Category: Personal Finance

Comparing NEFT, RTGS, IMPS, UPI

National Electronic Fund Transfer (NEFT)

The National Electronic Fund Transfer System (NEFT) is an electronic fund transfer system that settles transactions in batches. NEFT service can be availed in a bank branch using cash, cheque, or a DD. Also, it can be using a net banking facility from your bank account. The maximum amount you can submit through NEFT in cash is Rs 50,000.

Banks have been instructed not to charge their savings bank account holders any fees for NEFT funds transactions initiated online from January 1, 2020. NEFT facilities are now available all the time, i.e. 24×7, 365 days. If you want to process NEFT at a bank, you’ll have to pay fees depending on the various slabs.

Real-Time Gross Settlement (RTGS)

It is the method of settling funds in real-time, on an order-by-order basis. To put it another way, the request to move or settle funds is handled directly rather than in batches as it is done in NEFT.

The RTGS framework is optimized for high-volume transactions. As a result, the minimum amount that can be sent via RTGS in a single day is Rs 2 lakh. The maximum amount per day is Rs 10 lakh. On a working day, banks will use the RTGS service window for consumer transactions from 8 a.m. to 6 p.m. Banks charge service charges for the amount depending on the value of the transaction. The charges differ with different banks and the timing of transactions.

SBI Charge on RTGS

SBI charges for a transaction between 9 AM to 12 PM are Rs. 25 for a transaction between Rs 2 lakh to Rs 5 lakh. Above Rs 5 lakh is Rs. 51.

SBI charges for a transaction between 12 PM to 3:30 PM is Rs. 26 transactions between Rs 2 lakh to Rs 5 lakh and for transactions above Rs 5, it charges Rs 52.

SBI charges for a transaction between 3:30 PM to 4:30 PM is Rs. 31 for a transaction between Rs 2 lakh to Rs 5 lakh. Above Rs 5 lakh is Rs. 56.

Immediate Payment Service (IMPS)

Even on Sundays and holidays, IMPS is available 24 hours a day, seven days a week. It is a perfect banking network in case of an emergency because it transfers funds instantly. The regular IMPS fund transfer cap is Rs. 2 lakh. In IMPS, the minimum transaction value is Rupee 1. If transfers are made using a mobile number and MMID, the maximum limit is only Rs 10,000. The IMPS fund transfer is managed by the National Payments Corporation of India (NPCI). Individual banks set their own fees for remittances through IMPS. Please check with your financial institution.

HDFC Bank Charges: 1) Above Rs.1 to Rs 1 Lakh – Rs.5 + GST

2) Above 1 lakh to 2 Lakh – Rs.15 + GST. GST is 18%.

Unified Payments Interface (UPI)

UPI is a mobile-based instant real-time payment system for transferring funds between bank accounts. UPI enables bank account holders from different banks to send and receive money using only their Aadhaar unique identification number, mobile phone number, or virtual payment address, without having to enter bank account details.

Popular UPI apps are

BHIM

PhonePe

Google Pay

NEFT, RTGS, IMPS, UPI: What is the Best Way to Send Money?

For instant fund transfers of less than Rs. 1 lakh, UPI is the best payment system. Pay transfers are free of charge.

IMPS is another excellent payment mechanism for transferring funds in amounts greater than Rs. 1 lakh but less than Rs. 2 lakh.

NEFT is also the fastest way to send money through a bank branch. It is ideal for future payments, loan repayment, or credit card payments. RTGS is ideal for the transfer of Rs 2 lakh and more.

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A glance at Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The LIC is the only organisation that provides PMVVY, a guaranteed pension fund. It is only available to those who have exceeded the age of 60 and ensures regular pension benefit payments on a weekly, quarterly, half-yearly, or yearly basis. PMVVY was revised and extended until March 31, 2023. With 7.4 percent interest rate the return of this scheme is the same as the post office Senior Citizen’s Savings scheme, which implies that you’ll get a 7.4% annual return for the next ten years if you invest in PMVVY before March 2021. The minimum and maximum investment caps set by PMVVY are Rs 1.56 lakh and Rs 15 lakh. The plan provides a ten-year guarantee on pension benefits, as well as a return of principal upon maturity. Beneficiaries can claim the principal if the investor dies within ten years. If you or your spouse suffers from a serious or fatal illness, you can exit early by paying a 2% penalty on the principal. Even loans are open to borrowers up to 75 per cent of the contribution under this scheme. Apart from the GST exemption on principal, the scheme has no tax advantages.

New rules under PMVVY

The lowered pension rates are the most significant change in the current updated edition. The interest rate on the investment in the adjusted PMVVY will be lower than before. Unlike the older edition of PMVVY, the interest rate in the updated PMVVY will fluctuate depending on the financial year (FY) in which the deposit has been made by the depositor. The policy lasts ten years, and the government has fixed an interest rate of 7.4 per cent, on deposits made from FY 20-21 to March 31, 2021. The government will notify the PMVVY interest rate at the start of each FY for contributions made in the next two fiscal years i.e. 2021-22 and 2022-23.

Maximum and maximum purchase price under PMVVY

The minimum and maximum pensions available under the scheme are described below:

Minimum and maximum pension benefit available under PMVVY

The minimum and maximum pension amounts available under the plan are listed below:

PMVVY vs Annuity Plans

Immediate annuity plans are sold by LIC and other insurers, and they enable you to get a lifetime pension with a lump sum purchase price. They are outperformed by the PMVVY in terms of pension payments. For example, a 60-year-old who purchases LIC’s Jeevan Akshay VII will earn an annual pension of Rs 71,210 compared to Rs 76,600 under PMVVY. He will earn Rs 54,900 under Jeevan Shanti, which allows him to delay his pension for a year. The PMVVY’s 10-year lock-in can attract those preferring liquidity more than the lifetime lock-ins of other immediate annuity plans. GST is not levied on PMVVY, but it is levied on immediate annuity plans at 1.8 per cent of the purchase price. The PMVVY, on the other hand, has certain pitfalls. Your monthly pension is reduced to Rs 9,250 owing to a cumulative contribution cap of Rs 15 lakh. For all subscribers above the age of 60, PMVVY provides the same pension amount. Pension premiums increase sharply with age in other immediate annuity policies. A 70-year-old will get a 30% higher pension under Jeevan Akshay VII than a 60-year-old with the same purchase price.

PMVVY vs SCSS

The SCSS from India Post enables seniors over 60 to deposit up to Rs 15 lakh and earn a 7.4% annual promised payout. Those over the age of 55 who have taken the VRS or who have retired can put their retirement funds in the scheme. The government changes SCSS interest rates on a quarterly basis. Initial contributions are liable for section 80C benefits, and the scheme has a 5-year lock-in duration. The interest is subject to taxation. The plan allows for early withdrawal, but there is a penalty. SCSS comes with a 5-year lock-in and can enable you to secure better rates than PMVVY. SCSS also provides premature withdrawal in case of emergency needs. The 80C benefit will assist seniors in meeting their tax-saving priorities while still maintaining a stable income. SCSS does not have a monthly pension and does not make loans available. SCSS and PMVVY earnings, on the other hand, are taxed as per your slab limit.

PMVVY vs Bank Deposits

Currently, some leading banks deliver rates of around 5 to 6 percent on one to five-year deposits and 7 to 7.5 percent is offered by small finance banks. PMVVY, on the other hand, is better than small finance banks since it is backed by the LIC and the government. You will also get fixed pension payouts for the next ten years without having to think about rate fluctuation. In the current interest climate, parking in bank deposits for up to one year will help you benefit immediately from a higher yield. However, considering the current PMVVY rate of 7.4% and leading bank deposit rates, it may take some time for deposit rates to come back on track.

Our take

A senior citizen can prefer investing in both PMVVY and SCSS after making a distinction rather than just one. Because the requirements can vary, don’t consider one to be smarter than the other. Both of these are government-backed and provide a guaranteed return to satisfy regular income requirements. PMVVY has a longer lock-in period than SCSS, but SCSS provides income tax benefits, so the decision between the two investment opportunities should be focused entirely on the investor’s needs. In addition, though a guaranteed rate of return of 7.40 per cent p.a. will be paid monthly, equating to 7.66 per cent per year over the period of ten years in PMVVY, the interest rate in SCSS is updated on a quarterly basis. After five years, the SCSS account can be extended for another three years, although the contributions in the extension duration do not gain interest. SCSS generates a tax advantage under Section 80C. That being said, under PMVVY, there is no tax gain. Some senior citizens can choose to consider a fixed deposit in a bank, as some banks give senior citizens interest rates as high as 7.75 per cent. The DICGC insures senior citizens who invest in FDs up to Rs 5 lakh in one bank.

Features of Payment Banks

1) Payments Bank has a deposit limit of up to Rs 1 lakh rupees. At no point in time should banks go over the limit. They can accept demand deposits that are, current deposits and savings bank deposits.

2) Individuals, small companies, and other organizations can make demand deposits and bank deposits.

3) Payment Banks also offer debit card facilities along with money transactions on electronic platforms such as ECS, NEFT, and RTGS.

4) They can make payments of utility bills on behalf of customers and the general public.

5) Mobile banking can be accessed through these payment banks.

Things Payment Banks are not authorized:

1) Payment banks are not authorized to open recurring deposits and fixed deposits (time deposits).

2) Payment banks cannot undertake any lending activity

3) They are not eligible to accept NRI deposits

4) Presently, cash transaction is limited to Rs 100,000 per customer.

Airtel Payment Bank

Bharti Airtel, India’s largest telecom provider, launched Airtel Payment Bank in January 2017 to support the government of India’s promised cashless revolution.

Airtel Payment Bank Features

• Individuals can open a Savings account at any branch ( 5 lakh+ banking points)
• Bank customer is eligible for a free personal accident insurance cover of Rs 1 Lac
• They can earn a 3.0% rate of interest
• The savings account offers an online debit card facility.

Benefits for merchant banking:

• QR Code Scanning
• Payment to a phone number
• BHIM UPI
• Merchant Initiated Payment.

Indian Post Payment Bank

Indian Post Payment Bank (IIPB) is backed by India’s post offices, they have a wide network of 1.55 lakh post offices and over 3 lakh employees to provide doorstep banking services.

Features of IIPB

You can open a zero balance saving account.

Your current post office savings account can be changed to a Payment bank savings account. That will result in a better interest rate. Aadhaar based Direct Benefit Transfer. The account can be opened with zero balance. Availability of funds at your doorstep, upon request and secure banking with QR card.

Fino Payment Bank

With a Fino Payment Bank Savings account, you can now ease your banking by taking advantage of the account’s multiple benefits. Fino Payment Bank Limited was founded on April 4, 2017, under the name Fino Payments Bank Limited. They have impacted the lives of over 100 million customers over the years across over 25000 touch points in 499 districts across 28 Indian states.

Features of Fino Payment Bank

• Transfer money instantly to any bank account across India.
• You can withdraw money from ATMs around the country.
• Shop at online and offline retailers with the Fino Payment Bank debit card.
• Bank customers can earn up to 6.25% per annum by opting for Sweep account facility
• The Fino branches have ICICI ATMs installed.
• Free cash deposit limit up to Rs 25,000 per month.
• Install the BPay app on your phone for easy payments.

Paytm Payment Bank

Paytm has developed a separate, unique Passcode for each of its customers to ensure the protection of their money in Paytm bank. Every month, you will usually receive 2.75 percent interest.

Features of Paytm Payment Bank

• There are no account opening fees or minimum balance requirements with Paytm Payments Bank’s Savings Account.
• Make online transactions with your free virtual card at any retailer that accepts RuPay cards.
• In Paytm Passbook, you can see your transaction and balance in real-time.
• Through the Paytm App, account holders may request a physical Debit Card.
• The bank offers a free insurance policy of up to Rs 2 lacs in the case of death or permanent complete disability.

Jio Payments Bank

The Reserve Bank of India (‘RBI’) has given Reliance Industries Limited in-principle approval to create a new Payments Bank under the Banking Regulation Act, 1949.

In November 2016, it joined forces with the State Bank of India to support the ambitious Payments bank capacity-building initiative for all Indians, and Jio Payments Bank Limited.

Features of Jio Payment Bank

• There is no minimum balance requirement for the Jio Payments Bank account.
• No debit card will be issued by Jio Payments Bank
• You can open a Jio Payment Bank account even without a Jio number
• Once you open a Jio Payment Bank account, you will get a Jio UPI to handle. You can define your own Jio UPI handle while opening your account.

NSDL Payments Bank

NSDL Jiffy is NSDL’s Payment bank, which keeps you stable, smooth, and quick transactions across your banking experience. In October 2018, NSDL Payment Bank started operations to help the initiative to provide streamlined banking services to all Indians.

Features of NSDL Payment Bank

The minimum average monthly balance to be maintained is Rs 10,000. Free virtual debit card to make online purchases. You can request a physical debit card from your NSDL Jiffy App.

Requirement to open a Payment Bank

A minimum paid-up capital of Rs 100 crores is the most significant prerequisite for establishing a payment bank. The operational promoters must own at least 40% of the venture, with the first five years locked in. The bank’s international shareholding will be controlled by the new FDI strategy.

Exemptions under section 80C

This is among the most popular deductions available under tax law. Section 80C of the Income Tax Act of 1961 allows individuals to claim a tax benefit of Rs 1.5 lakh. You can subtract Rs 1.5 lakh from your gross taxable income if you can disclose annual investments of rs 1.5 lakh. Tax-saving Fixed Deposits, Public Provident Fund (PPF), ELSS, National Saving Certificate (NSC), tuition fees, life insurance premiums, National Pension Scheme (NPS), home loan reimbursement, EPF, Senior Citizens’ Savings Scheme, and Sukanya Samriddhi Yojana are some of the initiatives that are eligible for deduction.

Additional exemptions under section 80CCD (1B)

You can deduct an additional Rs 50,000 for contributions to the National Pension System under Section 80CCD (1B) in addition to the Rs 1.5 lakh under Section 80C. (NPS). Individuals can invest in both equity and debt funds under this scheme, which lets them create a retirement portfolio. At the age of 60, the entire amount can be withdrawn.

Exemptions under section 80E

Under this clause, you can claim a tax exemption for interest paid on an education loan for yourself, your spouse, your children, or any student for whom you are a legal guardian. There is no limit on the amount that can be claimed as a deduction in a given year. You can seek the exemption from the year you begin repaying the education loan and lasting for the next seven years, or until the entire interest is paid, whichever comes first. Furthermore, this tax exemption is only possible if the loan is borrowed by an authorized financial institution rather than a family member or friend.

Exemptions under section 80D

An individual or a HUF can seek an exemption of Rs 25,000 for medical insurance premiums paid in a calendar year. Health insurance premiums paid for yourself, your spouse, your children, and your parents can all be deductible. It’s worth remembering that, if your parents aren’t senior citizens, you can get an additional deduction for their insurance up to Rs 25,000. (above the age of 60). The exemption amount is expanded to Rs 50,000 if the parents are over 60 years old. The overall exemption available in a case where both the taxpayer and the parents are above the age of 60 is Rs 1,00,000. In addition, Section 80(D) allows an exemption of Rs 5,000 for preventive check-ups conducted on the taxpayer, spouse, minor children, and parents during the subsequent year. You can also look at some sections for additional deductions, such as Section 80(DD), Section 80(DDB), and Section 80(U) respectively.

Exemptions under section 24

You can seek an interest payable as a tax deduction under Section 24 of the Income Tax Act if you have an existing home loan. The overall amount that can be claimed as a deduction is Rs 2 lakh per annum. Besides that, under Section 80(EE) of the I-T Act, you can claim an additional deduction of Rs 50,000 in addition to Rs 2,00,000. There are, however, certain requirements that must be fulfilled in order to assert this additional deduction. If the property is rented, and you have not owned it, there is no upper ceiling, and you can subtract the full interest rate as a tax break. The stamp duty value of the house must be less than Rs 45 lakh in order to be eligible for this deduction. In addition, the home loan must be issued between April 1-2019, and March 31, 2020.

Exemption against interest earned on savings accounts

An individual or a HUF can claim a total exemption of Rs 10,000 for interest income from a bank, co-operative society, or post office savings account. Clearly speaking, under Section 80TTA of the Income Tax Act, interest on savings accounts is tax-free up to Rs 10,000 annually. And there’s Section 80 (TTB), which enables senior citizens to claim a deduction of up to Rs 50,000 from interest income.

Exemption against donations

To raise your tax benefit you can also contribute or donate to charities. Various contributions listed under Section 80(G) of the Tax Code are liable for a 100% or 50% deduction. Individuals must be aware, though, that cash contributions above Rs 2,000 are not liable for tax deductions. As a result, making contributions via digital forms is preferable since they would be liable for a tax exemption under Section 80. (G).

Exemption under section 80GG

If you do not get a house rent allowance (HRA) as part of your salary or if you are self-employed, you can claim this exemption. To take advantage of this deduction, you need to fill out Form 10BA. This clause enables you to claim a deduction of up to Rs 60,000.

Contributions towards NPS as an employee

A taxpayer’s contributions to the NPS are tax-deductible under Section 80CCD(1) of the Income Tax Act of 1961. Individuals who contribute any amount to their NPS account during the fiscal year are liable for a tax benefit from their gross income of up to 10% of their basic wage for salaried employees and 20% of their overall income for self-employed citizens. This exemption is for contributions rendered directly by the employee or indirectly by the employer, i.e. as a tax benefit from wages. The exemption allowed under this provision, though, is limited to the total limit of Rs 1.5 lakh specified by Section 80CCE. The cumulative level of exemption allowed under sections 80C and 80 CCD(1) of the Income-tax Act is outlined in section 80CCE. Hence, in a financial year, investment in the section 80C category like PPF, EPF and NPS (under section 80CCD (1)) shall not cross the stated cap of Rs 1.5 lakh. Please remember that the overall amount that can be contributed towards NPS for the purpose of seeking a deduction under section 80CCD (1) cannot surpass 10% of an individual’s basic salary.

Contributions towards NPS by your employer

Contribution by your employer towards your (as an employee) NPS account falls under Section 17(1)(viii) of the Income-tax Act. That being said, the amount contributed by the employer is deductible under Section 80CCD(2) of the Income Tax Act, up to a maximum of 10% (14% in case of Central government employees) of basic salary for the fiscal year. This deduction is in addition to the tax benefit for employee contributions stated above, and it is not applicable to the total cap of Rs 1.5 lakh set out in Sections 80CCE and 80CCD (1b). That being said, under Section 17(2)(vii) of the Finance Act of 2020, an employer’s contribution towards PF, NPS, or a superannuation fund in excess of Rs 7.5 lakh in a fiscal year is considered as taxable for an employee.

Additional tax benefits under NPS for you as a taxpayer

Section 80CCD(1B) of the Income Tax Act allows an additional allowance of Rs 50,000 over and above the Rs 1.5 lakh accessible under Section 80CCE. Thereby, if you as a taxpayer has surpassed the Rs 1.5 lakh deduction cap under Section 80CCE through holding other contributions liable for deduction under the same section (other than NPS), a contribution rendered to NPS by you or your employer can be used to seek an additional Rs 50,000 deduction under Section 80CCD (1B).

Our take

The Pension Fund Regulatory and Development Authority (PFRDA), which was developed by statute, governs NPS. The PFRDA sets investment criteria and regulates the system’s efficiency. The NPS account (PRAN) is unique, and the subscriber can transfer his or her pension account from one employer to another and from one place to another in case of a job change. Furthermore, as a tax-free element, one can withdraw up to 60% of the NPS maturity value. The remaining 40% should be retained in order to purchase an annuity, which is mandated. As a result, for retirees, NPS could be a suitable alternative. An Employee Provident Fund account can only be opened by an employee at first, but he or she can maintain it even after leaving the job or retiring, while an NPS account can be opened by anybody whether salaried or non-salaried. The same is true for PPF. A salaried individual can, in practice, have all of these accounts open at the same time. To maximise returns and minimise tax obligation, an employee with a high salary can use a blend of EPF and NPS. NPS returns remain tax-free until they are withdrawn from the portfolio at maturity. To deter wealthy individuals from contributing money in Provident Funds (PFs) in order to gain higher tax-free interest, Finance Minister Nirmala Sitharaman declared in the Union Budget 2021-22 that PF deposits above Rs 2.5 lakh in a financial year will be taxable starting in the next budgetary year. Wealthy PF investors, on the other hand, may also transfer their savings to other potential alternatives to decrease their tax obligations, as interest on excess contributions would be credited to their income. NPS is a strong choice for pension hunters because of the tax-efficient component and higher returns than PF.

The commercial segment has been the need for economic growth and development, and will remain so in coming years as well. The time of lockdown witnessed this sector got hit badly as no commercial activity was taking place. However, this sector, including retail, is recovering faster as people get back to work to keep the wheel of fortune rolling. The sale of commercial properties during the lockdown was an indication that investors and buyers realize the crucial part this sector plays in the well-being of people and the country.

At present, the commercial segment is staring at the increased investment by the NRIs in the present situation arising out of COVID 19. The investment opportunities for the NRIs are now much more flexible because of the depreciation of the rupee. The investors with a knack to invest in real estate diverted their attention towards commercial real estate because it gives them better yield and appreciation; this is why commercial realty attracted the maximum private equity investments in the previous year, totalling nearly USD 3 billion in the first three quarters. Commercial realty includes industrial, retail, and frontier segments such as co-living, will continue to do well because of the good returns in the short and long-term.

A relatively new concept in the commercial segment, which foresees a bright future, is High Street. When everyone is inclined towards the mall concept, the high street brings with itself the old-world charm wrapped in novelty for people’s convenience. The intention is to get the concept that the people already were aware of and grew up seeing. Both high street retail and shopping malls have their utilities and set of dedicated patrons. Elevating urbanization has led to the growth of high street retail. With constraining spaces, high streets are emerging as the places where people meet, greet, and have fun. Looking at the acceptability and popularity of the concept, investors too are showing interest towards it, resulting from foreign brands’ interest in this concept. High streets are considered better than malls as they yield a better rental income and returns. Customers prefer the high street as they get a better brand and in-store experience. The demand is high in Tier 1 and 2 cities. In fact, Noida is becoming the hub of high streets because of better connectivity through metro rail, an excellent road network, and a vibrant residential market.

The segment has been performing exceedingly well riding on the innovative investment options it has come out with. One such option is the investment in pre-leased properties, which is turning out to be a popular form in Noida as the buyer is assured of a settled ROI. The property owners have the advantage of earning a pre-settled rental income and the capital gain on the property that is purchased. Today, both foreign and national investors, UHNIs and HNIs, actively invest in this asset. The most important aspect of investing in commercial property is the location assessment. The proximity to the metro and residential projects promises immense success.

Authored by Sagar Saxena, Project Head, Spectrum Metro

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