Five Tax Measures This Year To Curb Tax Evasion

Prime Minister Narendra Modi-led government took an unprecedented move towards the end of 2016 to curb tax evasion. The government invalidated Rs 1000 and Rs 500 notes as legal tender, the action termed as ‘Demonetisation.’ It followed a slew of tax measures to curb tax evasion and bring more people within tax ambit.

Few measures that are truly aimed to take a grip on tax evaders are discussed below

1. Amnesty Scheme - The scheme managed to grab highest attention as it stipulates 50% in taxes and surcharges. This comes with the condition of locking-in the quarter of the total wealth in a no-interest bearing scheme for a period of four years. Failure to take advantage of this scheme could mean 85% in penal tax, if revealed in subsequent years. Few financial experts claim that the amnesty scheme will divert more cash into the stock markets as unaccounted cash will convert into legitimate and flow into the system.
2. Digital Push - Government has waived off 15% service tax charged on debit, credit and other cards to promote cashless transactions upto Rs 2,000. This implies lower costs for banks and merchants that can be passed on to the end-customers. The step attempts to motivate more people to switch to digital payments from cash transactions, which will apparently replace the cash economy.
3. Rigid Reporting - Cash deposits aggregating Rs 10 lakh and more in a bank account have no scope of escaping the eyes of Income-tax department following it’s new instructions. Moreover, payment towards credit card dues in excess of Rs 1 lakh cash will also be reported to the department. Alongside this, transactions in stocks, mutual funds and foreign exchange aggregating Rs 10 lakh in value during a financial year are also reportable.
4. New Tax Forms - The income tax department has introduced new tax return forms for people belonging to high income group. Tax-payers with a total income of Rs 50 lakh and more will have to declare their assets, states the new income-tax rule. New reporting columns - ‘Asset and liability at the end of the year’, are introduced in ITR forms. Liability in relation to declared assets will also be made compulsory for the declaring entity.
5. Goods and Services Tax (GST) - The GST is more than likely to become a reality in 2017 as it already got cleared in the parliament last June. Moreover, the GST Council has recently agreed on four slabs - 5%, 12%, 18% and 28% - to structure the tax on various goods and services. Essential commodities like medicines, vegetables, and food grains might not attract any tax.

With these measures the government has successfully tried to plug holes that might have aided unaccounted cash holders to escape the tax scrutiny until now. But, the times ahead are likely to get rougher with more radical tax changes waiting to unfold in financial year 2017.

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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Financial To-Do Checklist For 2017

New Year usually begins with new resolutions and commitments. But, most of them do not even last a day. Financial goals too run the risk of getting buried under routine chores of life. 

To encourage you not lose track of your financial life, we have compiled a quick monthly financial to-do checklist to help you begin this year on the right foot.

January 

• Set investment goals for the year by assigning tentative numbers against investments and expenditures. 
• Recheck if investments and premium payments are made in line with the investment declaration submitted to the employer.
• Submit investment proofs to the employer by mid-month. 
• Organise utility and other payments by setting a reminder before due dates.
• Review vacation plans in the beginning itself to make good of any gap that could arise later. Check out fares and hotel rates, in case there is any revision. A portion of monthly savings can be allocated towards this goal to save on last-minute adjustments.

February

• It is critical to revisit your investments and goals to change them in line with the revised taxations rules as per Budget. 
• Ensure to get together all reimbursement invoices like car fuel, medical bills, leave travel allowance (LTA), etc. within the month for claim purposes. 

March 

• Make the fourth and final advance tax payment by 15th of the Month for FY 2016-17. 

April

• New financial year begins that calls for the need to chalk out investment plans as per the revised salary structure.
• Physical gold or gold funds can be bought on the occasion of Akshay Tritiya while taking care that it does not occupy more than 10% of the total portfolio. 

May

• Make the best use of bonus received during the month by repaying a debt or investing it towards a financial goal. 
• Revised ECS mandate for increased investments can be made in this month. 

June

• Time to pay first payment of advance tax by 15th of the month. 
• Review investment performance and rebalance it in line with risk appetite. 

July

• Prepare to file tax returns for FY 2016-17 by 15th itself. This will give ample time to review and file error-free returns. 

August 

• Festivals will begin early this year, therefore, budget planning can start this month.

September

• Payment of the second instalment of the advance tax falls due on 15th of the month. 
• Budget planning for festivals can continue. 

October

• With Diwali around the corner, it’s time to make the most of the festive season sale. Make sure to keep festive spending within budget as far as possible.

November

• Spendings can be minimised during this month following festive months.

December 

• The third instalment of advance tax becomes due on 15th. 
• Review your yearly investment accomplishments during the year end. Do reward yourself if you managed to achieve the stated investment goals for the year. 

The year has ended well financially if you were able to tick off all the financial tasks till December. Pat your back for being on the right track. At this point, you might want to take some time off to welcome New Year afresh. 

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

Like us at https://www.facebook.com/Inverika/

Make The Most of The Lower Housing Interest Rates

The New Year kicked off on a happy note for home loan borrowers with State Bank of India slashing its lending rate. The bank has cut the marginal cost of funds based lending rate (MCLR) by 0.9% from 8.90% to 8%. As more lenders are likely to follow the suit, here is a quick recapitulation for borrowers who want to make the most of the lower housing interest rates. 

Loans with Banks - Post April 1, 2016, Banks have been asked by the Reserve Bank of India to change from base rate to MCLR. This means that all the new floating rate bank loans disbursed after March 31, 2016, are automatically covered under MCLR. Those who have taken loan before this deadline have the option to either switch to MCLR or continue with the base rate. Since MCLR is a more transparent rating system, therefore, it is advisable to switch to the same. 

Loans with NBFCs or HFCs -MCLR is not applicable for Non-banking financial companies (NBFCs) and Housing Finance Companies (HFCs). These lenders follow a static Retail Prime Lending Rate or base rate and a variable spread to fix applicable interest rate. Home loan borrowers can convert to lower housing interest rates by paying a conversion fee that varies across lenders. On the higher end, the fee can go up to 1% of the outstanding principal amount. 

Cost vs Savings - Before executing the switch or conversion, analyse the costs against savings that you make from reduced interest rate. If the conversion fee is higher than the overall savings on interest outgo then it makes little sense to switch. At the same time, if you are in the final years of repaying your home loan then switching to will negligible impact. This is due to the fact that significant part of interest rate stands paid within the initial loan tenure. 

Here’s a table to illustrate optimal scenarios when switching to lower rates makes sense.  

Home Loan Amount	Existing Interest Rate	Current EMI	New Interest Rate	New EMI	Yearly Savings	Conversion Fee	Case For Switch
30 Lakh	10%	₹ 28,950	9.10%	₹ 27,185	₹ 21,180	₹ 15000	Yes
30 Lakh	9.75%	₹ 28,455	9.10%	₹ 27,185	₹ 15,240	₹ 15000	No
30 Lakh	9.50%	₹ 27,963	9.10%	₹ 27,185	₹ 9,336	₹ 15000	No
30 Lakh	9%	₹ 27,476	9.10%	₹ 27,185	₹ 3,492	₹ 15000	No

Home Loan Balance Transfer - Inconclusive negotiations with existing lenders can be fixed by balance transferring the loan to the new lender. However, the process will be mean starting fresh right from the beginning. Also, this option is best suited for loans that have a residual tenure of 8-10 years. Again analysis of cost vis-a-vis savings needs to be taken care. There has to be a significant gap like 75bps or more to consider this option. 

Home loan accounts for the biggest monthly expenditure of Indian households. A systematic adoption of the above-mentioned steps along with planned prepayments can help you speed up the debt repayment process.

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

Like us at https://www.facebook.com/Inverika/