Flame Newsletter - June 30 to July 06, 2011

Both these years the upper limit of no-tax slab for women was Rs 1.9 lakh and tax was paid according to the same but an extra demand was raised.

July 06, 2011 12:59 IST | India Infoline News Service
Learn to manage your finance efficiently
Woman mistaken to be man made to pay more tax: Report

I-T department has asked Guniben Adani to pay her tax as per the tax slab of men. For last two years, I-T department is confusing her to be a “male”.
Last year Adani wrote a letter to I-T department through her Chartered Accountant asking why she is forced to pay tax as per the male slab and to acknowledge her as a female. I-T department issued a rectification letter to her which again marked her as a “Male”.
I-T department has asked her to pay an extra Rs 3,000 tax on her income as rent from her properties during financial year 2009-10 and Rs 1,500 for income during 2008-09.  Both these years the upper limit of no-tax slab for women was Rs 1.9 lakh and tax was paid according to the same but an extra demand was raised.
Indian banks hike base rate and BPLR
After the last policy rate hike by regulator Reserve Bank of India, banks have started revising their base rates as well as BPLRs. ICICI Bank has raised its lending rates by 25 bps. The base rate of the bank now stands at 9.5%. Also there has been a 25 bps hike in its benchmark prime lending rate (BPLR) too.
Public sector lender Dena Bank has announced increase in its base rate by 25 bps to 10.2%. The benchmark prime lending rate of the bank has also been raised by a similar amount taking it to 15.25%. Corporation Bank has raised its base rate by 35 bps taking it to 10.25% from 9.9% earlier. Indian Overseas Bank (IOB) has allowed for a 25 bps rise in its lending rates. Its base rate now stands at 10.25% while its BPLR stands at 14.5%.


Karnataka Bank has raised its base rate by 25 bps. The revised rates for the bank are to come to effect from today, July 04, 2011. The base rate of the bank now stands at 10.50% while its BPLR remains unchanged at 15.25%. Major public sector banks, including State Bank of India, Punjab National Bank and Bank of Baroda, are likely to soon raise lending rates making home, auto and commercial loans expensive.
Uncomplicate your Finance
Repaying a Personal Loan
Most people usually consider taking a personal loan when some unforeseen expense needs to be met. As the amount required is generally not very significant, lenders do not require landed or movable assets as collateral and disburse the loan once an applicant submits documents such as his bank statement, residential proof and PAN card. But having taken a personal loan, a borrower must also understand the terms and conditions of repayment, because by not doing so, the loan could cost him more than what he intended. Nevertheless, a borrower can free himself of personal loans if he makes use of some option.
Asset monetization: If a person possesses a number of assets such as a vehicle, landed property, life insurance policies, gold jewelry, fixed deposits or mutual funds, he can monetize them to settle his personal loan. Some banks charge lower rates of interest against assets which can be used to offset personal loans.
Debt consolidation: This method allows a borrower to pay in lower installments each month over a longer tenure so that a bank can combine all the components of a borrower's debt portfolio into one package. Debt consolidation is particularly helpful if a borrower has taken more than one loan but has lesser monetary resources to settle his dues. This method provides the borrower with a built-in view of his credit worthiness. Though debt consolidation may prove to be expensive in the long run, it provides short-term relief to the borrower at a time when he may be short of funds.
Top up and secured loan: With this loan option, a borrower can move to a lower cost credit by topping up on his existing loan. He can also negotiate with his lender to convert the existing loan into a secured loan by mortgaging his landed or movable assets such as his house or vehicle. The property, though, should be free from any debt or mortgage.
Personal loans attract high rates of interest and are always risky alternatives; hence it is better to assess other options before opting for such loans. Approaching the bank where an individual has a current or savings account for a loan could prove to be a much better option, as interest rates in banks are comparatively lower.
108 Mantras for Financial Success

The greatest power that a person possesses is the power to choose – J. Martin Kohe
Borrow wisely: Choose the loan most appropriate for you

If you have to borrow, choose the right product keeping in mind cost, tenure, flexibility and other terms. For instance, it may save you lot of money if you consolidate your personal loan, credit card overdrawn balances and replace them with home equity loans.
EMI calculator will help you judge how affordable a loan can be for you. You can calculate home loan and personal loan EMI with this calculator.

Beyond the usual finance…

A priest announced to his congregation: "I have good news and bad news. The good news is, we have enough money to pay for our new building program. The bad news is, it's still out there in your pockets."
What is everyone asking? (Q&A)

What factors should be considered when taking house loan?
At the outset, you should have a clear understanding of the transaction process involved to calculate mortgage payments. Several factors are taken into consideration while calculating mortgage payments. The principal or the total amount which is needed to be borrowed must first be considered. The next factor to consider is the amount of interest that you will have to pay on the principal amount. This varies with different lenders but can also depend on the person’s credit score and other factors. Next, you should consider the amount of tax payable on the property. This tax is called the property tax and is included in the monthly payments on mortgage. Finally, there is the home insurance policy which a person must have bought before the final deal on loan is made.
How will my eligibility for taking loan be assessed?
The eligibility of a home loan sanction depends upon the level of equated money installments (EMI) the applicant can afford in repaying the loan. Most lenders in India consider all EMI payments a person has made, such as car loan, personal loan and so on. Generally, the maximum combined EMI permissible is about 45-60% of a person’s gross salary. Once a lender is satisfied with the applicant’s EMI payment capacity, it calculates a figure for the total home loan that can be sanctioned. Lenders also generally expect that the applicant will self-finance at least 15-20% of a home’s cost amount as upfront payment and sanction the remaining 80-85% as the loan amount.
How a lender does determine the interest rate?
Interest rate is usually one of the first factors a borrower has to take into account and be most concerned with. Lenders have varying rates to offer but they are generally determined by a person's credit score, which means, they depend on the risk level a lender is willing to take when crediting a person. By securing collateral in exchange for the loan, the lender reduces the overall risk due it considerably. If a borrower fails to pay back the loan, the lender gets to keep whatever collateral has been offered.
What other factor can help to get the loan quick?
Another key factor is collateral terms, it determines how quickly and under what circumstances a lender can claim right over the collateral. A borrower should therefore, understand the terms clearly to avoid any misunderstandings. Sometimes, a lender can come after the collateral within 30 days, while others let some more days of non-payment pass before calling up.
What about the loan tenure and EMIs?
Loan duration, EMIs are two factors important factors for a borrower to understand. EMIs sometimes comprise only the interest part for the initial months while the principal remains the same. Further, the longer a loan term, the lower the EMI amount, but the interest rate will be higher. This means the borrower is paying more for the money.
When do penalties and Fees come into picture?
A borrower should ensure he understands the fees and penalties for repaying the loan early, for missing payments, for late payments, for refinancing of the loan, among others.
If the above factors are not considered properly before securing a loan, paying off the amount at a later stage could become a huge headache, especially if there happens to be a financial setback.
There are so many banks, NBFCs and other institutions giving loans, how should choose?
Since markets these days are filled with financial institutions that offer loans, you should look for lenders who are offering at the lowest interest rates. Interest rates and costs vary from one credit provider to the other.
EMIs with longer tenure cost me less?
You must ensure that you go through the credit document thoroughly and understands all the terms of repayment. He should make it a point that he does not take a loan which has a repayment option of a long period as doing so will cost him more. Furthermore, borrowers must also ensure that they have planned their repayments before applying. Time must also be devoted to consider the interest rate and other charges.
What else should be considered while taking loan?
Even if a borrower has gone through the terms of agreement and has understood them well before signing the documents he should never put his signature on any blank documents; doing so could rise to unnecessary complications and push him further into deeper debts. Another important factor you should never borrow from one lender to settle the dues of another. It is also important for the borrower to talk to his lender if he is in a position where he is unable to make his repayments as agreed in the credit document.
In case you have any queries about related to managing finance, do send us a mail at flame@indiainfoline.com

Invest wise with Expert advice



Open Demat Account

Invest wise with Expert advice

By continuing, I accept the Terms & Conditions and agree to receive updates on Whatsapp