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Old 11th May 2011, 14:55   #226
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re: Income Tax savings, Investments and Insurance

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Originally Posted by vina View Post
benbsb - in your previous post you were quoting santhos and e had claimed that the total cap is on individuals and not property - he was basically saying that you can give a declaration (like yours) of 50:50 and claim 3L total.

I think that is where the confusion is stemming from.

I personally always believed that total limit on one independent property (i.e. one registration deed) is 1.5L, and one tax payer can claim rebate on no more than one property.

However santosh is saying that is not true - he may be right, and if he is then a lot of us will save some more in taxes.
days.
There were many people asking clarification on this from Finance team. Finally the finance guys have accepted it to be a mistake and now we are allowed to claim 1.5L fully even if its a joint home loan.
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Old 11th May 2011, 16:18   #227
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re: Income Tax savings, Investments and Insurance

capital gains tax is calculated on the actual capital "gain" not on the entire amount.
there itself you have some respite.
It would be better to check this with an accredited finance expert/ auditor because they will be able to help you better in minimizing the damage.

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Originally Posted by nileshch View Post
This could be the last resort. But avoiding cash deals is what I'd prefer. Is there a better way?
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Old 11th May 2011, 17:40   #228
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Originally Posted by zaks View Post
I have some 2 lakhs after selling off company stock and would like to invest it in some long term instrument which can grow.
Regarding the aforesaid amount of Rs.2 lakhs I would suggest that you keep the same in a Flexi Savings Bank Account wherein you will receive around 6 to 7 % as interest. Link the account to a few good quality equity diversified funds. [SIP of Rs. 10 to 20K] In such a manner you can make a staggered investment in diversified equity funds.

If you are someone who follows the stock markets regularly then you can buy MFs on a particular day when the market declines and make your investments in a staggered manner without going for an SIP.

You can also invest around Rs.20k in Gold ETFs through a demat account. It would diversify your portfolio.


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Originally Posted by zaks View Post
I also need some advice on how to invest Rs.15k which I can spare every month. Do I do it via SIP in a ELSS or a regular Mutual fund or any other means?
For the Rs.15000 per month you can follow the same procedure. You must keep in mind that ELSS is meant for tax saving and has a lock in of 3 years. The product would be discontinued from 1.4.2012 and the funds would be merged.

If have the time and the inclination then you can also invest in the stock markets directly and you may get better returns vis-a-vis MFs. However the said option is a much riskier option.
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Old 11th May 2011, 18:14   #229
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re: Income Tax savings, Investments and Insurance

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Originally Posted by neoonwheels View Post
There were many people asking clarification on this from Finance team. Finally the finance guys have accepted it to be a mistake and now we are allowed to claim 1.5L fully even if its a joint home loan.
@Neonwheels,

Could not understand the post, can you elaborate please? Is it still 3L interest rebate for co owners? Pls clarify.
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Old 11th May 2011, 18:25   #230
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re: Income Tax savings, Investments and Insurance

ghodlur - each co-owner of a property can claim deductions on interest (re)paid on the housing loan independently.
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Old 11th May 2011, 18:32   #231
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Originally Posted by ghodlur View Post
@Neonwheels,

Could not understand the post, can you elaborate please? Is it still 3L interest rebate for co owners? Pls clarify.
It is 1.5L max rebate for each of the multiple co-owners if they both (1) jointly own the property and (2) jointly hold the loan.

So if there are 3 co-owners, they can claim 4.5L too !
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Old 11th May 2011, 18:46   #232
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Hi,

I recently got married and after all the expenses, I am left with about 1L as spare. It is a decent amount for me and I would like to invest it for future use.

I could invest it as a whole or split it up and invest in different schemes. Since I do not have a very good idea about the schemes that would suit my case, I need your help in deciding what is best for me in the long run.

I am 30 and I do not have any loans on my head.

MaSh
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Old 11th May 2011, 19:17   #233
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30, married and 1L peanuts to spare and asking for advice on a public forum. Do not give them to mutual fund managers. They are monkeys.

Put in some 400 day deposit - they give better rate of interest.

Or buy some gold - you wfe will adore a bit more. (buy solid, non-decorative gold - preferably like plain bangles - work / making charges are minimal here).

Or go for some gold ETF.

But nothing beats the thrill of a bank balance or gold in hand.

If you chose deposit, by the time it matures, you will be asking your wife rather than us about what to do with the proceeds!!!!

Nah - I will not suggest mutual funds. If you knew what they were, you would not be here in the first place. And besides, you will need some cash in 10 months time.

/me ducks missiles from mashmash
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Old 12th May 2011, 00:00   #234
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re: Income Tax savings, Investments and Insurance

Quote:
Originally Posted by mashmash View Post
Hi,

I recently got married and after all the expenses, I am left with about 1L as spare. It is a decent amount for me and I would like to invest it for future use.

I could invest it as a whole or split it up and invest in different schemes. Since I do not have a very good idea about the schemes that would suit my case, I need your help in deciding what is best for me in the long run.

I am 30 and I do not have any loans on my head.

MaSh

Your conditions are your conditions, but the most important question is this - can you forget about this 1L for next 10 years or do you anticipate any commitments for which you might need them?

If you can forget about them for a very long time then you can put the money in one of the Index funds or in some relatively good mutual fund (defined by 5 yrs returns).

Otherwise put it in FD.

I wouldn't advice Gold at this point (Full Declaration: I hold a lot of gold as biscuits since 2007 and haven't sold it, mainly because wife wouldn't let me). However if you do buy Gold buy Gold ETF and not the metal.
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Old 12th May 2011, 10:19   #235
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re: Income Tax savings, Investments and Insurance

Quote:
Originally Posted by BaCkSeAtDrIVeR View Post
ghodlur - each co-owner of a property can claim deductions on interest (re)paid on the housing loan independently.
Quote:
Originally Posted by vina View Post
It is 1.5L max rebate for each of the multiple co-owners if they both (1) jointly own the property and (2) jointly hold the loan.

So if there are 3 co-owners, they can claim 4.5L too !
Quote:
Originally Posted by ghodlur View Post
@Neonwheels,

Could not understand the post, can you elaborate please? Is it still 3L interest rebate for co owners? Pls clarify.
Each co-owner can take the tax rebate of max 1.5L for interest component of a home loan. For a husband and wife joint loan, the amount is 3L.
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Old 12th May 2011, 22:59   #236
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Quote:
Originally Posted by ghodlur View Post
I am sorry my friend but I beg to differ on this. The interest benefit is for single property and not on individuals. So the max interest rebate you can get is 1.5L no matter how many individuals are involved. If your argument was true then a single property would have many more applicants and everybody would be claiming the exemption which is absolutely not true.
The IT Act specifically says it is for an Individual and not single property. I have practical experience, in my own and in my clients case. I have concurrence from IT Officials at the time of Assessments.

Quote:
Originally Posted by neoonwheels View Post
So this means, my wife and I, can get the benefits worth 3L of interest repayment.
You are right, both can claim Rs.1.5 L each. You refer the link National Website of Income Tax Department of India


Quote:
Originally Posted by benbsb29 View Post
Both my wife as well as myself are claiming tax benefits on our home loan. All we had to do is give a signed declaration at both our respective offices about the ratio in which we would like the amount to be split for the claim. In our case, we have opted for 60:40, in favour of me.
Now you cannot declare the ratio. If this was the case you should have done it at the time of registration of sale deed, mean to say the ratio should have been mentioned in the sale deed. The general assumption is 50:50 if noting is mentioned in the sale deed.

Quote:
Originally Posted by vina View Post
Are you a lawyer? If you are then you just saved me and my father a bunch. Thanks.
No. I am a practicing Chartered Accountant.

Here i am discussing interest part of the loan repayment.

Sorry for late replies.

Quote:
Originally Posted by neoonwheels View Post
There were many people asking clarification on this from Finance team. Finally the finance guys have accepted it to be a mistake and now we are allowed to claim 1.5L fully even if its a joint home loan.
Friends

If conditions mentioned by me in earlier post is complied, pls go ahead and claim full benefit, each co-owner Rs.1.5L.

This is already a well-settled law.

Quote:
Originally Posted by shankar.balan View Post
if the sale proceeds of a property are reinvested in another property or to clear off an existing property loan within 6 months to one year of the said sale, then capital gains tax would not be applicable as far as I understand from my audit adviser.
If you clear-off existing property loan you wont get any exemption from Tax. You have to invest in either house property or bonds (REC / NHAI)

Quote:
Originally Posted by nileshch View Post
So does this mean the whole of the sale proceeds should be used? What if I want to chip off some part of it for other uses?
Since you will be selling vacant land and you want exemption, then you need to invest the total sale proceeds.

Do not worry - you have said there is no appreciation in land value, first work out the numbers and then decide, whether to invest or repay. If you are incurring small amount of tax, you better pay tax and then use the sale proceeds in what-ever way you want.



Quote:
Originally Posted by Gansan View Post
I think there are also some special investments / bonds where the sale proceeds can be parked for three years?
Yes. REC - Rural Electrification ... Bond, NHAI - National Highway Authority of India Bond


Quote:
Originally Posted by nileshch View Post
This could be the last resort. But avoiding cash deals is what I'd prefer. Is there a better way?
First work out the numbers, talk to the purchaser and then decide. All are not good like you . All property dealings invovle cash component.

Last edited by benbsb29 : 13th May 2011 at 06:33. Reason: Merging back-to-back posts.
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Old 13th May 2011, 00:40   #237
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Originally Posted by santhoshs View Post
If you clear-off existing property loan you wont get any exemption from Tax. You have to invest in either house property or bonds (REC / NHAI)

Since you will be selling vacant land and you want exemption, then you need to invest the total sale proceeds.

Do not worry - you have said there is no appreciation in land value, first work out the numbers and then decide, whether to invest or repay. If you are incurring small amount of tax, you better pay tax and then use the sale proceeds in what-ever way you want.

Yes. REC - Rural Electrification ... Bond, NHAI - National Highway Authority of India Bond

First work out the numbers, talk to the purchaser and then decide. All are not good like you . All property dealings invovle cash component.
@santhoshs great to hear from you again - I had looked at you team bhp profile earlier and seen that you are a CA. thanks for the clarifications.

A few questions:
  1. Does one have to invest the entire amount received or only the capital gain on the property (e.g. property bought for 30L, sold for 50L - should I invest 50L or just the difference 20L) to avoid LTCG tax?
  2. What is the significance of vacant land vs. built up for the purpose of taxes?
these days quite a few property deals do not involve cash component if the seller decides against it. Most of the guys who made their money in IT or such new age sectors have mostly white money and they hate to pay the cash component (not out of moral principals but because later when they will sell, they can not go all white).

I do agree with you though that majority of such deals involve undeclared cash components.

Last edited by benbsb29 : 13th May 2011 at 06:34. Reason: Formatting.
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Old 13th May 2011, 19:44   #238
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Quote:
Originally Posted by vina View Post
A few questions:
  1. Does one have to invest the entire amount received or only the capital gain on the property (e.g. property bought for 30L, sold for 50L - should I invest 50L or just the difference 20L) to avoid LTCG tax?
  2. What is the significance of vacant land vs. built up for the purpose of taxes?
There are 4-5 types of claiming exemption. It depends on the asset sold / the type of investments you are making.

In the present case the property sold is vacant land - for this the exemption can be claimed only if the sale proceeds are invested in bonds or in purchasing / constructing house property. Additional conditions for this - at the time of purchasing (2 yrs time)/ constructing (3 yrs time) this new property the person should not hold more than one house and the new property cannot be pledged or sold for three years from the date of event (pur or completion of constn). If the entire sale proceeds are not invested, the exemption will be reduced proportionately

Other transaction / exemption include - if the property trfd / sold was residential house property, then only the gain amt is required to be invested in another house property or bonds. Entire sale proceeds need not be invested.
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Old 13th May 2011, 22:05   #239
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Originally Posted by vina View Post
Most of the guys who made their money in IT or such new age sectors have mostly white money and they hate to pay the cash component (not out of moral principals but because later when they will sell, they can not go all white).
Absolutely. Why would anyone like to throw in their money into a black hole? And also vice versa?

Quote:
Originally Posted by santhoshs View Post
If you clear-off existing property loan you wont get any exemption from Tax. You have to invest in either house property or bonds (REC / NHAI)

Quote:
Originally Posted by santhoshs View Post

Since you will be selling vacant land and you want exemption, then you need to invest the total sale proceeds.

Do not worry - you have said there is no appreciation in land value, first work out the numbers and then decide, whether to invest or repay. If you are incurring small amount of tax, you better pay tax and then use the sale proceeds in what-ever way you want.

Quote:
Originally Posted by santhoshs View Post

Yes. REC - Rural Electrification ... Bond, NHAI - National Highway Authority of India Bond

Quote:
Originally Posted by santhoshs View Post

First work out the numbers, talk to the purchaser and then decide. All are not good like you . All property dealings invovle cash component.

Quote:
Originally Posted by santhoshs View Post
There are 4-5 types of claiming exemption. It depends on the asset sold / the type of investments you are making.

In the present case the property sold is vacant land - for this the exemption can be claimed only if the sale proceeds are invested in bonds or in purchasing / constructing house property. Additional conditions for this - at the time of purchasing (2 yrs time)/ constructing (3 yrs time) this new property the person should not hold more than one house and the new property cannot be pledged or sold for three years from the date of event (pur or completion of constn). If the entire sale proceeds are not invested, the exemption will be reduced proportionately

Other transaction / exemption include - if the property trfd / sold was residential house property, then only the gain amt is required to be invested in another house property or bonds. Entire sale proceeds need not be invested.
Thanks, Santhosh for the overwhelmingly detailed response. Things are pretty clear now. It makes me feel better than the tax will not work out that much as it would hurt. I researched on how to calculate the long term capital gains tax and am satisfied now.
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Old 20th May 2011, 17:33   #240
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Originally Posted by vina View Post
Your conditions are your conditions, but the most important question is this - can you forget about this 1L for next 10 years or do you anticipate any commitments for which you might need them?

If you can forget about them for a very long time then you can put the money in one of the Index funds or in some relatively good mutual fund (defined by 5 yrs returns).

Otherwise put it in FD.

I wouldn't advice Gold at this point (Full Declaration: I hold a lot of gold as biscuits since 2007 and haven't sold it, mainly because wife wouldn't let me). However if you do buy Gold buy Gold ETF and not the metal.
To answer your questions: 10 years,Yes, if no emergency arises. Would you recommend any particular Index Fund or mutual funds? Would you recommend splitting the amount or investing as a whole?
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