More articles for you

Your one stop place for everything related to finance and lending

Stocks Markets

What is Floating Stock in the Share Market?

Welcome to this roller coaster world of money, loss, profit, shares, and stocks! In general, one can either make or break themselves in the stock market. It is such a volatile space that all assets can be gone in a blink of an eye. On the flip side, one can even become a millionaire. With that said, the intention is to make good profits in the stock market. After all, who wants to bear losses? But investors need to stop themselves from making a mistake. That is jumping on the bandwagon with little or no knowledge. If someone is into randomly buying and selling stocks, bearing losses is inevitable. This is where a deep understanding of the stock market is necessary to minimize losses and maximize returns. One must be familiar with the structure and operations of the stock market. One such term that one needs to understand is “floating stocks.” Don’t worry, the concept is not that difficult. Let’s understand it in more detail. [B-01] What is floating stock? The number of shares available for trading on stock exchanges is referred to as “floating stock.” The shares that are represented by floating stock are referred to as the “floats” of a company. Generally, a company with fewer floating shares experiences lower demand from sellers. As a result, it could be challenging to locate buyers and sellers for such businesses. A stock with a low floating percentage is a penny stock. It is far more volatile than a stock with a high floating percentage. However, one needs to understand that floating stock does not stay the same over time. The corporation may issue more shares to raise money, which would increase the floating stock. If the company buys back the shares on the open market, the floating stock price will again decrease. Understanding floating stock The total number of shares issued by any company in an IPO enters the secondary market once it goes public. As a result, investors get free access to the shares here. This includes a diverse range of organizations, including big financial institutions, and non-retail and retail investors. The amount of shares purchased by these groups reduces the number of outstanding shares of a company. Floating stock, which is now accessible in the market for new investors, is the remaining stock that is not held by the business. For instance, the corporation ABC has 20 million shares in existence. Institutional investors may own 8 million of the 20 million shares, while employees may own 3 million, and management and connected parties may own 7 million. 10%, or 2 million, would be the only quantity that could be traded openly. Importance of floating stock The free float of a company is crucial for investors. Companies with low floats typically have stocks that are more volatile and have wider spreads. One may find it challenging to enter and exit low-floating equities. A substantial portion of the shares of low-float businesses are held by a small number of organizations. It may not be exposed to frequent buying and selling. Due to the lack of available shares for trading, large institutional investors frequently steer clear of businesses with low-float stocks. When investors purchase many stocks, a low floating stock diminishes liquidity and influences the share price. Limitations of floating stock Understanding floating stock is essential in order to safeguard one’s assets. With that said, floating stocks do have various restrictions, such as: Negative Investor Sentiment If a firm has few floating shares, investors can get discouraged from investing, as they might think there aren’t many stocks available. Even if the business is financially sound and runs well, one should probably avoid investing. It is because the stock will likely be extremely volatile or have little liquidity. Stock Dilution Even when there is no need for capital raising, some corporations issue extra shares to raise their floating stock. Such a move enlarges the company’s outstanding shares, thereby diluting the stock. The primary factor affecting the firm’s share price is stock dilution, which may require one to sell their current holdings. What impact does floating stock have? Individual investors, specifically those who participate in pools like mutual funds and ETFs, are not directly impacted by the stock float. Additionally, long-term stock investors experience no direct effect on their investments. This is due to the possibility of a major improvement in performance, which might cause the high float stock to drop. In that case, the marketer must accurately evaluate the company’s future, vision, performance, growth, and other aspects. Also, the short-term volatility of stocks has a direct effect on investors, who often buy or sell stocks based on the volatility. It is not wise for any short-term trader to invest heavily in floating stocks. While investing in cheap stock floats, one can end up selling the stocks at a lower price. For short-term investment, this heavily depends on the company’s future goals and success. [B-02] The key takeaway There are only a few Indian companies with high floats. One may invest in low-floating companies but should always avoid sudden price fluctuations. Also, one should avoid small companies with low-flow floating stock. The price is bound to be vulnerable to manipulation. All in all, investing in low-float stocks is not a great idea. You might look for a buyer for your investment for a long time and never find one. Also, your investments might see high volatility, which increases the chances of loss. For more finance-related information, do not forget to visit Piramal Finance. We aim to simply finance better understanding.
08-11-2023
Read More
Personal Loan

What is FOIR: Meaning of FOIR & its Effect on Personal Loan Approval

Personal loans are unsecured loans. To ascertain the borrower’s repayment capability, lenders have set certain parameters. One of the most common parameters is FOIR. The full form of FOIR is a Fixed Obligation to Income Ratio. It plays a key role in personal loan online approval. FOIR checks the payment obligations you have in relation to your income. This helps in determining your disposable income and whether you will be able to repay the loan without defaulting. FOIR is calculated considering a borrower’s Equity Monthly Instalments (EMIs). It tells the proportion of your EMIs to your income. Thus, it becomes an important factor while processing a loan application. Other factors that a lender considers while approving a loan are credit history, income records, instalment of current loans, etc. [B-01] How is FOIR Calculated? FOIR has a simple calculation formula. It is calculated by dividing a person’s total debts or existing obligations by their total monthly income multiplied by 100. Some lenders also consider the applicant’s rent and insurance premiums along with their EMIs as a fixed obligation. The EMIs could be for a home loan or a car loan. Other financial obligations can include: Credit card payments Monthly living expenses EMI of the loan the borrower is applying for However, the debt amount does not include tax deductions and contributions to Fixed Deposits and Recurring Deposits. FOIR = (sum of total debts/sum of total monthly income)*100 Now, let’s look at it with an example. Suppose a person’s total monthly income is Rs. 50,000. And their total existing obligations in a month are Rs 20,000. The FOIR will be 20000/50000*100=40% Effects of FOIR on Personal Loan Eligibility FOIR is considered in all types of loans, such as personal loans, home loans, etc. Since there is no asset security in personal loans, FOIR plays an important role. It is one of the most common parameters lenders consider while providing a personal loan. A lower FOIR signifies the borrower has fewer monthly fixed obligations or debts. This shows their repayment capability is strong. Hence, the chances of getting a personal loan increase. The average FOIR may vary from lender to lender and from case to case. Ideally, a FOIR must be between 40% and 55%. This makes securing a loan easy. However, people with a FOIR of at least 60% can get a loan too. But, this is usually the case with people with high net worth. Low FOIR Effects on Your Finances A low FOIR means that you have fewer obligations or debts. This shows you have a good amount of disposable income, making you capable of repaying a loan on time. These factors can help in securing a loan as they reflect favorable creditworthiness. Maintaining a low FOIR impacts your finances by: Reducing your total liabilities Increases your disposable income Improves the repayment capacity How to Improve Your FOIR FOIR on the higher side can cause trouble while securing a loan. It is one of the parameters that lenders consider. However, you can take some measures to improve your FOIR. These include: Pay off your outstanding debts. A lesser amount of debt will result in a higher FOIR. This will also result in a better credit score. Disclose other regular sources of income, if any. This will further help in improving FOIR. Do not take multiple loans at the same time. This leaves an impression of higher debt, which can result in lower chances of securing a loan. Maintaining a low credit utilization ratio is another way to improve your FOIR. The credit utilisation ratio compares the total amount of credit available to the amount of credit used. It calculates the maximum amount of credit that can be used. It is best to keep your credit utilization ratio under 30% before you apply for a personal loan. Loans are frequently denied when the credit utilisation ratio is high. Increasing your loan tenure can reduce your EMIs. This will further help in improving your FOIR. Maintain your credit history. Adding a co-applicant can also help in reducing the FOIR as the EMI burden is divided. Usually, adding an earning family member is advised. Do not switch jobs frequently within a short period of time. This leaves a negative impression on the lender. Ratio Impacting Loan Eligibility Generally, three ratios influence loan eligibility. These are: Fixed Obligation to Income Ratio (FOIR) Instalment to Income Ratio (IIR) Loan-to-Value Ratio (LTV) Conclusion A lender usually expects you to repay the loan on time. To be sure of this, they check your monthly income and see what portion of it is spent on repaying other debts. FOIR helps them ascertain this. Typically, a borrower should not be spending more than 50% of their income on repaying debts. These debts can include EMIs from home loans, car loans, credit card bills, and so on. A lower FOIR indicates that the borrower has healthy finances. Thus, securing a personal loan becomes easy. FOIR is one of the parameters that a lender checks. So, make sure you meet other criteria as well. We hope that this article has helped you understand the FOIR meaning. To learn more about personal loans, you can check out other blogs at Piramal Finance. Also, explore the various products and services they offer. [B-02] Bank Criteria for FOIR FOIR margins can differ from bank to bank. There is no set standard margin. However, a FOIR between 40% to 55% has the maximum chance of securing a loan. Lenders do consider people with higher FOIR for loans. These are generally people with a high net worth.
08-11-2023
Read More
Other

What is FPO and How Does it Work?

An FPO (Follow-On Public Offer) is a fresh issue of shares by a listed company. It comes after an IPO (Initial Public Offering) when a company’s shares are listed for the first time on a stock exchange. There is a significant difference between an FPO and an IPO. Companies usually announce an FPO to raise fresh equity or bring down their debt. Public companies take advantage of FPO using an offer for subscription documents. All proceeds from such an offering belong to the company that issues the stock. However, a company must fulfill various regulations to execute an FPO. Let us start by understanding the different types of FPO. [B-01] Types of Follow-On Public Offerings There are two main types of FPO based on the extent of dilution. Also, there is another route to go about getting an FPO. It is known as an “at-the-market” offering. Diluted Follow-On Offering This type of offering occurs when a company issues additional shares to raise funds. These shares are offered to the public for subscription. In this type of offering, the number of shares increases. This leads to a decrease in the earnings per share (EPS). The funds received through an FPO are used to reduce the company’s debt. They may also be used to alter the capital structure of the company. From a long-term perspective, the additional cash influx benefits the company and the shares. Non-Diluted Follow-On Offering In this case, the holders of existing shares bring their stock of privately-held shares to the public. Any proceeds from the sale of such shares go to the holders who place the shares on the open market. Generally, such shares are offered by the founders of the company. Or, company board members may come forward to offer such shares. In this case, since no new stock is offered, there is no effect on the EPS. Another way to create an FPO is by using an at-the-market offering (ATM). A company can raise the desired capital with this method. Another name for such an offering is controlled equity distribution. “This is because shares can be sold at prevailing prices in the secondary stock market. Raising additional funds through an FPO has many advantages for a company. The proceeds from such an issue can help a company pay off its debt. Consequently, it will help them improve their debt-to-value ratio. A company can even use such funds to finance different growth projects. Why Does a Company Issue an FPO and How Does it Work? The purpose of issuing an FPO is to raise fresh capital. Every company requires capital to conduct its operations. Additionally, capital is also needed to finance the purchase of various assets, expand plans, and pay off liabilities. After launching an IPO, a company can raise an additional round of funds from the public through an FPO. This is done by offering new shares to the general public, which generates money for the company. From a financial standpoint, the issue price of an FPO is generally lower than the prevailing market price of a share. The idea behind such pricing is to attract as many subscribers for the share as possible. The listed shares of the company face lower demand in the market. Due to this, their market price falls. Their price eventually converges on the issue price of the FPO. There are many factors that determine the success of an FPO. Here are a few examples: Profitability of the company Sentiments in the market and among investors Current trends in the market Potential for growth for the company From the perspective of an investor, an FPO is far more beneficial. As an investor, you can understand the company’s management. Having established itself, the company is an example of its business practices and growth prospects. Thus, if you are willing to invest your money in the company, an FPO is a safe path for you. A publicly traded company easily provides the historical reference needed to estimate its earnings report. Also, you can check the company’s performance in the stock market with reliable data to bank upon. So, if you were keen on investing in a company but were holding back due to uncertainty, a Follow-on Public Offer will still give you a chance. An FPO works simply. A company, which is already listed on the stock market, decides that it wants to raise new capital. If they have already raised funds from the public, this subsequent round will be termed an FPO. The company will need to file draft documents with the registrar of companies and issue a prospectus. Additionally, it will have to comply with any legal requirements of an FPO. After obtaining clearance, they can offer shares to the general public. The public can subscribe to the company’s shares at discounted prices during the offer period. It is how FPO works. As an investor, you can benefit by subscribing to an FPO. So, now you must have understood how FPO and IPO are different. Also, it is clear how FPO works and why it can benefit investors. [B-02] Conclusion So, an FPO is a method to raise funds from the public. There are two basic types of FPO. An investor can build confidence in a company by monitoring its performance. Later, they can apply to be a shareholder through the FPO. If you want more knowledge about an FPO or IPO, check out Piramal Finance. It is a premier destination for all types of financial products. You can explore the website to understand more about equity and debt and how companies structure their capital after raising funds through an FPO.
08-11-2023
Read More
Other

What is Form 16? How to Get Form 16? 

Form 16 is a certificate issued by an employer on behalf of the employees. It presents information on the tax deducted at source (TDS) by the employer. This is why it is also known as a “salary TDS certificate.” The form helps the taxpayer while filing income tax returns. Thus, every employer must provide their employees with Form 16 as it works as proof of tax paid. Generally, the form is not issued for employees that don’t fall under the tax bracket, as they don’t have to pay taxes or file returns. Form 16 is issued under Section 203 of the Income Tax Act, 1961. [B-01] What is Form 16? Form 16 has two parts: part A and part B. Part A contains information on tax deducted by the employer and other TDS-related information. Part B has details like your total income, taxes paid, tax deductions, other income, etc. Let’s take a detailed look at what both parts contain. Form 16, Part A Personal information of the employee and employer like name and address Permanent Account Number (PAN) of the employee PAN and TAN (Tax Deduction Account Number) of the employer. TAN is a number assigned to the account that collects or deducts tax. Assessment year. It is the year when the income earned is taxed. If the income is earned in the financial year 2019–20, then the assessment year will be 2020–21. Period during which the taxpayer was employed in the financial year Summary of salary with details like gross salary, incentives, deductions, etc. Summary of tax deduction and deposition throughout the year The date on which the tax was deducted from the salary The date on which tax was deposited in the account of the government Form 16, Part B Taxable salary of the employee. Here, the total salary is divided into additional sections like Leave Travel Allowance (LTA), House Rent Allowance (HRA), Leave Encashment, Gratuity, and others. Exemptions under Section 10 of the Income Tax Act are also mentioned in Form 16. These include hostel expenditure, conveyance, children’s education, etc. Deductions from salary under sections 80C, 80CCC, 80CCD, 80D, 80E, 80G, and others. These are contributions made to the Public Provident Fund (PPF), pension plans, life insurance policies, tax-saving mutual funds, etc. The maximum limit for deductions is Rs. 1,50,000 Gross income. This includes the total salary of the employee along with income earned from other sources like a house or property, etc. Net taxable salary. Total of all the deduction amounts that are reduced from the gross income. The tax liability is calculated on this amount. Education cess, surcharge, rebate under Section 87, relief under Section 89 The total amount of tax payable on income deducted TDS amount and balance tax due How to Get Form 16? Form 16 reflects the employee’s total earnings and tax deducted at source. Thus, it must be issued by the employer every year on behalf of their employees. You can get your Form 16 from your employer. In cases where you have quit the job, the employer must provide you with Form 16 for the period during which you received your salary. The employer or tax deductor can log in to the TRACES portal. A login ID and password are required for this. People logging in for the first time are given a user ID and password based on their TIN and TAN. One can also register as a new user in TRACES. Once logged in, go to the Downloads tab, where one can find Form 16/16A. Enter the required details to download Form 16. Fill in the details of the employee. The employer will have to fill in their details as well. Importance of Form 16 Form 16 has many benefits for the employees. Some of them are highlighted below. Form 16 acts as proof of tax paid. It ensures that the tax has been paid to the government on your behalf. It also acts as proof of income earned by an employee, which is recorded with the Indian government. The information helps in filing the income tax return (ITR). It also lets the taxpayer prepare their ITR without the help of a CA or a financial planner. Form 16 helps immensely during the verification process while securing a loan. It also helps during a foreign trip, as it serves as an essential document during visa processing. Some organizations, at the time of hiring new employees, ask for Form 16 issued by the previous employer. [B-02] Conclusion Form 16 is a very useful and important document. It contains all the details regarding the income earned and the tax deducted from it. Therefore, it proves to be helpful at the time of filing an income tax return. Apart from serving as proof of tax paid and income earned, it has other benefits as well. Many financial institutions ask for Form 16 at the time of securing loans or even term insurance. So whenever you receive Form 16 from your employer, make sure to save a copy. If you need help with your finances or want to read more such blogs, head over to Piramal Finance. Our experts there will help in solving your queries.
08-11-2023
Read More
Other

Tips for Digital Business Owners to Become Successful

As a digital business owner, chances are that you have either experienced success or are on the way to achieving it. Becoming successful is never easy. With the right steps, however, you can slowly get there. Today, digital business owners have several options to expand their reach. One such option is digital marketing. The following article will look at how digital business owners can succeed. It will discuss how digital marketing, as an internal strategy, can help make business operations efficient. Tips for Digital Business Owners to Become Successful Here are some ways in which digital business owners can succeed: 1. Know Your Target Audience It is important to know who your target audience is. What are the demographics of your existing customers? What are their interests? Where do they spend their time? Despite an excellent marketing strategy, your efforts won’t be effective if they aren’t targeted at the right people. The easiest way to find out who your target audience is is through social media. It is important to understand which social platforms your customers use. 2. Create a Targeted Marketing Plan Creating an effective marketing plan is essential for any digital business. An effective marketing plan involves budgeting, identifying strategies and tactics to implement, and translating the results into KPIs. It is also important to note that marketing plans can be created for specific products and services or your overall business’s brand. 3. Know Your Competitors Just like you need to know who you are marketing to, you also need to know who is competing against you. The more information you have on your competitors, the better your marketing efforts will be. Identify the areas in which they are weaker than you, and try to capitalize on them. Make sure that if there is any competition for a potential client or customer, that person knows about it. Provide a detailed description of what their competitors are offering and why your offerings are better for customers and businesses alike. 4. Implement a Digital Marketing Campaign It is important to implement the strategies that you have laid out in your digital marketing plan. Marketers, who can consistently implement the guidelines they set forth, tend to have more success than those who are inconsistent. Common digital marketing strategies include social media campaigns, email marketing campaigns, PPC ads, blogging, content creation, and so on. 5. Utilize All Social Media Platforms Social media is an incredibly powerful tool for any digital business. It is quick, free, and provides immediate results. It is important that you utilize every social media platform that is relevant to your target audience. This means being active on each platform, having a unique strategy for each, and ensuring that you have addressed any customer concerns promptly. 6. Speak to Your Customers It is important to interact with your customers regularly. Try to get a sense of what drives them, what they like about your products and services, and what areas you can improve in. It is also helpful to reach out to those who have given negative feedback. This will help provide better customer service and, thus, a better experience for clients. 7. Create a Website It is important to have a website, especially if you plan on selling products or services online. Not having a website makes it hard for customers and clients to locate your online digital business. If you have a website, ensure that the content aligns with what you are selling. There are many free platforms that allow you to create a website. A simple search on Google will give you a list of free or low-cost websites you can use for your e-commerce business. Don’t forget to mention contact information, an address, images of your products or services, different methods of payment, and other similar things that customers will find helpful. 8. Improve your SEO While building your website, make sure to use SEO. SEO is the act of modifying the content that you post on your website, social media platforms, and emails to rank higher on search engines. Improving your SEO will make it easier for search engines to find you. This helps you get more traffic from people searching for what you sell or offer. To attract more visitors to your site, or in other words, boost your SEO, you need to improve the quality and quantity of the content on your site. Since the content is a key factor in SEO, make sure that it is relevant, accurate, and well-written. Also, make sure to submit regularly updated blog posts to increase organic traffic. To improve your SEO rankings, try using keywords with high volume searches. [B-02] Final Thoughts Digital marketing is a powerful way to grow your online digital business. It is a great way to reach out to customers and clients in ways that other marketing methods can’t. If you are a newly launched digital business and need help with finances, you can always consider taking the help of experts. You can also read similar blogs or articles on the Piramal Finance website. Here, you can learn about the different loan options available for digital business owners.
08-11-2023
Read More
Personal Loan

Loan Against Stock: All You Need to Know

In India, a loan against a stock is defined as a loan given to an individual by a financial institution using shares or stocks as collateral. The loan amount is determined by the value of the shares pledged. Several institutions offer loans against shares, including banks, NBFCs, and stockbroking firms. The loan can be used for various purposes, such as business expansion, personal needs, or working capital requirements. It is a quick and convenient way to raise funds, and the interest rate is usually lower than that of personal loans. Here we will discuss everything you need to know about loans against shares, including how they work, their benefits, etc. [B-01] What is a Loan Against Stock? The definition of a loan against stocks is when an individual borrows money from a financial institution by using securities, such as shares or bonds, as collateral. The loan amount is based on the value of the securities pledged. The lender holds the collateral until the loan is repaid in full. On the one hand, the borrower gets much-needed financial assistance, while on the other, the lender has a low-risk investment. When the loan is repaid, the securities are returned to the borrower. The interest rate on these types of loans is usually lower than that of personal loans. The best part is that you can use the loan amount for any purpose, as there are no restrictions imposed by the lender. How a Loan Against Stock Works The LAS system is simple. You pledge your stocks with the lender, who, in turn, offers you a loan amounting to a certain percentage of the value of your shares. Most of the time, the institution opens a current account in the borrower’s name. The rate of interest is calculated based on the amount withdrawn by you during the period when it was used. This facility can be availed of for a short-term period or on an ongoing basis, depending on your requirements. In the former case, you can use it to meet emergency expenses like medical bills or travel costs. On the other hand, if you require a regular inflow of funds, you can opt for the latter. What are the Features of a Loan Against Stock? Loans against shares are a popular mode of borrowing among investors as they come with several features. Some of them are mentioned below: The loan value is a predefined percentage of the market value for shares held to account. Eligible securities for loan against shares include ESOPs, equity shares, preference shares, and debentures. When taking out a loan against your Demat shares, the loan against share interest rate is generally 12–18% per year and is cheaper than personal loans. You can pledge your Demat shares to avail of a loan amounting to Rs. 20 lakhs. You don’t need a guarantor to avail of a loan against shares. As security, banks or NBFCs ask for a pledge of shares. Benefits of Loan Against Stock The benefits of a loan against stock are many, and it can be a great way to get quick access to cash. Here are some of the main benefits: You can use the loan for any purpose. The loan against share interest rate is usually lower than that of other types of loans. There are no restrictions on how you use the loan. The loan is easy to obtain. You can get the loan quickly. The loan can be used as collateral for other loans. The loan can be paid back over a longer period. You can get a tax deduction on the interest paid on the loan. The loan can be used to buy stock or invest in a business. You can get a loan against multiple stocks. What are the Eligibility Criteria for Loan Against Stock? There are several eligibility criteria for taking a loan against shares, which are as follows: Age Criteria: The applicant must be at least 18 years old. You can avail of this facility until the age of 65. Resident Criteria: You must be a resident of India to apply for this loan. Minimum Stock Value: The shares pledged by you should have a minimum value of Rs. 4 lakh. Documents Required: You have to submit KYC documents, such as identity proof, proof of documents, proof of stocks, address proof, and the latest photographs. These are some of the documents required for taking a loan against shares. Documents Required for Loan Against Security The documents required for a loan against shares are as follows: Identity Proof: Passport, PAN card, Aadhaar card, driving license, voter’s ID card Address Proof: Passport, utility bills such as electricity, water, and gas bills; ration card. Proof of Income: Latest salary slip, bank statements for the last 3 months, Form 16 Proof of Stock: Latest stock holding statement Photographs: Passport-sized photographs How to Apply for a Loan Against Stocks? Almost every bank in India offers loans against shares. However, the process of applying for this loan is different for every bank. In some banks, you can apply for this loan online; in others, you must visit the branch and submit the required documents. Banks also have different eligibility criteria and rates of interest. Hence, you should compare the offers of different banks before applying for this loan. The steps to apply for this loan are as follows: Visit the website of the lender and fill out the application form with personal and financial details. Submit the form along with the documents required. The lender will verify your documents and, if satisfied, will approve the loan. The loan amount will be credited to your account within a few days. These are the steps involved in applying for a loan against shares. [B-02] Conclusion Anyone who has shares in their Demat account can avail of a loan against those shares. The loan amount will depend on the value of your shares. The loan against share interest rate is generally lower than that of other types of loans. You can use the loan for any purpose. The repayment period is also flexible. Parimal Finance offers loans against shares at attractive interest rates and with a simple application process. So, if you are looking for a loan against stocks, then apply with us today!
08-11-2023
Read More
Tax

What is Income Tax Payable And How to Calculate

The government is entitled to a cut of the total revenue of your company, called the income tax. Paying income tax is your company’s financial obligation. However, an accounting term often used is income tax payable. [B-01] What is the income tax payable? The income tax payable is the amount that your company needs to pay in income tax within the following year. Simply put, it is the tax your company has to pay within the next 12 months. Income tax payable grows in proportion to your company’s profit. You will not always have the same tax payable on the total income. The income tax payable on the total income is shown on the balance sheet as a liability. Liabilities can be decreased through tax credits provided by the relevant government agency. Most tax credits have a time limit on when they can be used on your taxes. It is necessary to track when your company becomes eligible for each. Formula to determine the income tax payable Your organization’s taxable income is not determined exclusively by its bookkeeping profit. The total profit reported on the books can differ from the taxable profit that must be applied to the income tax rate. This is because the government permits many modifications that affect the accounting profit. Income tax payable and income tax costs can fluctuate because it takes time for a company to record the earnings in the account. This often happens because some clients are given late payment due dates. Income tax payable is not included in the statement of operations. Instead, it is shown on the balance sheet. There is typically a disparity between income tax expenditure and income tax paid. The difference may be due to depreciation, tax deductions, and other accounting issues. Since the process is complicated, your business needs help calculating its taxable revenue. There is no set method for determining income tax payable. However, the calculation is done according to set standards. Tax costs can be estimated using the following formula: Taxable income x tax rate = income tax payable For example, if the total taxable income is INR 10,00,000 and the tax rate is 25%, your company has to pay INR 2,50,000. Deferred income tax liability vs. income tax payable Income tax payments and deferred income tax liabilities are financial obligations on a company’s balance sheet. It is a common misunderstanding that they are the same thing. These two things couldn’t be more different from an accounting perspective. Income tax payable represents tax that has not yet been paid. It is still not paid often because the filing dates are far. For example, your company expects to pay Rs. 2,50,000 in taxes for the upcoming tax period. Then, you can record an income tax payable of this amount on the balance sheet. This sum is due on the same day as the rest of the company’s tax obligations. On the other hand, a deferred income tax liability refers to an outstanding tax bill that has been postponed until a later tax filing season. Obligations result from discrepancies between tax accounting and generally accepted accounting procedures. Income tax expenses and income tax payable Income tax expense and income tax payable are not the same. Expenses have to be recorded when they are incurred. An income tax expense is an amount your firm estimates it will have to pay in taxes for the reporting period. Income tax expenses can be utilized to record income tax charges. A business that makes its tax payments monthly or quarterly should make corrections to its income statement. On the other hand, the balance sheet will show income tax payable on the total income as a liability. Types of Income Tax Payable Your corporation’s taxable income can be broken down into two categories. There are two types of income taxes that must be paid: Current income tax payable: The estimated tax payment for the current year. Deferred income tax payable: The taxable income in the current year that will not be paid until the following year. How do you calculate the income tax payable for your company? You can use the formula given above to calculate the income tax payable. However, it is not always clear whether the income is taxed. Companies use GAAP-calculated pre-tax net income as a starting point. You can account for changes between the net income and taxable income. You have to make adjustments if there is any discrepancy between accounting and tax regulations. The fines and other costs you deducted from your net income may not be tax deductible. Adding and subtracting these amounts is often done. Once you have completed these processes, you will have your initial taxable income, from which you may deduct any tax-related expenses (such as tax credits). Apply the government’s tax rate to determine your total income tax. This is the amount your company has to pay. On the balance sheet, record this amount as a liability. Deferred impacts of items like future year tax credits, revenue, costs, and net losses might be difficult to account for when calculating income tax payable on the total income. [B-02] Conclusion Your company’s expected income tax payable is a liability. It is your company’s responsibility to pay the income tax in full. The income tax payable by your business might be due in the current or next financial year. Income tax payable is an important obligation for any business. Businesses need to account for various state and local income tax rates. The process can be confusing. If you’re unsure where to start, look to a professional for help.
08-11-2023
Read More
Personal Loan

What is a Loan NOC letter and How to Get it

In India, when you apply for a loan from a bank or financial institution, they will ask for a No Objection Certificate, or NOC. You may have also heard of this being called a “No Dues Certificate.” The lender requires this document to ensure that you do not have any outstanding loans or debts with any other bank or organization. Several factors can impact your ability to get a NOC, including your credit score, employment history, and income. So, what exactly is a NOC letter, and how do you get one? This article will take a closer look at all these questions. [B-01] What is a Loan NOC Letter? The meaning of “NOC,” or No Objection Certificate may vary depending on the context of the person using it. A NOC is a document issued by a company, organisation, or individual to state that they do not have any objections to a specific action or event. A letter of authorization from your employer, for example, would confirm that you can take time off work for a vacation. In the context of loans, a NOC is a document that your current or previous lender issues to confirm that you have no outstanding debts or loans. Who Issues a NOC Letter? A NOC is typically given on a company, organization, or individual’s letterhead. A manager or company director will typically sign such a document. In the case of an NOC for a loan, this would usually be issued by your current or previous lender. Why Do You Need a Loan NOC Letter? Now that you know more about a NOC, you may wonder why you need one to apply for a loan. There are a few different reasons for this. Firstly, the lender will want to be sure that you do not have any outstanding debts or loans with another bank or organization. If you do, they may be less likely to approve your loan application. Secondly, the lender will use the NOC to check your credit history. This is because having a good credit history shows that you are a responsible borrower and are more likely to repay your loan on time. Finally, the lender will also use the NOC to check your employment history and income. This is because they want to be sure that you have a stable job and earn enough money to repay the loan. Benefits of a Loan NOC Letter There are a few advantages to having a NOC when applying for a loan. First, the lender will approve your loan application more quickly if you have a NOC. The following are the benefits of having a loan NOC letter: This document is trustworthy and accurate, which means there will be no issues in the future regarding the repayment of a personal loan. By having a personal loan contract, you are protected from any legal problems that could arise if there is confusion about the terms of the loan. A NOC is an important document that acts as a precautionary measure for both the borrower and lender. It protects the rights of both parties if something goes wrong during the loan process. A NOC letter can help you get a loan with better terms and conditions. This is because the lender knows that you are financially responsible and have the means to repay the loan. Factors That Affect Your Ability to Get a NOC Below are the factors that affect your ability to get a NOC: Your Credit Score: A high credit score is always advantageous when getting loans. A good credit score reflects your financial responsibility and shows that you will likely repay the loan on time. Your Income: Lenders will always want to know how much money you make each month. This is because they need to ensure you can repay the loan. Your Employment History: Lenders will also want to know how stable your job is. They will want to see that you have a steady income and are unlikely to lose your job soon. Your Debt-to-Income Ratio: This ratio measures how much debt you have compared to your income. Lenders use this ratio to determine whether you can afford more debt. Your Assets: Lenders will also want to know what assets you have. This is because they can use these assets as collateral for the loan. Your Repayment History: Lenders will also check your repayment history to see if you have defaulted on any loans in the past. Getting approved for a loan will be more difficult if you have a bad one. How to Get a Loan NOC Letter? The primary prerequisite for getting a housing loan is a NOC letter. You can get a NOC by following the steps below: 1. Get your documents in order The first step is to get all of your documents in order. Next, you must provide the lender with your identification, income, and bank statements. 2. Choose a lender The next step is to choose a lender. There are many different lenders, so it is essential to compare their terms and conditions before you decide which one to go with. 3. Apply for the loan Once you have chosen a lender, you can apply for the loan online or in person. 4. Get the NOC Once you get approval for the loan, you will need to get a NOC from the lender. This document will list all of the terms and conditions of the loan. 5. Sign the NOC The last step is to sign the NOC. This document is a legally binding contract between you and the lender. By signing in, you agree to repay the loan according to the terms and conditions. [B-02] Conclusion The NOC is an important document that can help you get a loan with better terms and conditions. People usually get a NOC when they apply for personal or housing loans. You must provide the lender with your identification, income, and bank statements to get a NOC. Once approved for the loan, you will need to get a NOC from the lender. We also provide services like personal loans, home loans, car loans, etc. You can apply for a loan online or in person. Piramal Finance has a team of experts who can help you get the best loan for your needs. Contact us today to learn more!
08-11-2023
Read More
Tax

What is House Rent Allowance, HRA Exemption and Tax Deduction?

Many people relocate to a new area in search of employment. Companies typically provide a housing allowance to help employees with this out-of-pocket expense. Thus, the house rent allowance (HRA) affects how much tax you have to pay. This article discusses everything you need to know about the HRA exemption and tax deductions. [B-01] What is the house rent allowance? Employees living near their workplace may be eligible for a “rent subsidy.” A rent subsidy, or HRA, is a payment made by your employer to help you with housing. The house rent allowance may be entirely or partially taxable, depending on the circumstances. The salary, HRA, rent, and job location determine how much of your paycheck is subject to HRA deductions. The tax breaks associated with HRAs are available to self-employed and salaried individuals. How to calculate HRA? When an individual pays rent instead of buying a home, the government allows them to deduct a percentage from the housing rental allowance. You can calculate your HRA refund by using an online salary calculator. The HRA calculator is available on the income tax portal. The advantages of paying rent can be claimed under Provision 80GG. HRA can be deducted even if you do not have a fixed income or receive HRA. Guidelines for deducting house rent allowance from your taxes If you fulfill the requirements of Section 10(13A) of the Income Tax Act, you can deduct your house rent allowance from your taxable income. The requirements are as follows: A salaried employee and a business owner can take advantage of the HRA tax deduction. However, you must rent a house to be eligible. Housing expenses cannot be included in HRA tax deductions. You need to submit a rent receipt as proof that you have paid your rent in full. If your company provides you with an HRA as part of your income, you will not be eligible for tax deductions if you do not pay rent. To avoid a tax penalty, employees spending more than INR 1,00,000 per year on rent must include their landlord’s PAN in their tax forms. HRA tax exemption for salaried individuals Rule 2A of the Income Tax Act specifies that salaried persons are exempt from paying tax on HRA contributions if they meet certain requirements. Employees must adhere to the company’s policies while claiming their house rent allowance. How do you determine if the HRA is deductible? The maximum allowable deduction is calculated as follows: Residents of metropolitan cities receive HRA equal to 50% of [base income + discretionary allowance (DA)]. Residents of non-metropolitan cities receive 40% of [base income + DA]. Rent paid should not exceed 10% of [annual base income + DA]. What documentation is needed to qualify for an HRA exemption? To get a deduction from your employer for your house rent allowance, you will need to provide the following: Rent receipts and rental agreements PAN of the home’s owner if the annual rent is higher than Rs 1 lakh HRA deduction is reflected in form 16. Factors to take into account when calculating HRA deductions Some things to keep in mind with HRA tax deductions are as follows: You cannot receive an HRA tax exemption if you pay rent to your spouse. If you have a house loan, you can still take advantage of the tax benefits associated with an HRA. You can claim a house rent allowance if you live with your parents and pay rent. However, you need to show a receipt. HRA and city compensatory allowance Employers (government and private) often offer their employees a City Compensatory Allowance (CCA) to help them deal with the increased cost of living. The CCA is available in major metropolitan areas and Tier 1 cities. CCA is also available to some employees working in a Tier-2 Indian city. The employee’s grade and position on the pay scale are considered. Therefore, it differs from one city to another. The CCA is meant to offset the higher-than-average housing costs of working in some areas, while the house rent allowance (HRA) covers the costs of renting a home. Allowances are subject to taxation in both cases. The HRA exemption is up to INR 1,00,000, while the CCA is not. HRA deduction: how do you get it? Before, businesses were not obligated to verify whether an employee had legitimate rent costs. However, this resulted in many requesting HRA deductions even though they were not renting properties. Many also requested deductions higher than their actual rent. Therefore, on June 1, 2017, the Income Tax Act was revised to prevent fraudulent use of the HRA deduction. Some rules are in effect: If the rent is more than Rs. 1 lakh per year, the renter must now provide the landlord’s PAN to verify the transaction. You need to provide TDS receipts when requesting the house rent allowance perk. The taxpayer can live in a place he or she rents and still claim the HRA deduction. Assessee can claim deductions under other sections of the Act, such as Section 24, Section 80C, and Section 80EE, in such a circumstance. [B-02] Conclusion Note that to qualify for a tax break, neither you nor your spouse can legally own any residential real estate in the same city. No deduction is permitted if you own any residential property and rent from this property. If you work in a different city and do not own any property in that city, you may be able to take advantage of the house rent allowance tax deductions. In the case of Section 80GG, however, this option is unavailable. House rent allowance is a complicated topic but can be beneficial to understand. If you are still unsure how HRA exemptions work, contact the best financial advisors at Piramal Finance to learn more.
08-11-2023
Read More