Category: Personal Finance

Benefits of opening a savings account

A savings account is the most common kind of bank account. It’s a form of account that helps you to prepare and control your finances. Although a savings account has many perks, it just pays a low annual interest rate. Opening a savings account, on the other hand, has several advantages. Let us learn about them. Below are some of the advantages of maintaining a savings account:

• One of the core advantages of maintaining a savings account is the liquidity that it brings.
• Another thing to keep in mind is that each account is covered for up to Rs. 5 lakh by the Deposit Insurance and Credit Guarantee Corporation which makes it a more secure place to save your money.
• Lenders have an auto sweep facility, which instantly converts funds above a certain amount into a fixed deposit. In contrast to standard savings rates, these funds receive interest at fixed deposit rates. The depositor can reap the maximum advantages of holding money in a savings account by allowing this functionality.
• Customers can enable automatic debits for utility payments and bills at their banks. In those situations, the utilities or service provider files a request with the bank, and the bank debits the amount immediately. This is a simple means of making prompt payments using your savings bank account.
• Savings accounts can be linked to Demat accounts and other holdings, which is one of the advantages of having capital in one. Dividends and interest payments are directly credited to the bank account in such situations. This simply means that all cash flows are consolidated into a single account.
• Fund transfers from a savings account are incredibly easy. There are a variety of fund transfer options available for both online banking and mobile banking. A savings bank account holder can use NEFT, RTGS, IMPS, and UPI to transfer money from his or her account to the beneficiary.
• Interest income from a savings account is taxable under the heading of “Income from other sources.” Furthermore, Section 80TTA allows a deduction of up to Rs 10,000 on such interest income, thus interest earned in excess of Rs 10,000 is subject to taxation.

Tax deductions under 80TTA

Interest received on a savings bank account that reaches the deduction cap is taxed under the classification ‘Income from other sources’ at the taxpayer’s tax slab level. However, if you forget to report it on your ITR, you can expect to receive an income tax warning as a result. And the applicable penalty is more drastic than the tax on interest received on a bank account. Section 80TTA of the Income Tax Act enables a deduction of interest received on a savings bank account up to Rs 10,000 annually. This cap covers interest from all banks, co-operative banks, and post office savings accounts. If the interest received from these sources reaches Rs 10,000, the excess will be taxed as ‘Income from other sources.’ It’s worth remembering that the exemption under Section 80TTA is based on the total interest earned from all of your bank accounts, not per bank account. Interest earned on time deposits, such as fixed deposits, recurring deposits, or some other time deposit, is not available for the Section 80TTA deduction. On interest income from bank savings accounts, no tax is deducted at source. Senior citizens are not covered under Section 80TTA. They get a better tax break under a separate section. Senior citizens are not covered under Section 80TTA. They get a better tax break under a separate section of the law. Section 80TTB enables a senior citizen to deduct interest gained on savings deposits and fixed deposits with banks, post offices, or co-operative banks for an amount up to Rs 50,000. Even, up to Rs 50,000, there will be no tax deducted at source. This Rs 50,000 cap must be calculated individually for each deposit.

Minimum deposit amount limit

Private bank savings accounts have a minimum balance limit that ranges from Rs 500 to Rs 10,000. The banks keep this higher than public sector banks because they are more responsible for supporting services to the salaried and non-salaried individuals. The minimum balance threshold at Bandhan Bank is Rs 5,000. This is followed by the RBL Bank, IndusInd Bank, IDFC First Bank and Yes Bank with a minimum deposit balance of Rs 500-Rs 2500, Rs 1500 to Rs 10,000, Rs 10,000 and Rs 2500 to Rs 10,000 respectively. The minimum balance threshold varies between Rs 2,500 and Rs 10,000 at major private banks including Axis Bank and HDFC Bank respectively (according to the below listed table). Whereas the leading lender of the country State Bank of India is currently providing an interest rate of 2.75% p.a for account balance up to and above Rs 1 lakh.

Savings account interest rates

Small private sector banks, such as Bandhan Bank, are offering interest rates as high as 7.15 per cent in the face of declining interest rates. RBL Bank, IndusInd Bank, and IDFC First Bank bid 6.5 per cent, 6.5 per cent, and 6 per cent, respectively, on savings accounts. Whereas on the other hand, some small finance banks pay higher interest rates on savings accounts in contrast to leading private and major public sector banks. AU Small Finance Bank and Ujjivan Small Finance Bank, for example, offer interest rates as high as 7% and HDFC Bank and ICICI Bank, for example, bid only 3 per cent to 3.5 per cent interest rate. Axis Bank and Kotak Mahindra Bank are now promising interest rates of up to 4%. On their savings accounts, the State Bank of India (SBI) is paying 2.70 per cent interest and the Bank of Baroda is providing up to 3.20 per cent interest respectively.

Basic documents required to avail of the loan

Although the documents needed for these government schemes will differ from one loan scheme to another, we have compiled a list of the most common documents required for all government loan schemes:

• BluePrint of Business plan
• GST Identification number
• Details of income tax paid for the last 3 to 5 years
• Age, Address, Identity and Income Proof
• Bank statements of last 6 months minimum
• Registered business address proof
• Income Tax Return for the last 2 years
• All the documents required to apply for E-KYC
• Details of the type of loan
• List of company Directors or partners of the company
• Passport-size photographs

There are several different forms of these schemes, and modern entrepreneurs may use various online platforms and choose based on the requirement. Here are the best 6 Government loan schemes for small businesses in India:

MSME Loan in 59 Minutes

The 59-minute MSME loan, which is available via government programs, is a business capital loan for amounts ranging from Rs 10 ten lakhs to Rs 5 crore. Although interest rates are low, they will vary depending on the individual’s credit profile. The advantage of this Government loan scheme for small businesses in India is that it approves or disapproves the loan in 59 minutes rather than 30 days, which makes it much quicker, and the loan is received in 7 to 8 days if approved. TO avail of the loan, the lender must be GST-registered and IT-compliant.

Your loan amount will be determined by:

• Income/Revenue
• Repayment Capacity
• Existing Credit Facilities
• Until the final stage of loan sanction, the loan process happens without human involvement. That is why the program is called Advanced Technology Backed Loans.

MUDRA Loan

The Pradhan Mantri Mudra Yojana (PPMY) was established with the intention of “financing the unfunded.” People may get loans from Public Sector Banks (PSB), Regional Rural Banks (RRB), Co-operative Banks, Private Banks, Foreign Banks, Micro Finance Institutions (MFI), and Non-Banking Finance Companies for non-farm activities under the scheme (NBFC). Mudra is an acronym for Micro Units Development & Refinance Agency Ltd. Mudra loans are divided into three categories based on the stage of growth of the operation that requires financing and the amount required. These loans are not subsidized in any way. If the loan application is related to another government scheme that requires a capital subsidy, it will be eligible for the Pradhan Mantri Mudra Yojana as well. The Mahila Uddyami Scheme, managed by MUDRA, is a special refinance program for women entrepreneurs. Women who avail the loans from MFIs/NBFCs will get a 25 basis point interest reduction.

• Types of Mudra loan
• Shishu: Loans up to Rs 50,000
• Kishor: Loans above Rs 50,000 and up to Rs 5 lakh
• Tarun: Loans between Rs 5 to Rs 10 lakhs

SMILE (SIDBI Make In India Soft Loan Fund For MSMEs)

The loan is open to new MSMEs in the service or manufacturing industries, as well as established small businesses seeking to grow. This government loan scheme was initiated by the Small Industries Development Bank of India (SIDBI) in 2015. It aims to assist new small businesses in meeting their debt-to-equity ratio. The SMILE program’s minimum loan amount is Rs. 25 lakh. It also has a loan repayment period of up to ten years. As part of the government of India’s “Make in India” initiative, MSMEs in 25 selected sectors will receive financial assistance at reasonable interest rates. Loans will be available in the form of soft loans and term loans under the scheme.

Stand-Up India

Crafted specifically to meet the funding needs of Scheduled Caste (SC)/Scheduled Tribe (ST)/women entrepreneurs looking to start a new company. The company should be in the manufacturing, trading, or service industries. If the company would be non-individual, the controlling stake (51%) should be owned by either an SC, ST or women entrepreneur. This scheme provides at least one woman and one SC/ST borrower with a minimum of Rs. 10 lakh and a maximum of Rs. 1 crore per branch. Stand-Up India accounts for 75% of the overall project costs, including machinery and facilities as well as working capital.

Credit Guarantee Scheme (CGS)

To provide affordable loans to the MSME industry, the government created the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). MSMEs can get up to Rs. 2 crores in terms of working capital loans under this scheme. The CGS loan is another unsecured government business loan that does not require you to give any assets or guarantee any property in order to obtain a loan. Under the Credit Guarantee Scheme of the Credit Guarantee Fund Trust for Micro and Small Enterprises, a limit of Rs. 2 crores can be covered (CGTMSE). Established and new companies are also eligible for coverage under the program. This government-subsidized business loan also has options for micro, small, and medium-sized businesses. This loan gives a substantial portion of the loan sum as a guarantee. The Guarantee Cover is available to the extent of a maximum of 85% of the sanctioned amount of the credit facility. To apply for this loan, you must have an IT PAN number.

Equity Mutual Funds

A mutual fund scheme that invests primarily in equity stocks is known as an equity fund.

Equity funds are run by professional portfolio managers with extensive experience, and their past success is transparent. The government has strict transparency and reporting standards for equity funds. There are various types of equity mutual fund schemes, each of which provides a specific underlying portfolio with varying levels of market risk.

Large-cap equity funds spend a considerable portion of their assets in businesses with a strong market capitalization. This form of the fund is known for offering long-term stability and stable returns. Large-cap stocks are less risky than mid-cap and small-cap stocks because they are less volatile.

What Is SIP?

SIP (Systematic Investment Plan) is a mutual fund tool that enables even the most novice investor to engage in the stock market. The SIP (Systematic Investment Plan) is a mutual fund tool that allows even beginner investors to participate in the stock market. SIP stands for systematic investment planning, and it is a method of investing in mutual funds in tiny, regular installments. You can easily begin investing in SIPs via the platform. The auto-debit feature in SIP makes investing a breeze. When you pick a sum and a time period, a fixed amount will be deducted from your bank account and charged to the SIP fund of your choosing at the predetermined time interval. These large-cap equity mutual funds are suggested for those who are willing to take a chance. Here are some of the best equity mutual funds, according to Crisil, that have performed well in the past and are good bets for SIP investments.

6 Best Performing Equity Mutual Funds SIP

Canara Robeco Bluechip Equity Fund

The fund is ranked number one by Crisil under Large Cap Equity funds. This fund has done really well over the last few years and has generated a return of 54.31% for 1 year and 18.35% for 3 years. This rate beats even rates from fixed interest-bearing instruments. The company’s portfolio comprises stocks HDFC Bank, ICICI Bank, Infosys, Reliance Industries, and State Bank of India. This is a large-company investment fund. When stock values decline, those funds appear to fall less than those that invest in smaller companies. As a result, they are better suited to cautious equity buyers. Returns of less than one year are absolute, whereas returns of one year or more are annualized. To begin a SIP, a minimum initial investment of Rs 5,000 is needed, with monthly investments as low as Rs 1,000.

Axis Bluechip Fund

The fund is ranked number one by Crisil under Large Cap Equity funds. This fund has done really well over the last few years and has generated a return of 39.96% for 1 year and 18.44% for 3 years. The fund is holding 95% in equity, 5.4% in debt 0.4% in cash. The top holdings of the company are HDFC Bank, Infosys, Bajaj Finance, TCS, and Kotak Mahindra Bank.

If you have invested Rs 5000 per month for one year, the amount as of today will be Rs 70, 323 with almost 40% returns per annum.

Kotak Bluechip Fund

The fund has given a solid 44.91 percent returns in the last year, though the 5-year returns are more subdued at 14.35 percent on an annual basis. The benchmark index is Nifty 50 TRI. It is ranked number 1 by the CRISIL rating agency. The schemes aim to find companies that are relatively stable about the wider market and to select stocks based on their financial ability, management strategies and credibility, track record, and liquidity. The fund mainly invests 98% in equities and 2% in cash instruments. The fund was started in February 2003 and the fund size is Rs 2,207 crore.

BNP Paribas Large Cap Fund

Since its inception in 2004, the fund has generated an annualized return of 15.08 % over the last three years. While one year returns at 49.38%.

Individuals will begin investing in the fund with a one-time payment of Rs 5,000, followed by a monthly payment of Rs 500. It has been ranked number 2 by CRISIL. The portfolio of the fund consists of stocks like HDFC Bank, Infosys, Reliance Industries, and ICICI Bank. Again, a very strong portfolio and investors should have no complaint about the solidness of the portfolio.

SBI Blue Chip Fund

SBI Blue Chip Fund is amongst the few funds that have given returns of almost 13.22 percent in the last 3 years. While one year return is at 59.83 percent. It has been ranked number 2 by CRISIL. A diversified equity fund has been introduced by SBI Mutual Fund. SBI Blue Chip Fund will invest in stocks with a market capitalization equal to or greater than the BSE 100 Index’s least market capitalized portfolio.

Mirae Asset Large Cap Fund

The fund is ranked number 3 by Crisil under a Large-cap Equity fund. The last three year’s returns of the fund have been close to 14.42 percent. While one year return is 55.59%. HDFC Bank, ICICI Bank, and Reliance Industries are only a few of the high-quality stocks in the fund’s portfolio. If redeemed within 182 days, the redemption rate will be 2%, and if redeemed between 183 and 365 days, the redemption rate will be 1%. The fund was launched in January 2013 and the size of the fund is Rs 23.353 crore.

Conclusion

Now, for these funds to continue to earn returns in the future, the index heavyweights must rally, as must the markets. Because most of these stocks are index heavyweights, returns will be primarily determined by how the index performs.

Today is the deadline (March 15) to pay-off the last advance tax installment for the income earned in the ongoing financial year 2020-21. Advance tax is required to be paid by any person whose estimated tax liability for the year is Rs. 10,000 or more. And if one fails to make the advance tax payment, there is imposed penalty on the due taxes.