Money Today experts answer your personal finance queries, from tax to insurance to investments -
Q. I am planning to buy a flat worth Rs 50 lakh in Mumbai. My father is a senior citizen and plans to fund the purchase by selling his apartment. I want to take a home loan too. If he sells his flat and puts the proceeds in a bank FD till the property is finalised, will it attract any tax? Will this transaction be treated as an income for me? - Hansal Patel, Mumbai
A. Yes, the sale of apartment will attract capital gain tax in the hands of your father. He can save tax by investing the capital gain part in new house i.e. the house you are intending to purchase in Mumbai should be co-owned by your father. There will be no tax payable at your end on this transaction.
Q. I and my wife jointly own a plot. Now, I want to buy a house in the US. What will be my capital gains tax liability if I were to sell the plot and use this money to buy property in the US? - Manoj Kalra, via email
A. The tax liability would be 20% on the capital gain, assuming that you have held this plot for more than three years. The tax liability between you and your wife will be in the ratio of contribution of money in the purchase of plot. As per income tax laws, if you sell any asset other than residential house property i.e. plot of land, gold, or equity and invest the full proceeds of sale in purchasing/constructing a house, then income tax on capital gains can be saved. You must hold the new house for at least three years. You can also claim deduction of interest paid for plot till date of sale. Therefore, you can save the entire tax if you invest the total sale amount in new residential property anywhere including America. Please note that the tax exemption is available if you do not own any residential house as on date of sale of plot.
Q. I have an account with HDFC Bank and recently approached them for a personal loan. They were offering a loan of Rs 2 lakh at an interest rate of 13.75 per cent per annum. I was surprised to find that my home bank was charging me more than some of the other private players whom I approached. This is the first time I am taking a personal loan of any kind. Is interest rate the only factor while deciding on the lender? What are the other factors that I must consider before I make my decision? -BL Gupta, e-mail
A. Choosing the right lender to avail a loan depends on multiple factors, but interest rate is definitely an important one. Additionally, the tenure of loan offered, eligibility in terms of amount of loan offered, processing charges, penalties in specific cases, speed of appraisal and disbursal are also critical influences while deciding on the loan. It is possible in certain scenarios that the rates offered by some banks may be better than your home bank. You may compare other parameters like tenure, processing charges, etc. across the lending institutions, align your priorities and then make a choice. Also, you can discuss the options with your home bank and check if the team is ready to revise the loan rates, given your existing relationship with the bank.
Q. I have three credit cards and use them regularly to make purchases. I have only once defaulted on the payment for one of the credit cards. I plan to take a home loan soon and wish to improve my credit score. Is it true if I have a few cards but all of them are up to date with payments, it will improve my credit score? Or should I just use one card? Also, I plan to make my wife a co-applicant in the loan. She has no credit history. Will that prove to be a problem? - Manish Kasturi, email
A. Generally, it is a good practice to consolidate cards and to get rid of those that are not often used. Credit defaults certainly have an impact on the creditworthiness of an individual. How far back those defaults occurred, and whether that default was rectified by you or not, will determine your future ability to avail loans. India, however, has positive data credit bureau which means it is not just defaults but also your 'on-time' payments that are reported into the credit bureaus. Hence, if you have more recent loans on which you have a good repayment track record that will certainly help the banks take a positive view on your application. Generally, banks look at a co-applicant as an incremental comfort, but if the co-applicant has no credit payment history, it should have no impact on the banks decision to process a loan. Also, if there is a positive credit history, banks would look at it positively whereas in case there is negative credit payment history, it could have a negative impact.
Q. I have never used a credit card, or taken a loan from any bank or other financial institution. A friend told me that in such a case, I will have no credit score and hence, this might make it difficult to apply for a home loan. Is this correct? Is it necessary to have a history of clean repayment history before one applies for a home loan? If yes, then what options do I have? - Navneet Mishra, Mumbai
A. Lenders use credit scoring to assess whether or not you will be able to pay back a debt on time and in full. In absence of a relevant credit history, the banks rely more on other documents submitted by you like income & bank statements, stability in job, IT returns in case of self-employed, etc. On detailed scrutiny of these documents, if the lender is convinced of the borrower's repayment ability, the loan shall be granted. Some credit bureaus, have introduced a scorecard for first-to-credit customers or individuals who have never had a loan in the past. This scorecard has six grades: one representing high-risk and six representing low-risk typically based on the information you submit as part of the application. Generally, absence of any credit history does not necessarily mean that getting a home loan would be difficult, provided other attributes are sound.
Q. My 75-year-old aunt has rented her house since April last year and has been earning a monthly rent of Rs 40,000. Which are the tax-saving instruments that she can invest in? She is not keen on a long-term investment. Is the choice limited to a bank fixed deposit or a Ulip scheme? Is there a monthly income plan (MIP) that also offers tax advantage? - Pranav Shah, Gurgaon
A. Your aunt can consider Equitylinked savings scheme (ELSS). They offer the shortest lock-in period-three years-among taxsaving investments. However, remember that ELSS investments are not risk-free. Senior citizen scheme offers a high and safe return, but has a holding period of five years. Then, there are retirement plans which are eligible for deduction under section 80 C whereby you can get monthly income in terms of annuity. The contribution to notified annuity plan of LIC (e.g. Jeevan Dhara) or units of UTI/notified mutual funds can be chosen for monthly income.
Q. I have an outstanding balance of Rs 69,000 on my Citibank credit card. I pay a little more than the minimum amount due every month. A friend of mine suggested that I pay the dues with a personal loan. Is this a better option? - Mohanlal Vaidya, Delhi
A. Even though the payment made covers the minimum amount due, credit card firm charges certain amount as either interest/charges. It must be noted that the credit card interest rates are among the highest for any type of loan. You can also consider taking a personal loan and close the outstanding amount on the credit card.
Q. One of my relatives, who had taken a loan from a bank for his business, died recently. His son is a fresh graduate and is unable to run the business, so the family has decided to close it down. While taking the loan, he had mortgaged his business premises, worth about Rs 25 lakh, with the bank. The outstanding loan is Rs 2 lakh and the family wants to clear it, provided the bank agrees to a onetime settlement. As per the bank statement, almost 75% of the outstanding amount is interest. What are the RBI guidelines on one-time settlement of the amount? - Vinay Billmoria, Jaipur
A. One first needs to assess the facts of the case and you need to take a statement and ask the bank to provide you details of interest. One time settlement is allowed if the loan has become an NPA. There are formal procedures to be followed and the same can be done only after certain approvals are taken within the bank.
Q. I am a 32-year-old professional working in Delhi. I am planning to buy a joint health policy with a cover of Rs 3 lakh. Is there any policy which provides maternity benefits and a comprehensive medical cover? - RKumar, via email
A. There are several health insurance products available in the market that offer maternity benefit as a part of full-fledged indemnity covers. However, remember that there is usually a waiting period of 12-48 months to avail maternity benefit. You must consult an insurance advisor or compare policies on the internet that cover maternity benefit and choose a policy that suits your needs the best.
Anil Rego, CEO, Right Horizons, has tackled financial planning; Antony Jacob, CEO, Apollo Munich Health Insurance has answered insurance queries; Mohan Jayaraman, MD, Experian Credit Information Company takes on loan-related queries & Sudhir Kaushik, Co-founder and CFO, Taxspanner.com, has provided tax solutions. Log on to moneytoday.in to submit your questions.