the profitability of the PSUs. At various occasions, the government has made clear its intent that it is going to pare its stake in all loss making PSUs. Also, of late the bank has done well at the retail level, which is also a boost for the stock of the PSB lender. And the stock of SBI is in fact the preferred pick from the space.
Also, as per the Morgan Stanley report which has for the first time in 13 years initiated an holistic coverage on PSBs there is a case for bad loans moderating going forward for these lenders. Moreover their balance sheets have been improving. Moreover,three back to back quarters of good financial numbers for the PSBs have increased their appeal.
Talking in particular about the State Bank of India counter:
“SBI’s performance has been strong with NIMs in spite of high liquidity sustaining at 20bps higher than FY20 levels and highest NIMs in last six years. Through the last 1-2 years SBI has cut its SA rates by 100bps and still sustained CASA ratio of 45%”, said CLSA.
Also, it views that the current re-rating in the counter should continue and the counter of SBI remains a deep-value opportunity and lists out three reasons for the same:
1] SBI is among the biggest beneficiaries of the benign corporate credit cycle;
2] Unlike its peers SBI over the last decade has gained market share both in its deposit and loan portfolio.
3] ROAs of 90bps will be comparable to the FY10-14 cycle.
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Re-issue of 6.66% Tamil Nadu SDL 2030 Issued on August 26, 2020
11.
Telangana
1050
1050
7.20
30
12.
Tripura
61
61
7.29
15
13.
Uttar Pradesh
5500
5500
7.17
10
14.
West Bengal
2000
2000
7.25
20
Total
21673
22173
* Gujarat has accepted an additional amount of ₹500 crore. ** Maharashtra has accepted an additional amount of ₹500 crore. *** Punjab has not accepted any amount in the 15 year security.
Asset Reconstruction Company (India) Ltd (Arcil) on Tuesday announced the appointment of Pallav Mohapatra as its Chief Executive Officer and Managing Director.
Prior to the appointment, Mohapatra was the MD and CEO of Central Bank of India (CBoI) from September 21, 2018, to February 28, 2021. Before being elevated as MD and CEO of CBoI, he was Deputy Managing Director, Stressed Assets Management Group, State Bank of India.
Vinayak Bahuguna headed Arcil as MD and CEO for five years till June 2020.
Anil Gorthy, Chairman, Arcil, in a statement, said Mohapatra brings with him years of seasoned banking insight and a wealth of experience in the industry, particularly management of stressed assets.
Arcil, which was set up in 2002, currently has assets under management (in non-performing loans) of ₹12,000 crore, according to the statement.
Utkarsh Small Finance Bank which has filed preliminary papers with markets regulator Sebi to raise Rs 1,350 crore through an initial share sale, has the lowest bad loans ratio among peers.
The bank’s deposits and disbursements grew at a CAGR of 54.48 per cent and 33.66 per cent, respectively during FY18-20.
The lender’s gross loan portfolio has grown at 44% CAGR since its start in FY18.
Loan book has remained stagnant in the last six months till September due to the pandemic, in line with its peers such as AU Small Finance Bank Ltd and Equitas Small Finance Bank Ltd.
Its gross non-performing assets are down to 0.71% as of March 2020 from 1.85% two years before that, but up from 0.64% in September 2020. About Rs 26.9 crore loans were not labelled as bad due to the Covid moratorium.
Collection efficiency
Collection efficiency is down with the bank able to collect 79.28% of its dues as against 90-95% rate before the pandemic.
The bank has the lowest level of bad loans among peers and is better poised to show faster improvement once the pandemic ends.
Deposits
The bank’s deposits grew by 14% during April-September with the share of its low-cost CASA deposits going up to 14.46% as of September, which will help in margins.
While the portfolio is dominated by microfinance assets, growth in newer segments has risen and the bank’s main focus is to diversify the asset portfolio.
The issue
The Initial Public Offer (IPO) comprises a fresh issue of equity shares worth Rs 750 crore and an offer of sale to the tune of Rs 600 crore by promoter Utkarsh Coreinvest Ltd, according to the Draft Red Herring Prospectus (DRHP) filed with Sebi.
The Varanasi-headquartered lender said it may also consider raising Rs 250 crore through a pre-IPO placement which would be in consultation with the lead managers to the issue.
The utilisation
The Proceeds from the fresh issue would be utilised to augment the Tier 1 capital base to meet future capital requirements.
As on September 30, 2020, the small finance bank across 528 banking outlets served 2.74 million customers, majorly located in rural and semi-urban areas in Bihar, Uttar Pradesh and Jharkhand that have a significant untapped market.
The company had been offering UPI services in India through Truecaller Pay.
The app had begun notifying users of the decision two weeks ago, it told LiveMint. “As per guidance from regulators, we gave two weeks’ notice to users,” a Truecaller spokesperson said as quoted by the report.
As per a notice sent to users by Truecaller as cited in the Medianama, users will no longer be able to transfer money, recharge or pay bills on the platform.
Their Truecaller UPI ID will be deregistered after ensuring zero-settlements with partner banks.
“All your data including transaction history, account information and other sensitive information related to UPI will be deleted from Truecaller systems after a statutory period of 180 days as directed by regulatory authorities,” read the notice.
The company further directed users to create UPI using their bank’s mobile app, BHIM UPI or other third-party apps.
A Truecaller spokesperson told LiveMint that the company was now focusing on “other opportunities” where it can serve the community well.
“The potential impact of such investment would be significantly higher compared to that of payments where many companies are already contributing. To summarise, this is a strategic decision to deprioritise payments, and focus on products and solutions that can help create significantly more impact in areas like communication, trust and safety,” the spokesperson said as quoted by Mint.
Truecaller Pay had nearly two crore registered UPI users at its peak during mid-2020, as per the report. Its banking partners included ICICI Bank and Bank of Baroda.
The discontinuation of the UPI service will however not impact its lending operations. Users will be able to avail loans whenever they require it. The platform will continue to focus on its lending operations through its partnership with various non-banking financial companies (NBFCs), as per reports.
Truecaller recently also launched a new app called Guardians focusing on personal safety.
Fitch Ratings expects a moderately worse sector outlook for Indian banks for the next fiscal based on muted expectations for new business and revenue generation, and deteriorating asset quality.
The disproportionate shock to India’s informal economy and small businesses, coupled with high unemployment and declining private consumption, have yet to fully manifest on bank balance sheets, it said.
The impact of the Covid-19 pandemic is likely to pose challenges to Indian banks‘ improving financial performance once asset-quality risks manifest in the financial year ending March 2022.
Forbearance help
Indian banks reported lower impaired loans and improved profitability for the nine months ended December 2020 due to various forbearance measures and continued large write-offs. Indian banks – particularly state banks – remained more risk-averse than in prior years, which was reflected in their weak credit growth.
The state’s less-than-adequate recapitalisation plans for its banks further underscores the risk, which will likely keep risk aversion high among banks amid continuing uncertainty about asset quality and an uneven economic recovery.
As the forbearance measures unwind, Fitch expects Indian banks to reverse the improvements in asset quality and profitability, with state banks more vulnerable to higher stress than private banks, which have better profitability and higher contingent reserves and capitalisation.
Public sector banks also have limited core capital buffers in the event of further asset stress, which is unlikely to be remediated solely via the state’s planned capital injections of USD 5.5 billion.
The plan is well below Fitch’s estimated capital requirement of USD 15 billion to USD 58 billion under varying stress scenarios.
“The strategy to either not lend or lend only to capital-efficient sectors is likely to continue as low market valuations leave state banks with limited scope to access fresh equity on their own,” Fitch added.
Shallow growth
It projects India’s GDP growth at 11 per cent in the next fiscal. The faster-than-expected GDP rebound in the December quarter is positive, but many sectors continue to operate well below capacity.
Besides, the decline in private consumption, and reports of rising urban utility-bill defaults and social security withdrawals point towards stress among retail customers.
“Fitch believes that the SME sector faces a litmus test in FY22 as short-term credit support extended in FY21, which, in our view, deferred the recognition of stress, comes up for refinancing,” Fitch added.
The Finance Bill, 2021 proposes to create one or more DRCs explicitly aimed at small taxpayers with the aim of allowing them to settle their conflicts with the least amount of expense and enforcement burden possible. The DRC has the authority to limit or waive any penalty imposed by the Income Tax Act of 1961 (“the Act”), as well as grant protection from prosecution.
The Finance Bill of 2021 also gives the Central Government the authority to make a scheme for DRC conflict settlement by notifying it in the Official Gazette. By removing interfaces to the extent technologically feasible, optimising resource use, and implementing complex authority, the scheme would improve performance, openness, and accountability.
Board for Advance Rulings (BAR)
The Authority for Advance Rulings (AAR) was established by incorporating a new Chapter XIX-B into the Finance Act of 1993 in order to prevent disputes over tax liability assessments and provide tax certainty. The Finance Bill, 2021 proposes to replace the AAR with one or more BARs for granting advance rulings under the Act, in order to improve the efficiency of advance rulings.
The Finance Bill of 2021 also proposes to empower the Central Government to make a scheme by notification in the Official Gazette for the purpose of giving advance ruling by BAR to impart greater efficiency, transparency, and accountability by eliminating the interface between the Bar and the applicants to the extent technologically feasible, optimising resource use, and introducing dynamo technology.
Interim Board for Settlement (“Interim Board”)
With effect from 01.02.2021, the Finance Bill 2021 proposes to abolish the Income-tax Settlement Commission (ITSC). The Interim Board, which will be established by the Central Government, will decide on the pending cases for settlement. Furthermore, the Finance Bill of 2021 proposes to allow the Central Government to make a scheme for the settlement of pending Interim Board applications by notification in the Official Gazette, in order to improve performance, transparency, and accountability.
Faceless Income-tax Appellate Tribunal (ITAT)
The Finance Bill of 2021 proposes to empower the Central Government to notify a scheme for the disposal of appeals by the ITAT in order to improve efficiency, transparency, and accountability by removing the interface between the ITAT and the parties to the appeal in the course of proceedings to the extent technologically feasible, and optimising resource use through eco-friendly measures.
Many first-time home buyers often remain confused about the Income Tax benefits that they can avail on home loan after the purchase of their first residential property. If you are buying home first time, you are entitled to get Income Tax benefits on home loan under three sections- Section 80C, Section 24 and Section 80EEA of Income Tax Act. These sections of Income Tax Act let you avail home loan benefit of Rs 5 lakh annually. Let’s understand with this detailed chart of Income Tax sections: –
Section
Maximum Tax Benefits(Rs)
Tax saving component
Conditions
80C
1,50,000
Home Loan Principal and Stamp Duty
Property should not be sold within 5 years of possession
Section 24
2,00,000
Home Loan Interest
Income Tax assessee or any family member should be living in that house
– Full interest can be claimed if house is on rent
80EEA
1,50,000
Home Loan Interest
-Stamp duty value of property should be up to Rs 45 Lakhs
– Loan sanction date should be between 1st Apr 2019 to 31st Mar 2022
– Assesse should not own any residential property till sanction of loan.
– Should not be claiming any amount under income tax section 80EE.
– Loan should be borrowed from Financial Institution only.
Now, let’s consider a scenario that you have purchased a property in April 2021, property value is Rs 50 Lakhs and you have taken 80% loan i.e. Rs 40 lakhs on it from a financial institution (Bank or NBFC) at interest rate of 7% for 20 years. Now your monthly EMI would be around Rs 31,000 and you have to pay a total amount of Rs 3,72,000 in first year, out of which Rs 2.77 lakhs is interest component payment and Rs 95,000 is principal component amount. Suppose your annual earning is Rs15 Lakhs annually, in that case you can claim Rs 95,000 (principal payment) deduction under 80C (remaining Rs 55000 of 80C can be claimed from stamp duty payment, valid for only first year), Rs 2,00,000 under section 24 and remaining Rs 77,000 interest amount under Section 80EEA.
So, first year you can take tax deduction benefits of Rs 4.27 lakhs. Moreover, principal and interest paid components against home loan EMIs change every year, so it is suggested that check it in advance before you do your tax planning.
Tax benefits for second time home owner: If you already own a property and wish to buy another then tax benefits under 80EEA cannot be claimed. In the above example now you can claim Rs 95,000 under 80C (plus 55000 Rs. against stamp duty paid in first year) and 2,00,000 Rs. under Section 24. However, if the purpose of home is investment and you want to lease it on rent, in that case you can claim full amount of interest component in section 24, which is Rs 2.77 lakhs in above case.
If woman member of the family invests in house: As per income tax laws, there are no specific benefits in case a woman invests in house. She can claim all the above mentioned benefits under income tax laws similar to man. However, some state governments have given 1%-2% benefit of stamp duty if woman is the owner of house. Like in Rajasthan, if you buy a house of amount Rs 40 Lakhs then in general case the stamp duty (including other charges) is 8.8% which is Rs 3,52,000, but if any a female member of the family buys this house then she has to pay 7.5% stamp duty, which is Rs 3,00,000. So, there is one-time saving of Rs 52,000 if a woman buys the same house.
Tax benefits for husband-wife or joint purchase: If both husband and wife purchase house jointly, the income tax benefit rules remain the same in that case, however, both husband and wife can claim tax benefits in their individual files. Maximum deductions benefits cannot cross the actual amount paid, i.e. both husband and wife cannot take benefit of same payment. For example, the interest component is Rs 2.77 Lakhs and husband has taken tax deduction benefit of Rs 2 Lakhs under Section 24, then wife can only take benefit of Rs 77,000 under section 24, benefit taken against interest component can never cross Rs 2.77 lakhs, which is the actual paid amount. Similarly, Rs 95,000 is paid against principal payment, so if they want to take benefit under Section 80C so either husband or wife can take full benefit of Rs 95,000, if they want, they can split the amount as per their tax planning, but full amount benefit cannot be taken in both accounts.
Authored by – Ravi Signal, Vice Chairman, GCL Securities Limited
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Individuals and HUFs can claim a tax exemption of up to Rs.1,50,000 in a financial year by investing in tax-saving fixed deposits with banks. This deposit, however, cannot be withdrawn early. However, you can take out loans against your FDs, which is a plus. The interest gained on these deposits, though, is taxed according to the individual’s tax slab rate. Also, after paying a 10% LTCG tax on income above 1 lakh, ELSS has the ability to outperform other tax-saving strategies in terms of returns. Under the terms of Section 80C of the Income Tax Act of 1961, both tax-saving FDs and ELSS have tax deductions. These instruments’ returns, on the other hand, are taxed accordingly. Because interest is applied to your net revenue and taxed as per your tax slab rate, tax-saver FDs are not so attractive as ELSS when it comes to seek tax benefits for individuals under higher tax brackets. ELSS is a good option for long-term investors with a higher risk tolerance attitude. Tax-saving FDs are a good option for individuals nearing retirement because they have low risks and assured returns. ELSS, on the other hand, is better for those who desire both wealth creation and tax gains. However, you must weigh considerations such as the age, investment tenure, and risk appetite before embarking on new investments.
ELSS vs PPF
Both the LSS and the PPF are excellent tax-saving investment vehicles. While risk-averse investors prefer to put their money towards PPF, conservative investors prefer to put their money towards ELSS. Over the long run, equity has been the highest performing fund. Double-digit returns are popular in ELSS schemes. But for the fourth quarter of FY 2020-21, PPF is actually offering a 7.1 percent interest rate which makes it a risk-free choice backed-by the government of India. Under Section 80C of the Income Tax Act, 1961, contributions to ELSS of up to Rs.1,50,000 a year are tax-free. If your gains surpass Rs.1 lakh a year, you’ll have to pay a 10% LTCG tax. However after the three-year lock-in period has ended, you can continue to invest in ELSS. But compared to a fixed deposit or a PPF, the risk associated with ELSS is higher. Under Section 80C of the Income Tax Act, 1961, you can subtract up to Rs.1,50,000 a year for contributions made into your Public Provident Fund account. A PPF account should be locked in for a minimum of 15 years. After the lock-in duration, you can extend it for another five years. PPF and ELSS are both outstanding tax-saving vehicles. Furthermore, as an investor, you must choose which one to choose or whether to invest in both. The possibility of premature withdrawal is an important factor to remember. While the PPF allows for a 50% withdrawal after the five-year lock-in duration, the ELSS does not approve partial withdrawals. You’ll have to wait until the three-year lock-in cycle is over. You can invest in any of them as an investor depending on your risk profile, which is your skill and personal initiative.
ELSS vs NPS
ELSS and NPS are two totally separate products with entirely different goals, but when it comes to deciding where to invest, we are always torn between the two. This is due to the fact that they are both equity-linked products that can be deducted under section 80C of the Income Tax Act. Under ELSS the maturity period comes with a tenure of 3 years. Alternatively, at the age of 60, 60% of the tax-free corpus can be withdrawn however 40% must be paid as a taxable annuity. Furthermore, ELSS funds are ideally fit for building long-term capital. ELSS are completely equity funds that invest almost entirely in equities over time, with nearly 95-100 percent. But on the other side, NPS holders will only have a maximum of 75% equity in their NPS portfolio allocation, with the remainder being debt. Furthermore, such a high degree of equity allocation is only open to people under the age of 35 who prefer the NPS Active option. Though you can spend as much as you like in ELSS funds, the tax-free amount is capped at Rs 1.5 lakh per financial year. If opposed to other tax-saving investments, ELSS funds have a distinct benefit of decent returns and tax benefits. National Pension Scheme (NPS) on the other hand is a government-backed scheme that investors consider for their retirement. NPS investments qualify for a tax deduction of Rs 1,50,000 under Section 80C of the Income Tax Act, as well as an additional Rs 50,000 deduction under Section 80CCD (1B). Amounts deposited in an ELSS cannot be withdrawn early. Whereas, under the NPS, you can withdraw early if you meet certain criteria to buy an annuity. ELSS has always been the better investment alternative, despite the fact that NPS offers tax benefits of up to Rs 2 lakh per year, while ELSS offers tax benefits of up to Rs 1.5 lakh. For a three-year lock-in cycle, the latter allows stability and the ability to gain better returns over the long run.
Conclusion
When determining which choice is best for saving taxes under Section 80 C, the investor must stick to the basics of risk profile, financial targets, returns and so on. A wise and experienced investor will still diversify his or her portfolio and maintain a diverse portfolio. It is critical to choose a scheme based on expected returns, risk tolerance, and investment time period. Tax planning is an important component of personal finance, and it’s critical to choose a strategy that suits the risk profile and liquidity requirements. Hence, it is recommended to consider the benefits and drawbacks of an investment vehicle first when making a decision.
