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Tax

Tax on profit from commodity trading in India

Online commodity trading has become very popular lately. There are many reasons why. Commodities can help protect you from inflation. They also allow you to spread your investments in different ways. Investing in gold or silver is also a smart way to secure your financial future. However, knowing the tax on online commodity trading is essential. This helps to make educated investments and trades. This is because you have to pay taxes for most high-return investment products in India. In the following sections, you’ll learn all there is to know about the commodity transaction tax. You will also learn how it might affect your earnings in the commodities market. [B-01] Commodity Transaction Tax: A brief overview Earlier, the government didn’t levy any taxes on commodities trading. This was in contrast to the trading of stocks and mutual funds. In 2013-2014, Mr. P. Chidambaram was the Finance Minister. He suggested a tax on the trading of commodities. It is similar to the trading of securities. He named this new tax the Commodity Transaction Tax (CTT). He applied it to all non-agricultural commodity transactions. This tax is similar to the Securities Transaction Tax (STT). You must pay this on equity investments. The CTT was 0.01% of the daily trading volume and applied to stock futures. The buyer or seller of the commodity pays this tax. This depends on the type of transaction. There was a proposal to increase the tax in 2008-2009. But the government did not implement it. This was because the Prime Minister’s Economic Advisory Council rejected it. A tax on speculative and non-speculative trading in commodities income Major commodity exchanges in India include the Multi Commodity Exchange (MCX), the National Commodities and Derivatives Exchange (NCDEX), and others. You can also trade futures and options contracts in the commodity market. The trader selects the contract type which determines the applicable commodity trading tax. Commodity traders make two main types of trades: Speculative trading: It is the same as day trading in the stock market. In speculative trading, a trader buys a commodity in the morning. They sell it in the evening. They do this just before the market closes for the day. These transactions are considered speculative. They are cash-settled. They are not delivery-based.Non-Speculative Trading: Non-speculative commodity trading is like positional trading in stocks. It involves holding the position for at least one day. Non-speculative trade transfers ownership from one buyer to another. Points to remember: Trading profits are subject to taxation in India. It doesn’t matter if they are speculative or not. You have to pay the taxes at the same rate as other business income. The taxpayer’s income tax bracket determines the taxable rate. Trading commodities is not like trading stocks. This is because of the structure of tax laws. In certain cases, you may be liable to pay both short-term and long-term capital gains taxes on stock trades. If you sell shares within a year of buying them and make a profit out of it, you have to pay Short-Term Capital Gains Tax (STCG). Long-term capital gain is the sale of an investment held for more than a year. The standard short-term capital gains tax rate in India is 15%. The long-term capital gains tax rate is just 10%. The stock and commodity markets are vastly different. Because of this, it is easier to calculate and pay taxes on gains from commodities than stocks. When you have losses from a declining investment, it is difficult to calculate the taxes. It is important for traders to understand the type of trading they are doing to determine the tax implications. You can consult a tax expert or financial advisor. This will help you get a better understanding of the tax implications of commodity trading. The next section talks about this topic in depth. How to Deduct Trading Losses and Trading Gains When Paying Taxes on Commodities? Profits from online commodity trading are subject to income tax at your normal rate. There is no tax on the losses. When paying taxes on commodity investments, it’s important to know how to deduct your trading losses and gains. For this, you’ll need to calculate your net profit or loss for the year. You can do this by subtracting your total trading losses from your total trading gains. If your net result is a profit, you’ll need to pay taxes on it according to the applicable tax rate. On the other hand, if your net result is a loss, you can carry it forward to the following year and deduct it from any future gains. The Indian Income Tax code permits taxpayers to deduct business losses from their taxable income. But, the law handles losses from speculation differently from those arising out of other types of investments. You can carry forward the speculative trading losses for 4 years. This starts with the fiscal year when you first suffered a loss. But you can’t make up for speculation trading losses with a steady income. If you made INR 50,000 in non-speculative transactions and INR 50,000 in speculative trades, you cannot claim a net profit of zero. This is because you cannot balance the speculative loss with the non-speculative gain. In this case, you should carry forward the speculative loss. You can use it to offset future speculative profits. This will reduce the taxable amount of the latter. You can balance out speculative profits against losses from other areas of your portfolio. You can also deduct non-speculative losses against either speculative or non-speculative profits. You can do this for up to eight years. [B-02] Conclusion The exchange of commodities is subject to two different forms of taxation. The first is the Commodity Transaction Tax. The second is the income tax. To counteract this, however, you might claim under the appropriate conditions. You must also subtract your gains from your losses. You can only deduct commodity investment losses from futures and options profits. And you can deduct the other losses from both types of profits. Visit Piramal Finance now that you know everything there is to know about commodity investment taxes and the CTT. Click this link to know more about its offerings like personal loans and credit cards.

08-11-2023

Tax Savings

Income Tax Benefits that Senior Citizen can Continue Enjoying in 2022

Additional tax breaks, on top of those already provided by general legislation, are available to individuals who have reached the age of retirement. These eligible individuals may benefit from increased income tax exemptions, larger deductions, and simplified preparation of their tax returns when certain conditions are met. Let’s take a look at the various income tax benefits that are available to people who are in their golden age. [B-01] Increased threshold for basic exemption Tax rates are not adjusted for senior citizens; everyone pays the same amount. However, the standard income tax benefits that apply to people who are not seniors, seniors, and super-seniors are not the same. The maximum /income that can be exempted from taxation is Rs 3 lakh for seniors and Rs 5 lakh for super seniors. The cap is only Rs. 2.5 lakh for those individuals who do not qualify as seniors. Citizens below 60Citizens between 60 – 79Citizens above 60Tax ratesBelow Rs. 2.5 LakhBelow Rs. 3 LakhBelow Rs. 5 LakhNilRs. 2.5 Lakh to 5 LakhRs. 3 Lakh to 5 Lakh—-5%Rs. 5 Lakh to 10 LakhRs. 5 Lakh to 10 LakhRs. 5 Lakh to 10 Lakh20%Above Rs.10 LakhAbove Rs.10 LakhAbove Rs. 10 Lakh30% However, this will no longer be the case if they elect to switch to the new income tax benefits. Everyone, regardless of age, is subject to the same basic exemption level, Rs. 2.5 lakh. The tax brackets under the new system are as follows: Income slab for all individualsTax ratesBelow Rs. 2.5 lakhNilRs. 2.5 lakh to 5 lakh5%Rs. 5 lakh to 7.5 lakh10%Rs. 7.5 lakh to 10 lakh15%Rs. 10 lakh to 12.5 lakh20%Rs. 12.5 lakh to 15 lakh25%Above 15 lakh30% Disregarding one’s income tax returns Individuals 75 years old or older are excused from filling out an ITR. Those who get their interest and pension from the same financial institution qualify for income tax benefits. Those who receive their pension from a different institution are not eligible. It is required that the person in question have no other potential sources of financial assistance. However, before distributing the money, the bank must subtract the tax from the total amount. The senior citizen must provide the bank with a completed copy of Form No. 12BBA to receive the refund outlined in Section 87A of the Income Tax Act and the number of deductions outlined in Chapter VI A. No tax withholding is withheld on interest income Senior citizens may submit a statement to their tax withholding entities in Form No. 15H for tax withholding on income from post office deposits, public provident funds, provident fund withdrawals, LIC maturity profits, etc. For senior citizens who have paid all their taxes and have nothing left to claim, this eliminates the need to file a tax return or seek a refund. Seniors can make this declaration on Form No. 15H, even if their income exceeds the standard deduction amount. Moreover, for those aged 60 years and over, the maximum interest tax deduction on deposits is Rs 50,000 (Section 194A). For those who are not seniors, the limit is Rs 10,000. Up to Rs. 50,000 in interest may be written off Under Section 80TTB of the Income Tax Act, seniors may deduct interest earned on savings and fixed deposits up to Rs 50,000. If your annual income is more than Rs 50,000, you’ll be subject to the lower, senior citizen-friendly tax rates. Interest earned on term or fixed deposits is not eligible for deduction under Section 80TTA for those who are not seniors. Tax deduction under Section 80C According to this provision, elderly citizens and super seniors are eligible to deduct up to Rs 1.5 lakhs from their yearly gross income for allowable investments and expenses. Common assets that qualify for 80C deduction protection include: Financial commitments to create an equity-linked savings scheme (ELSS) over 5 years. You may put money away in various ways, such as the National Savings Certificates (NSC), the Public Provident Fund (PPF), and the Life Insurance Policy (LIP). Healthcare expenses and insurance premiums are tax deductible under Section 80D According to Section 80D of the Indian Income Tax Act, individuals under the age of 60 years are eligible to receive a tax deduction for up to Rs 25,000 of the cost of their medical insurance premiums. Nevertheless, the reduction of Rs 50,000 is a significant income tax benefit for senior citizens. Under section 80D, senior citizens are eligible for an additional deduction for medical expenses. Tax break increase for a certain illness Under Section 80DDB of the Internal Revenue Code, taxpayers are allowed to deduct the expense of treatment for certain diseases. This section discusses the medical treatment of serious diseases and ailments, such as cancer, neurological abnormalities, etc. Deductions for medical expenses are possible up to Rs 1,00,000. The money from a reverse mortgage doesn’t have to be paid in taxes By permanently mortgaging their houses, elders may receive monthly payments via a reverse mortgage arrangement. A senior citizen retains all rights of ownership and possession. When the borrower dies, the lender will sell the property and use the proceeds to pay off the debt plus any accrued interest. The proceeds from the sale are distributed to the rightful heirs. A senior citizen who receives a lump-sum payment now or in instalments throughout their lifetime from this plan will not be subject to federal income tax on that amount. Prepayment of taxes is not required An individual must make an advance tax payment if they anticipate having a tax liability for the subsequent fiscal year that is more than Rs 10,000. If senior citizens have no revenue from a company, they do not have to make an advance tax payment. They are accountable for deducting and paying taxes on their earnings. This is another one of the income tax benefits. [B-02] Summing up When paying taxes, seniors are considered to be 60 years or older but still younger than 80. Those who have reached the age of 80 and beyond are considered “super senior citizens”. These are some income tax benefits these seniors and super citizens may enjoy in their golden years. To learn more about their benefits, you may visit Piramal Finance, which will provide you with all the necessary information.

08-11-2023

Tax Savings

What you need to know about tax benefits of nps in India?

National Pension Scheme (NPS) is an optional, long-term investment strategy for retirement. The Central Government along with the Pension Fund Regulatory and Development Authority (PFRDA) are in charge of it. In this article, we will discuss in detail the tax advantages offered by NPS. [B-01] What is National Pension Scheme (NPS)? The Central Government launched the National Pension Scheme as a social security programme for all individuals. However, those performing any sort of military service are not included in this scheme. The programme asks for a periodic contribution to a pension account during your employment tenure. You can withdraw only a specified amount of investment before retirement. The remaining amount will be credited to your account on a monthly basis after retirement. For those employed in the private sector, there are many Tax benefits of NPS as it offers deductions under Sections 80C and 80CCD. Moreover, this account is also transferable in cases of job switches. Who should invest in the NPS? People who are looking to make a retirement plan and are low on their risk appetite must consider NPS as an investment option. Having a steady pension in a methodical manner post-retirement has a huge impact on your life. Salaried individuals who look forth to saving taxes and investing more can consider this plan under 80C. Features of NPS Returns/Interest – NPS invests a portion of money in stocks, which allows it to provide a higher return when compared to PPF. This programme has been in place for more than ten years and has thus far produced annualised returns of 9% to 12%. Risk Assessment – The upper margin of equity exposure in the National Pension Scheme is between 50-75%. For government workers, it is set at 50%. There is also an attached condition that the equity component will decrease by 2.5% annually after an investor turns 50 years of age. However, the margin of exposure in equity cannot fall under 50% in any circumstance. Hence, investing in NPS stabilises the risk-return ratio of the investors, protects their corpus and also provides a steady return. Tax benefits of NPS The employee’s and employer’s National Pension System contributions are exempt from tax up to Rs. 1.5 lakh. You can claim the tax benefits of NPS under Sections 80CCD(1), 80CCD(2), and 80CCD(1B) of the Income Tax Act. Self-contribution is covered by Section 80CCD(1) of the tax code. The maximum deduction for salaried workers is 10% of their pay, whereas the maximum deduction for self-employed people is 20% of their gross income. Employer contributions to NPS are covered by Section 80CCD(2), which is also a part of Section 80C. Self-employed people are not eligible to get this benefit. You may only deduct up to 10% of your basic income plus Dearness Allowance or the employer’s NPS contribution, whichever is greater. You may claim Rs. 50,000 as an add-on NPS tax advantage for self-contributions made under Section 80CCD(1B). Therefore, under NPS, people may claim tax benefits of NPS of up to Rs. 2 lakh. Things to remember: Tax savings: Those in the highest tax category of 30% can save an additional Rs. 16,000 in taxes thanks to the extra Rs. 50,000 deductions on NPS. Employees can save over Rs. 10,000 in the 20% tax band, and Rs. 5,000 can be saved by those in the 10% tax bracket. Opting out of EPS: The Finance Minister intends to provide employees with the choice to forego EPF and invest in NPS instead for their retirement. Tax on withdrawal: There hasn’t been a prolongation of the tax benefits for NPS withdrawals. As a result, contributions to the NPS up to Rs. 1.5 lakh and the interest received are tax-free, but the amount withdrawn is not. Extra tax saving options: The total deduction allowed under Sections 80C and 80CCD of the Income Tax Act would now be up to Rs. 2 lakh, thanks to the additional Rs. 50,000 deduction on NPS. The cap for deductions under section 80CCD, including contributions to the NPS, has also been raised from Rs. 1 lakh to Rs. 1.5 lakh. This should provide investors with more possibilities for tax reduction in turn. Withdrawal options: Once you are 60 years old, you will have the option of leaving NPS. You must use at least 40% of the total pension wealth to purchase an annuity for your monthly pension. The balance is paid as a lump sum. The annuity service providers are in charge of providing a consistent monthly pension once the subscriber leaves the NPS. NPS structure: Tier-I and Tier-II accounts make up the NPS scheme: Tier I – This is a non-withdrawable account intended only for retirement. Contributions made to this account are tax-deductible. Tier II – Only individuals who have an active Tier I account may start a voluntarily withdrawable Tier II account. You will have the option of making withdrawals from your account as needed. This works in the same fashion as a normal bank savings account. Minimum deposit: While the minimum contribution is Rs. 500 in a single deposit, the minimum deposit for a Tier-I account is Rs. 6,000. Opening an NPS account: To offer NPA-related services, the majority of banks are registered with PFRDA. Anyone between the ages of 18 and 60 is eligible to open an NPS account. Online tracking is available for both transactions and the current fund value. Portability: Once your NPS account opens, you will receive a PRAN. This is a distinct integer that never changes. You have the choice of portability with NPS between locations and jobs. [B-02] Conclusion Consider investing in the NPS scheme for the advantages mentioned above. Understand your risk tolerance and investment objectives before making a decision. However, if you want more equity exposure, consider investing in some other options. Read more at Piramal finance about NPS and don’t forget to explore their vast range of products and services.

08-11-2023

Know More

Everything you need to know about personal loan processing fees and charges

Need to use your property as security for a loan? Find out who qualifies for the interest rates the loan against property and how to get them. Know the lender’s processing and closing fees before applying for this loan. These costs include underwriting, credit and property appraisals, legal fees, title searches, and document preparation. Here, we’ll talk about these things to help you understand them better! [B-01] What is the loan against property? Property loan governs personal and natural land. The property includes legal rights to resources like land and personal items like intellectual property. Contract loan allows property transfers and secured debts, while tort loan protects ownership from harm. Loans against property eligibility, a standard mortgage option, can finance personal or professional needs for employed and self-employed people. To get a loan, a person must pledge commercial or residential property as collateral. The lender holds the asset until the loan’s interest and amount are paid. Interest rates on loan against property Loans based on property Loans against property interest rates are the most attractive financial tool for people who need money. The amount and length of the loan affect the interest rate. Borrowers can choose between rates that stay the same or change over time. The market affects an adjustable rate, while a fixed rate stays the same for the whole loan. We now know how home loans work. So we need to figure out who owns what. Lenders make changes to this loan. Market and bank rates place it between 10-15%. 9% per year. Real estate loans from banks usually cover between 70% and 90% of the property’s current market value. You can pay back the loan in manageable monthly payments for up to 15 years. Use this money however you want. Our 15-year-old team will find a bank or NBFC with low interest rates for you. We look at your profile and make recommendations for banks and NBFCs. Factors influencing the interest rate on loans against property The length of time it takes to pay back an interest rate on a loan against property is the main thing that makes a big difference in the interest rate, which is what the bank charges the borrower. When the time between payments is short, interest rates are high. Next, if you want to get a loan against properties at a lower interest rate, your credit score must be at least 700. The lender’s interest rate is based on the property’s kind and market value and the applicant’s profile. The interest rate that the bank charges is also based on factors including age, profession, salary, etc. Eligibility of applying for a Loan against Property First of all, you have to know about the eligibility criteria for a loan against property. Let us know more about it. Whether it be a commercial or residential property, it must be located in India. The maximum age must be 65 years, while the minimum age of the applicant must be 25 years. Salary or self-employment are two possible jobs. (Private or public professionals must share the experience of a minimum of 3 years in the company .) Net income must be Rs. 25,000 monthly. Also, specific documents become necessary to submit while applying. These documents involved are the latest salary slip for applicants who work on a salary basis, the previous three months’ bank account statements, the original PAN card and Aadhar card, and a copy of the documents of the property we are talking about. Finally, the IT returns of the salaried applicants arrived. More papers are also involved in the loan application and processing process. How does the processing fee work? The borrowers must pay a non-refundable, one-time charge to the lender when submitting a loan application. Typically, processing fees amount to 7% of the loan amount. How can I apply for a loan secured by property? The client must go to the financial lender’s website and submit an online loan application. The lender’s customer service department will contact the applicant and ask for the delivery of the necessary paperwork. The lender will next check the given documents, and after that, they will inspect the applicant’s property. The loan amount will be added to the customer’s bank account if, indeed, the application is approved. Following the five easy steps, you can apply for a loan against the property. Benefits of a loan against property Compared to unsecured loans, secured loans often have lower interest rates. Additionally, your chances of receiving a loan with a low-interest rate increase if you have a strong credit score and a practical credit history. When a loan is secured by real estate, the borrower still retains ownership of the asset. The right to your property does not change when you use it as security for a loan. You will be unable to pay back the loan, and this also enables you to look into selling a property. You won’t have to pay any fines for pre-closing the loan if the loan you have obtained has a variable interest rate. However, if your loan had a set interest rate, you would only have to pay a small sum. The majority of loans secured by property have adjustable loan repayment terms. You can get a loan with a 20-year repayment period, depending on the lender you select. Understanding the benefits mentioned above, you can now decide to apply for a loan for your property. [B-02] Summing-up: This essay explains how to apply for a loan against property, including administrative fees, and the interest rates on the loan against the property. The explanation is based on extensive research to help you choose the best interest rates on the loan against the property. Also, it highlights several advantages and disadvantages while raising a fund. Finally, we can say that we get a diverse getaway of info on what to do when you are applying for a loan against property interest rate with some of its benefits.

08-11-2023

Health Insurance

Things to Consider While Renewing Your Health Insurance Policy

You often recharge your smartphones to avoid having your services interrupted, right? In the same way, you must renew your health insurance policies to keep them active. Our health insurance could lapse if we don’t renew it during the grace period. After its expiration, you will have to go through the trouble of purchasing a policy once again. Thus, it’s crucial to renew your health insurance policy on time. Additionally, there are several things you should consider while doing so. Here are the six important things you should consider while renewing your policy: [B-01] 1. Don’t overlook the renewal date. The renewal date is one of the most important things to consider while renewing your health insurance policy. Once the pre-fixed term of your health insurance policy expires, you must renew the term. Renewing the policy allows you to enjoy continuous health insurance benefits. Although the insurer reminds you of the renewal date, the insured must not overlook it. The insurer provides the insured with a grace period of 15–30 days in case you forget to renew your policy. Per the rules, the insurer is not liable to charge extra fees during the grace period. Health insurance policies lapse if when they are not renewed before or during the grace period. If the policy lapses, it cannot be renewed. Such lapses are risky, especially for those with medical conditions. 2. Examine your changing healthcare needs. Healthcare costs increase as per your age. Hypertension and diabetes are very common illnesses these days. Also, the risk of serious diseases increases with your age. At the time of policy renewal, you must tell the insured about the additional diseases that you didn’t have before renewal. This might increase your premium, but it will insure you against future health conditions. Also, health insurance policies should change with the changes in an individual’s life stages. For instance, if you are married and have a child. You should get your new family members covered under your health insurance. With changing health insurance needs, you must upgrade and renew your policy from time to time. Also, if your current insurer does not meet your present and future health insurance needs, you must shift to another insurer. Choose the best health insurance policy that fulfils your needs at an affordable premium. 3. Increase the sum assured under the policy. After reviewing the above-mentioned health insurance needs, you are certain that an increase in the sum covered is necessary. And this can only be done at the time of renewal. And if the proposed upgrade is large, the insurer may impose restrictions such as no prior claims and the need for medical exams. Be aware that the waiting periods will apply once again to the extra share of the insured. Thus, when it’s time for policy renewal, you should be ready and aware of that. 4. Check for changes in policy terms and conditions. The Insurance Regulatory and Development Authority of India (IRDAI) looks for the insurance sector. According to IRDAI, insurers can change the terms of a policy with its approval. However, they must communicate those changes with their customers 90 days in advance. As a responsible policyholder, you should keep your eyes open. Before the renewal of your health insurance policy, discuss the changes in the policy with your advisor. Move ahead with the policy renewal if the changes in the policy provide you with the desired benefits. Or, choose another policy that provides highly valued benefits at the same premium. 5. Have a look at the premiums offered by competitors. There is a lot of competition in the insurance sector. Due to this, many competitors try to offer competitive premium rates. You should also compare the premium rates of other competitors of the same policy offering similar benefits. Nowadays, comparing the premium rates and benefits offered by different insurers is very easy. You can do this by using various comparison tools available online. You can compare the different health insurance policies in terms of Benefits. Claim settlement ratio. Reviews. Premiums. You must rethink your policy if it does not offer the benefits as per the premium. Or, if it charges a higher premium as compared to other health insurance policies. 6. Save the receipt and inform your family member about the renewal. Notify your family member about your policy’s terms. So they are aware of the changes and are not surprised when the time comes to file a claim. Tell them where you keep the insurance papers, cards, etc. Follow up with the third-party administrator (TPA) to get the updated cashless identity cards issued. As you’ll be deducting the premium from your taxes. Printing out the receipt and keeping it in your tax file for your records and future use is a good idea. [B-02] To Sum It Up. Most people believe they have done everything after buying a health policy. But this is an incorrect belief. Buying health insurance policies is as important as renewing them properly and promptly. Always remember your renewal date. Also, consider your changing health insurance needs. And ask for an increment in the sum assured. Before renewing your policy, check for any changes in the policy’s terms and conditions. Compare the premiums offered by other insurers or competitors. Keep your receipts at hand. Inform your closest family members about the policy changes. Change your insurer if you are unsatisfied. Choose the best health insurance policy with reasonable policy terms and the benefits offered. Visit our website to find more useful and informative blogs.

08-11-2023

Personal Loan

How security is the important factor to get personal loan

Personal loans may be a quick way to receive much-needed cash. This can be used to pay for home renovations, unexpected medical expenses, starting a business, or a holiday. On the other hand, getting a personal loan from a bank includes the client verification procedure after the loan application. Unlike mortgages or vehicle loans, personal loans are often not backed by a guarantee. So lenders must check the eligibility requirements before accepting them. Lenders check your credit score, income, existing EMIs, occupation, age, and repayment history when considering your application for a personal loan. [B-01] About Personal Loan When there is a need for rapid cash, a personal loan is the most outstanding alternative. It has the fastest disbursal time compared to other loans on the market. Given how simple it is to obtain a personal loan, a statement from the RBI in March 2021 revealed that personal loans had grown by 13.5%. (Y-o-Y). This shows that more people are interested in personal loans to cover unexpected needs and make ends meet. Remember that credit risk evaluations are performed before the lender approves a loan. Let us learn more about credit risk assessment and the most important aspects that influence credit risk in personal lending. Loan Risk The risk of loss a lender bears due to a borrower’s inability to repay any loan is referred to as “loan risk.” Loan risk assessment is a method in the personal loan industry that shows whether or not an individual should be granted a specific amount of credit. This approach considers the risk that the lending party will have to bear if the loan’s principal and interest are not paid. Since the pandemic outbreak and the ongoing loan crisis, credit risk assessment has taken centre stage for financial institutions. Loan risk assessment is a complex procedure for most financial institutions, as it involves reviewing the bank’s capital and loan reserves simultaneously to reduce losses caused by bad loans. With regulators demanding greater openness, banks must do extensive background checks on their clients and appropriately calculate the related loan risk. The problem in personal lending is accurately analysing whether or not an individual can arrange for repaying the borrowed money. The loan amount, payment schedule, and loan tenure are all aspects that are checked. While improving people’s access to credit can benefit the economy, it’s critical to consider the loan risk involved. When banks fail to undertake due diligence and give loans without a sufficient credit assessment, loan assets become non-performing assets (NPAs), resulting in losses to lending institutions and, eventually, the broader economy. Factors Affecting Loan Lending Scope: The ability of the borrower to repay the loan is essential. The customer’s employment history, present job stability, and income quantity are all crucial indications of the borrower’s capacity to repay the existing loan in the case of personal lending. A well-balanced revenue and spending connection reveal not only the borrower’s financial capability but also his ability and judgement in business management. Borrowers who have college-going children or who are owners of small firms with fluctuating income flows are termed “low capacity” borrowers. The “debt-to-equity” ratio checks whether the borrower can produce the necessary funds to repay the loan. The borrower’s capacity is calculated by comparing current income (before taxes) to recurrent obligations. Assets: This element is used to determine the net worth of the person who has asked for a loan. It reflects the borrower’s total assets, including savings and investments in jewels. A high capitalisation rating shows that the borrower is well-capitalized to absorb any unexpected losses. While the borrower’s current income is utilised to repay a personal loan, the borrower’s capital is regarded as an extra reserve to fulfil demands in unanticipated situations. Conditions: When determining the risk that the lender will have to bear, external factors such as the economy, market, and industry circumstances are vital to examine since they will have an indirect impact on the borrower’s ability to repay the loan. The goal is to establish if the borrower can adjust to changing situations and be flexible enough to repay the loan during its duration. Security: Security is the borrower’s assets that can be pledged in their name as security for the loan given. This might include permanent assets such as the borrower’s land title and financial assets such as bonds. Security is only guaranteed for secured loans, not unsecured loans such as credit cards. We need to realise that collateral will not be utilised to evaluate a borrower’s ability. This is because collateral is only liquidated when the borrower fails to repay the loan in the worst-case scenario. Nature: Character is determined by the borrower’s moral integrity. It all boils down to the borrower’s willingness to repay the loan. It determines if the borrower will fulfil the credit obligation. The most important part of determining a borrower’s creditworthiness is character. The borrower’s repayment and credit management histories are examined to establish the borrower’s inclination to repay the loan. If there are signs of default, it shows that the borrower has been inattentive or careless in the past. This shows a negative character, resulting in lower scores. [B-02] Conclusion Credit scores are sometimes used to screen loan applications along with these five loan risk assessment parameters. These factors are essential in establishing a framework and objectives that will allow lending institutions to judge the borrower’s eligibility for a loan. Loan risk departments of lending institutions make decisions with the help of data. This helps them with loan risk and in arriving at reliable estimates of the borrower’s creditworthiness. There are no complex rules governing how lenders weigh these features. Different lenders may value one feature more than another. Online lending platforms may prioritise character and capacity, whereas banks prioritise securities. Fast, practical, and easy to secure, personal loans from recognised firms like Piramal Finance can help cover unexpected expenses or assist with your home upgrades, unforeseen medical expenses, starting a business, or even going on vacation without much fuss.

08-11-2023

Tax

Personal loan interest rate is tax deductable or not?

Personal loans are unsecured loans that are great when you need money but don’t have anything to put up as collateral. These loans are often not taxed since they are not considered part of your income when completing your IT reports. However, the loan must come from a legitimate source, such as a bank or other money firm, as loans from unknown sources may be taxed as income. As a result, you may claim an income tax deduction. There are, however, certain limits tied to it. People considering a loan may question whether such loans are tax deductible. In a nutshell, the answer is yes! Many consumers are unaware they might get tax perks on personal loans and lose out on refunds. The final use of the loan amount will determine whether or not you get a personal loan tax benefit. [B-01] Is Personal Loan Tax Deductible? No, in most cases, but there are a few exceptions. Personal loans may be tax-exempt if the revenues are used for firm costs, qualifying education costs, or eligible taxable assets. A personal loan will not impact your taxes if you do not use it for one of these reasons. A personal loan may help you save money by consolidating high-rate debt or offering the cash you need to cover an urgent or surprise cost. While there are exceptions, personal loans do not affect your taxes. This is why: 1. It is not earnings The money you get from a personal loan is not added to your taxable income, so you don’t have to pay taxes. 2. It is just for personal use Loans are often used for personal purposes, and personal costs are typically not deductible. 3. Even when it is permitted, only interest is tax deductible Certain forms of loans may be eligible for a personal loan tax deduction. Yet, you may deduct only the interest portion of the loan, not the whole amount. Is Personal Loan Interest Tax Deductible? The amount given back to the lender in interest is tax-deductible and can be written off as payments for work costs. Firm costs are costs incurred to create income from a firm and may be subtracted from total revenue to determine the taxable amount. In short, a user may deduct the rate from firm costs to know the taxable amount. It is an excellent tool for small firm owners and startups to reduce their tax obligation and use the profits to develop their operations. Yet, the principal amount borrowed from the lender is not tax-deductible and cannot be claimed as a business expense. The whole amount taken as a firm loan is the principal amount, and no tax is due on the main amount. It is a component of the total salary, and the firm owner pays tax on the net income received. Personal Loan Tax Benefit The Indian Income Tax Act does not mention any special personal loan deduction, but there are tax breaks for other regular loans such as education, home, etc. Yet, this does not rule out the possibility of obtaining tax savings via a personal loan. As there is no mention of a personal loan deduction in the Indian Income Tax Act, the reason the loan was obtained will be taken into account when granting tax deductions for a loan. In the case of a bank loan, tax benefits are available only if the loan was taken for a purpose that qualifies for an income tax deduction. The following situations will qualify for a personal loan tax deduction: For Commercial Purposes If a person uses a personal cash loan to invest in his/her firm, the rate on the loan becomes a liability for the firm. In this case, the rate paid is an expense that can be deducted from the firm’s net profit. This lowers the amount subject to net tax profit. Besides, no limit has been set by the Income Tax Act on the amount of a firm’s tax-deductible liabilities. The person’s interest is tax deductible if the loan is used for business purposes. For the Purchase or Building of a Home Section 24 of the Income Tax Act, titled “Deductions from Income from House Property,” allows for tax breaks. Section 24 mentions that the rate paid on funds obtained through a bank loan can be deducted from net taxable income from residential property. Section 24 will apply if the funds are used to buy or build the same property. Education Costs If you use a personal loan to fund your higher education, you can claim tax breaks under Section 80E of the Income Tax Act. This perk only applies to loan interest payments, not principal, but there is no upper limit on the amount of the rate that can be claimed as deductible. Section 80E currently allows for a personal loan tax deduction of up to Rs. 1.5 lakhs for education-related costs incurred by you, your spouse, or your children. And you may also claim savings if you are a student’s legal parent and have taken out a loan in their name to assist in funding their education. To Purchase Assets Assume the loaned money is used to purchase jewellery, stocks, or other non-residential assets. In such instances, the user cannot claim immediate tax relief when acquiring the assets. The rate paid on lent money used to purchase the item, on the other hand, is added to the overall cost of obtaining that asset. As a result, if the debtor sells an asset, the paid rate is subtracted from the capital gains. It is reduced as part of the buying price. This lowers the taxable profit. [B-02] Conclusion Even though the Income Tax Act does not explicitly state a personal loan tax deduction, you may profit from them. The main factor when providing tax deductions on personal loans is the reason you obtained the loan, never the original amount. Finally, you may claim tax deductions if you use the personal loan balance for tax-favourable reasons. Before deciding on a loan, be sure you understand all of the details. To learn more about the personal loan tax deduction, visit Piramal Finance for related blogs and explore their products and services.

08-11-2023

Business Loan

Loan Against Commercial Shop In India

If you are looking for sizeable funding, you can opt for a loan against commercial shop. You can use this property loan to fund your expansion or buy expensive machinery. We have gathered the best and most relevant information about property loans. In this article, we will tell you why it is a good idea to collateralize your commercial property against loan. We will also tell you how to apply for a loan against commercial shop. [B-01] What is a loan against commercial shop? A loan against a commercial shop is a type of loan in which you mortgage your commercial property against loan.You can get approximately 70% of the current market value of your mortgaged property as property loan amount. You can use a rented, self-occupied, or vacant Office space Shops Showrooms You can use this loan amount to buy raw materials or invest it in advertising. Banks, NBFCs, or digital lenders provide loan against commercial shop. You can pledge ready-to-use and fully constructed commercial property against loan. These properties should be litigation-free and must have all the required permits and approvals from the respective authorities. However, you can’t use under-construction properties to avail of this loan. Eligibility Requirements for Getting Loans Against Commercial Property To qualify for the property loan, you must meet the requirements listed below: You must be an Indian national. You must have a regular income. The commercial property should be fully constructed. There shouldn’t be any legal concerns. You must have a credit score of 750 or more. Documents Required for a Loan Against Commercial Property Documents required to apply for this property loan are: Address and identity proof: Aadhaar card, PAN card, passport, voter’s ID, or driving licence You can use one of these documents for identity and address proof. Income Proof: You can use ITR filings and bank account statements as proof of your income. Documents related to property: For pledging property against loan as collateral, you will also need documents related to the property. It could be the title deed, buyer agreement, certificate of occupancy, or letter of allotment. Your lender could ask for more documents, so make sure you have all the documents that you might need to obtain this loan against commercial shop. Things to Consider While Going for a Loan Against Commercial Shop Taking a property loan against your commercial shop might sound like a good idea. However, it is not always so. Here are some things you should consider before you put your property against loan as collateral. Collateral To be eligible for a loan against commercial shop, you must first own a business property. It may be a store, office, factory, or another type of commercial building. According to the lender, the requirements can change. To get the loan, your business property will be mortgaged, so you should have legal ownership. Payback period The maximum payback period is 15 years. However, it can vary depending on the policy of the lender you have chosen. Pick the payback tenure you are comfortable with. You are being charged interest Generally, if you have mortgaged property against loan, you get a cost-effective interest rate. So, compare the interest rates various lenders are offering. Make sure you are receiving the most reasonable offer for your asset. People tend to miss out on a lot in this case. Find a bank or lender who will provide you with an affordable interest rate for property against loan. It would be best if you put some effort into your research. Even insignificant variations in interest rates have a significant impact on your ability to repay the loan in the long term. There are additional costs. Loans of any kind come with additional costs. There will be stamp duty and state fees. Certain lenders may also charge service fees, prepayment fees, and statutory fees. So, it’s crucial to include all those fees when calculating the actual cost of taking out the loan. These fees can appear insignificant. However, they have the potential to reduce the cost of borrowing the loan and have a role in your capacity to pay it back. Processing Fees You would have to pay certain fees, generally referred to as “processing fees.” They would cover things like registration fees, legal costs, brokerage fees, and loan assessment fees. You will have to pay a processing fee of 1% to 2% of the loan amount, depending on the lender. Real Estate Appraisal Loan against commercial shop is given in exchange for collateral, as the name implies (in this case, a shop). The bank’s representative values your property against loan to establish the maximum loan amount the bank is willing to offer. Also, the bank bases the loan amount on the property’s current value. The maximum loan amount that you can receive is also 70–80% of the value of the property. You should assess the loan-to-value (LTV) ratio offered by banks in light of these considerations. Also, check the value of your property and see if there are chances it will go up shortly. If there are chances of a rise in your property value, waiting will get you a higher loan amount than now. [B-02] Summing-up: This article aims to provide information about factors that you must know before going for a loan against commercial shop. Before making the decision, know all about it. Pay attention to the information mentioned before while making any decisions. Also visit, Piramal Finance for more in-depth, educational articles.

08-11-2023

Tax

Simple tips to manage your personal finance in 2022

How easy would life be if someone could give us a magic formula to manage all our personal finance? While this might not be realistic, some efficient planning could work like magic for this. In this article, you will find some tips to manage your personal finance efficiently. Personal finance is crucial for achieving financial freedom. At every stage of our lives, we must prepare for and manage our finances. We wouldn’t be able to effectively pay our debts off and free ourselves from a life of servitude without precise planning, which would make us slaves to debt and credit. Living paycheck to paycheck is a very challenging way of life. Even if we have a job that pays for our daily needs, unforeseen fees like expensive medical bills or car repairs could have a terrible impact on our finances. Consequently, having enough personal finance management abilities can help us handle our money well. Additionally, it ensures a bright financial future. [B-01] The following advice will help you define your financial objectives: 1. Establish long-term objectives: You must establish long-term objectives such as paying off debt, purchasing a home or retiring early. These objectives are distinct from your immediate objectives, such as setting aside money for a romantic date. Establish short-term objectives such as sticking to a budget, cutting back on spending, paying off debt or refraining from using credit cards. Prioritize your objectives to aid in the development of a financial strategy. 2. Recording your strategy: The secret to success is your budget. You will have the most influence over your financial destiny using this tool. The success of the rest of your plan depends on your budget. You should continue assisting with long-term objectives, like retirement savings. Another important element in achieving financial success and reducing stress is setting up an emergency fund. Keep these items in mind when developing a financial plan: 1. Eliminate unnecessary costs : Pay bills on time to avoid late fees and extra tax, etc., set up reminders or schedule future payments to avoid fault. 2. Cut on day-to-day costs: Savings is what makes the future peaceful. Make a list of all necessities and prioritize your personal finance. This will help you save money on all the extras. Try getting housing bills like water, gas, electricity, and internet in terms of a plan. It makes the overall deal better in terms of both service and money. 3. Track your spending: Get out of debt and keep it that way. It is very important to know where all your money is going. Thus maintain a record of your personal finances. Try using an online payment mode to keep it easy. You can also stick to traditional pen-paper records or excel spreadsheets. Eliminating debt should be the primary priority. For many people, debt presents a significant barrier to achieving their financial objectives. Additionally, there are certain programs for tracking finances that can be utilized to achieve this more effectively. Here are some pointers for quickly paying off debt: To raise additional funds for your debt repayment plan, sell any unwanted or unused items you have lying around the house. If you want to make quick or long-lasting improvements to your condition, a second job may help accelerate the process and could be required. To have more money for your debt repayments, look for places in your budget where you may cut back. 4. Save for retirement now, regardless of your age: Save in small amounts, which will add up to a surplus in the future. This will also enhance your personal finances and will make you efficient in spending. 5. Don’t be afraid to seek assistance: Work with advisors, gather data and seek clarification on your inquiries. You’ll feel more comfortable financially, and your personal financial stress will decrease as a result. Find a mentor who is ready to assist you in creating and working through your budget over the initial months. This mentor can be useful if you’re feeling overburdened by the budgeting process. Create a personalized financial strategy. Make smart preparations for the financial milestones of life. Use debits over credits: Paying via debits will limit your expenditure and not put a heavy load to return like when paid in credit. One of the best things is you can’t spend more than the amount you have. This gets you out of unnecessary debts. Some advantages of debts are:- Convenient to Use Works as an Emergency Fund Self Protected. Easy to Obtain Sets a Budget 2. Set clear goals to accelerate your savings : List down the things that you need to purchase in the near future. Work out how much money you will need for this. Try keeping a certain amount aside for this. Decide the timeframe which will keep you more motivated and keep track of the saved amount. This will help you boost your personal financial status. Overall tips to improve personal finance management. Create a budget Save first, spend later Set financial goals Start investing early Avoid debt Save Early [B-02] Conclusion: In summary, planning and tracking are crucial to your personal finances. The key to financial success has a personal financial plan. Every stage of life’s financial objectives must be included in this strategy. You must safeguard your wealth. Thus, you must be aware of every expenditure. Every person manages their personal finances to some extent. Finding the ideal balance between income, expenses, savings, and investments is crucial. This harmony will guarantee that the person’s personal financial planning and management are at their best. If you are ready to write your own financial management plan, then don’t forget to visit https://www.piramalfinance.com for more information on personal financial management. You will surely get positive takeaways from here and will be able to excel in your goal.

08-11-2023