Go for a five-year debt strategy now

 Go for a five-year debt strategy now

Invest 30-35% of fixed income portfolio to NCDs & InvITs for higher yield

THE UNION BUDGET this year sprung a surprise on various fixed income instruments, especially debt mutual funds, by charging the taxation norms. Incremental allocation to fixed income portfolios will have to evolve to achieve optimum risk reward ratio on post-tax basis. This will force investors to reassess their asset allocation and also readjust their post-tax returns expectations.

Debt markets still look attractive

The RBI paused rate hike in the current Monetary Policy Committee meeting, which has cooled down yield to some extent. This action has been perceived by market participants that interest rate in India will not go up in a hurry and we may be at the peak of the interest rate cycle. That is the reason the debt market has turned attractive and the yield curve has become flat from shorter to longer duration, leaving no room for gap between the two.

Global headwinds

Globally, we are still in a high interest rate scenario after the recent hike by the US Fed on March 22. Market expectations for peak Fed funds rate have been revised downwards by 75bps after the Silicon Valley Bank event. The failures of large banks in developed economics keep investors away from equity markets. So it looks like a higher interest rate regime for some more quarters in the US.

Fear of failure of large banks and investors in developed economics reason not to participate in the equity markets. US housing, looking at the leading rates, statistics, is already pointing towards recession and the dollar index is showing signs of weakness. Majority of the currencies have appreciated against the dollar since it peak from September 2022.

Investment strategy

Investors want to be risk –averse and want to play safe in the current market scenario. In India, we have seen changes in tax regime for debt mutual funds & fixed income instruments. There is hardly any premium left for locking in rates for long term maturities. We feel that investors want to be safe on account of global and domestic factors like global central bank’s policy actions, currency, and inflation, crude oil and geopolitical events. This will keep yields volatile and MPC has also kept the doors open for future actions looking at these events forcing investors to play safe.

In the evolving market scenario, we recommended an approach where ‘Accrual ‘should precede ‘Duration’ such that the average maturity of the portfolio should be invested in a three to five years maturity combination of high quality (government securities /AAA equivalent) strategies. To improve the overall yield, 30% to 35% of the overall fixed income portfolio can be allocated to select high yield NCDs, private credit strategies and real estate investments trusts (REITs)/ infrastructure investments trusts (InvITs).

FIXED INCOME

Yield curve has now become flat from shorter to longer duration, leaving no gap between the two.

Invest 65-70% in government securities /AAA equivalent bonds of three to five years maturity.

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Email: pmgiia26.com Mobile 8882286639

TDS is mandatory when buying property form NRI

 TDS is mandatory when buying property

 form NRI

An NRI can expect to get only 70-80% of the sale proceeds due to this

When a non-resident Indian (NRI) sells a property, as per Section 195 of the Income- Tax Act, TDS is required to be deducted at 20% plus surcharge, and cess by the buyer from the sale consideration. The TDS rate would be higher (30% plus surcharge plus cess) if the immovable property was held for less than two years. Further, there is no minimum threshold limit for TDS deduction.

This TDS is deductible irrespective of whether money is received in India or outside India or even if the final tax liability in the hands of the seller is much lower. In such cases, the seller can apply for a specific lower deduction tax certificate. The steps involved, for such applications are as follows.

Step 1: Calculate capital gains, tax liability

The seller needs to obtain the stamp duty valuation to ensure that the sale price is not less than fair market value. Based on the stamp duty or sale considerations, whichever is higher, he should compute the capital gains and consequent tax liability. In case of loss or a significant difference between the final tax liability and the TDS, the seller will have good cause to file for a lower with holding certificate.

Step 2 : TAN of the buyer

The seller has to submit the valid TAN of the buyer at the time of filing the applications. In case the buyer does not have one, he can obtain the same in 7 to 10 days by filling an application in Form 49B.

Step 3: Collect documents for lower withholding certificate

The applications for lower withholding certificate are filed in Form 13, online. For the application, the seller is required to submit the following three sets of documents:

Documents pertaining to the proposed sale such as MOU, stamp duty valuation, purchase agreement evidencing the cost of acquisition and bank statement/receipts of payment made at the time of purchase of the property.

Documents evidencing the estimated computation of Income for the financial year in which the property is sold. The estimate computation should include all income that the assesses has received or is receivable during the year and consequent tax liability on the same.

Documents evidencing that no tax liability is due for the previous four years. The assesses is required to submit previous years income tax returns, form 26 AS, and any past assessment orders.

Step 4: Register on the I-T portal and file applications

Once the application is submitted, the assessing officer will examine it, ask for additional information if needed, before issuing the certificate or rejecting the application. It generally takes three to four weeks for processing the application. Further, the department issues certificates for withholding tax based on merits of the case. A lower withholding certificate is valid till the end of the financial year and the seller should ensure that the payment is processed within the time frame mentioned in the certificate.

Further, for any reason, if TDS id deducted at a rate higher than the final tax liability of the seller, the seller can always file his tax return and claim a refund of the excess TDS deducted. The lower withholding certificate only ensures that the cash flow of the seller is not adversely affected on account of higher TDS.

DEDUCTION NORMS

Section 195 of the I-T Act requires TDS at 20% plus surcharge and cess from the sale proceeds

The TDS rate is 30% plus surcharge plus cess if the property was held for less than two years.

If the final tax liability is much lower, the NRI can apply for a specific lower deduction tax certificate.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 8882286639

HEALTH INSUARNCE

 Tips to avoid rejection of your porting request

Complete waiting period with current insurer before porting policy

POST-COVID, MANY INDIVIDUALS are porting their health insurance policies as they prefer insurers that offer innovative products, have a wide network of hospital, and have an established track record of settling claims faster. However, before porting policyholders must access the pros and cons and keep in mind that the new insurers can reject the request for porting for various reasons.

For porting, you have to apply to the new insurers at least 45 days before the renewal date of the existing policy. You can transfer the credit gained by the pre-existing conditions, if the previous policy has been maintained without any break. If the premium due on given policy is not paid on or before the premium date or within 30 days, it will be considered as a break in policy.

Rejection of portability

If the policyholder has a pre-existing condition and does not disclose it to new insurer, then it will reject the request for porting. Moreover, if you have not completed the waiting periods for certain treatments or conditions with the current insurer, then the new insurer may reject the request for porting. Also, some insurers have age limits for porting policies. So, if you are over the age limit set by the new insurers, it may reject your request for porting.

The proposal to port a health insurance can be rejected if the policyholder has health condition, made several claims in the past and has provided wrong information at the time of taking the policy. The new insurer may reject request for porting if the policyholder has not disclosed pre-existing conditions, not paid premiums, policy exclusions, is over the age limit and not completed waiting periods.  “It important to be aware of these conditions to ensure that your request for porting is not rejected. ”

What to look before porting

The premium rates of the new insurers may be different from your current insurers. So compare the premiums of the new insurers with your current insurers to ensure that you are getting the best deal.

To guarantee that your claims are resolved quickly, it is critical to select insurance with a high claim settlement ratio. Similarly, as insurers may have different waiting periods before porting the policy to ensure that there is no gap in coverage.

In case of a long- term policy, if a policyholder is not satisfied with the services of the health insurance company and wants to port a multi-year policy during the team, the he will lose out on the premium paid as health insurance portability is allowed only at policy renewal.

“If you have a preferred network of hospitals/ doctors, see that they are covered by the new insurer. Also check the network hospitals of the new insurer in case you need to access healthcare services in the future. “Says Goyal and adds that the policyholder must check the renewal process of the new insurers to ensure that it is easy and hassle-free. “This will help ensure that you do not face any issues with renewing your policy.

GROUND FOR REJECTION

An existing health condition, several claims in the past and wrong information given at the time of taking the policy can go against you.

Some insures have age limits for porting policies. So, if you are over the age limit set by the new insurer, it may reject your request for porting.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 9868944340

No TDS deduction when each buyer pays less than Rs 50 lakh

 No TDS deduction when each buyer pays less than Rs 50 lakh

A recent ruling by ITAT Jodhpur Bench has brought much-needed clarity to property purchases by multiple buyers

In a recent ruling, the Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT) clarified that tax deducted at source (TDS) under Section 1941A of the Income-Tax (I-T) Act is applicable only when the consideration for the transfer of immovable property is more than Rs 50 lakh per buyer.

Introduced by the government in 2013 to curb the use of black money in property transactions, Section 1941A requires the buyer to withhold tax at the rate of 1 percent of the consideration or the stamp duty value (SDV) of the property, whichever is higher, when a resident transfers an immovable property (other than agricultural land).

‘Consideration’ here includes the price paid for the immovable property and other charges, such as processing fees and external development charges.

Ending ambiguity

In the case presented to the Jodhpur bench, four individuals had jointly purchased an immovable property for a total consideration of Rs 1.26 crore. Each individual held one-fourth share of the property, which equated to a consideration of Rs 31.5 lakh per person. The assessing officer (AO) considered the purchase cost to be Rs 1.26 crore and applied Section 1941A. The AO held the assess to be in default and imposed fines under various sections of the Act. However, the bench ruled that in this particular case, Section 1941A of the Act cannot be invoked.

“The judgment is a step in the right direction and reinstates the intended view of the legislature that the threshold limit of Rs 50 lakh is to be evaluated for each assesses. The judgment will remove ambiguity in cases involving co-owners or joint owners of properties.

When does Section 1941A apply?                                                                                               

Section 1941A applies to transactions involving immovable property, which in this section refers to any land (other than agricultural land), any building, or part of a building. “The buyer must deduct TDS at the rate of 1 percent of the total considerations and deposits it with the government.

The buyer needs to have a valid Permanent Account Number (PAN). “The TDS needs to be a deducted at the time of giving credit, whichever is earlier.

Tax needs to be deducted if either the sale price or the SDV, whichever is higher, crosses Rs 50 Lakh and SDV is Rs 52lakh, and then Rs 52,000 needs to be deducted while making the payment of Rs 45 lakh.

Jain adds, “TDS must be deposited with the government within 30 days from the end of the month in which TDS was deducted, using Form 26QB.”

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MSSC: 7.5% interest rate attractive but no tax benefits a dempener

 MSSC: 7.5% interest rate attractive but no tax benefits a dempener: 

The Mahila Samman Savings Certificate (MSSC), which was introduced in Union Budget 2023-24 and become available for investments from April 1 2023, is in the news these days. On April 29, Prime Minister Narendra Modi urged women to enroll for it. The Union Minister for Women and Child Development Smriti Irani subsequently opened an account.

“The MSSC is a small savings scheme that has been made available to women depositors for a two-year period up to March 2025. One can invest up to Rs. 2 Lakh for tenure of two years.

The scheme

A women herself, or a guardian on behalf of a minor girl, can apply for this scheme on a before March 31, 2025. One can invest a minimum amount of Rs 1,000/- and it multiple of Rs 100 thereafer. The maximum investment limit is Rs 2 lakh in a single account or in all the accounts belonging to an account holder.

Attractive rate, short lock-in

The scheme has a short lock-in period of only two years.”The interest rate of 7.5 percnet per annum, compounded quarterly, is reasonable good.”

Colonel Sanjeev Govila , a Securities and Exchange Board of India –registered investments advisor (RIA) and CEO, Hum Fauji Initiatives, a financial planning firm, explains that 7.5% per annum compounded quarterly is equivalent to an interest rate of 7.71 percent per annum. Being government backed, this scheme is free of any credit risk.

Reinvestment risk

The maximum investment limit of Rs 2 lakh is quite now. Moreover, premature withdrawal invites a penalty.”Premature closure is allowed at any time after six months of opening but the interest rate reduces by 2 percentage points. And premature withdrawals are allowed only up to 40 percent of the balance after one year from the date of opening the account.”

The scheme doesn’t offer Section 80C deduction.”The interest is also subject to tax at the account holder’s applicable income-tax slab rates.”

MSSC is subject to reinvestment risk: If two years, later interest rates are lower than where they are today, the investor will be forced to reinvest at a lower rate.

Who should invest

Certain types of women investors will find the scheme suitable. “It is a good alternative to fixed deposits (FDs) for women investors looking to invest for the short term. It offers higher return than many FDs and partial withdrawal makes liquidity less of a concern”

First-time retail women investors who want to test the investment waters may go for it, as can those who don’t need the money for two years.” Women in lower tax brackets, who don’t want to take any risk, may go for it.”

Those who have a long investment horizon and the capacity to take risks may avoid it, as  can those with an investment horizon of less than two years.

Alternative fixed-income options

Within the small-savings basket, the Public Provident Fund (PPF) is a superior investment option. ”While its interest rate is lower at 7.1 percent, it is tax-free and provides Section 80C benefit. Association of Registered Investment Advisors (ARIA). The PPF, however, is a long-term investment option.

Another long-duration option from the small savings baskets is kisan Vikas Patra, which offers 7.5 percent per annum interest for 113 months.

Seniors may opt for the Senior Citizens Savings Scheme (SCSS), which has a tenure of five years and offers an interest rate of 8.2 percent per annum. “Sukanya Samriddhi Account, which offer 8 percent per annum, is a good alternative for minor girls aged less than 10 years”

According to Govila, those who have a horizon of up for two years, but require liquidity over a short period may opt for low-duration and short-duration debt mutual fund. Those who have an investment horizon of more than two years may opt for categories like medium-duration and banking & PSU funds.

SALIENT FEATURES OF MAHILA SAMMAN SAVINGS CERTIFICATE

An individual may open an unlimited number of accounts, subject to the maximum deposit limit of Rs 2 lakh

A three-month period must elapse between the opening of one account and another.

A minimum of Rs 1,000/- and sum in multiples of Rs 100 can be deposited in an account.

Interest will be compounded quarterly, credited in the account, and paid at the time of account closure.

Maturity is after two years from the date of opening, and the eligible balance will be paid to the depositor.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 8882286639

 

 

Opt for rental bond in lieu of security deposit

 Opt for rental bond in lieu of security deposit

It is guarantee by the surety provider on behalf of the tenant

RENTAL BONDS ARE a form of financial guarantee that tenants provide to landlords. In India, the concept of rental bonds is not very common. Instead, landlords often require tenants to provide as security deposits, to be used to cover any damages or unpaid rent at the end of the tenancy.

As security deposits can be financial burden, rental bonds turn out to be beneficial for both. The rental bond company or serety provider underwrites the tenant and issues a bond after charging a fee, providing the landlord with a credit verified tenant. The tenant is charged an amount to issue the bond. If he defaults on rent or causes any damage later, the surety provider will pay the landlord upto the indemnified amount and recover the costs from him.

Benefits for landlords

Financial protection: In case tenants fail to pay rent or cause damage to the property during the tenancy the landlord can use the bond money to cover the costs.

Encourages responsible tenancy:  It encourages tenants to take care of the property and fulfill their obligations under the lease agreement. This reduces the risk of damage and makes the tenant responsible.

Provides a sense of security: A rental bond provides a sense of security to landlords that their investment is protected, and they can recover their losses if anything goes wrong during the tenancy.

“The requirement of a security deposit or rental bond encourages tenants to take care of the property and fulfill their obligations under the agreement and landlords are expected to fulfill their obligations as per the terms of the agreement.”

Benefits for tenants

Increased chances of getting approved: Paying a rental bond upfront increases the likelihood of being approved for a rental property, especially If the tenant has a limited rental history or bad credit.

Protects tenant’s rights: It allows the tenant to live in a well maintained and safe rental property. If the landlord fails to maintain the property or breaches the lease agreement, the tenant can use the bond money to cover the costs of repairs or seek legal remedies.

Encourages landlords to return the bond: It encourages landlords to returns the bond in full at the end of the tenancy, provided there is no damage or unpaid rent. This ensures that tenants receive their money back and are not unfairly penalized.

Check terms of rental bond, lease agreement

It is important to go through the rental agreement document carefully and check the condition report of the property before signing the rental bond. Make sure you understand your responsibilities as a tenant.

Understand the payment terms regarding the rental bond, such as the amount you need to pay, the due date, and the refund policy. If you have any questions or concerns, do not hesitate to ask your landlord or property manager before signing the bond. It is better to have a clear understanding and avoid further confusion. You should take picture or videos of the conditions of the property before moving in, so you have evidence of its initial condition.

BUILDING TRUST

Rental bonds can help in bridging the trust deficit between landlords and tenants.

It provides financial security, encourages responsible tenancy, and protects the rights of both parties.

Understand the terms of the bond such as amount to be paid, due date & refund policy.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 8882286639

                                                                               

Heirs must know what you own to claim wealth

 Heirs must know what you own to claim wealth

Appoint nominees and write a will to make the transfer hassle-free

The Reserve Bank of India recently announced that it will start a new portal that will provide information on unclaimed bank deposits to facilitate the search for untraceable money.

Not just unclaimed bank deposits, there are thousands of crores locked in unclaimed shares and insurance policies lying with many institution across India. While  policymakers  and regulators will do their best to ensure that this money reaches the right person. It is better to ensure such a situation never arises.

Make a list of investments

The starting point for smooth wealth transfer is to make a list of all your investments. “When the owner of an asset dies, the spouse of family members often doesn’t know what assets the deceased owned. Even if they have the list of asset, they don’t’ know where their document is kept to support their claim. It is imperative to maintain detailed information on assets (immovable and movable) and to share this information with the spouse and other information with the spouse and other direct family member.

Mutual Fund (MF) investors can avail the consolidated account statement offered by registrar and transfer agents (RTAs) showing all MF holdings.   

Share password with caution

Since many assets are held in digital format, sharing access details can be considered. “You can use password vaults to share access to your email. You may even share access to your mobile phone with loved ones, if privacy concerns allow.

However, in the event of death of the investor, the passwords should be used by the near ones only to know about the investments details. They should not be used to carry out transactions. “Sharing of password with the family with the objective of wealth retrieval by selling or monetising securities –held solely or jointly with a deceased owner- amount to impersonation and invites criminal charges. If the nominee or joint holder operates the account digitally for market transactions or for off-market transactions, it is an office, ”warns Dutta.

Seed your contact details

In many cases, people lose track of investments because the concerned financial institutions fail to reach them. Not only must you should also provide your latest email ID and mobile number in all your investment accounts. “Consolidate your relationship and digitise them as far as possible. Make sure your phone number and email are updated on each one. It is also advisable to hold investments in joint from with your spouse

Specify nominee

While making investments, don’t leave the nomination section blank. You can appoint more than one person as nominee and specify the share of each one. “Ensure that all investments have a nomination so that he transmission or succession process becomes relatively easy,  “founder and chief executive officer, plan Ahead Wealth Advisors.

You can change the nominee as many times as you want in your lifetime. “Remember that a nominee is merely a caretaker, custodian, or trustee representing the legitimate heirs.

An overriding Will

All those who have accumulated lifetime must write a Will. It helps transmit your assets to the persons whom you choose to transfer them to. “A Will overrides a nomination, and hence is critical. Make sure the executors are aware where the latest Will is stored, “says Dhawan.

A will not only specifies the inheritors but also the proportion in which the assets should be distributed among the legal heirs. “A valid will enable distribution of assets to beneficiaries, whereas a nomination merely helps in naming a custodian or trustee representing the heirs of future beneficiaries, “says Dutta.

Be prudent while writing a Will. Involve professionals if you need to and get it registered. As in the case of nomination, a will can also be changed as many times as you like.

While you do not need to inform your loved ones about the exact details of your Will, they should know where and with whom the document is kept.

HNIs SHOULD OPT FOR TRUSTS

A Will is adequate for a family with limited assets, where the sole intent is to distribute the property to individuals.

For HNIs and wealthy business persons, a trust is a better option as it provides the flexibility to allocate money for host of different purposes.

For business owners, an additional benefit is that lenders and creditors can’t ask a court to liquidate the assets of a trust in the event of business failure.

The formation of a trust is, however, more expensive than drafting a Will.

For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 9868944340