A majority of salaried individuals tend to get worried when they see the TDS deduction on their pay slip and most wish that taxes were lower. This year the government seems to have heard this vast majority as the lowest income tax rate was effectively halved from the earlier 10% to 5%. But it is easy to forget that it’s not just the salaried individuals that have to worry about paying income tax as even self employed as well as corporations are liable to pay income tax. Through the years, various changes have been introduced in the way taxes are calculated, collected and paid, so let’s see if these changes including paying income tax online have been a boon or a bane for the stakeholders.
Fewer Paper Documents
The pinnacle of achievement for a digital society, according to many thought leaders, is a paperless existence. We in India might not be there yet, but with the introduction of the online income tax payment system, the submission of paper documents has definitely been eliminated to a large extent. In the past, everything required a paper submission and copies of these had to be stored carefully by the tax payer for up to 5 years in case there was an audit requirement. Moreover, when submitting these documents to the Income Tax Department, a prescribed order had to be followed and in case of a mistake, the papers often had to be filed anew. Thankfully these problems are in the past if you have been paying or have started paying your income tax online. The online system does not need any reordering of papers and in case you make a mistake while filling out the form, the error will get marked automatically allowing you to make the changes immediately. Additionally, rectifications and re-submissions too are a breeze as new documents just need to be submitted as scanned copies if required by the IT Department and not otherwise.
When paper documents are submitted, they have to be verified one at a time by hand and this requires a lot of time and effort. The online system uses interlinked databases like TRACES that automatically check the tax payer’s entries by running it through multiple databases simultaneously without any human intervention. The system automatically flags errors/mistakes/mismatching data based on the entries available on the various interlinked databases vs. the forms submitted by the income tax assessee. In case an error is detected by the system and the submission is flagged, the form is checked manually. Thus the system of paying income tax online saves time and there is lesser scope of errors creeping into the process.
Cheaper Cost of Collecting Tax
The old system of collecting taxes often required multiple tax collectors knocking on the tax payer’s door or sending out multiple notices to make errant individuals pay their taxes. Then there was the paperwork that had to be sorted through sometimes more than once to ensure that everything was in order. This required not just time but also an army of clerks, assistants, paper pushers, stenographers and so on. For the government especially the IT department, this was a problem because all these employees had to be paid out of the government’s coffers and thus the efficiency of income tax collection was quite low in the pre-digital age. When a tax assessee pays his/her income tax online, it no longer requires such a large workforce to corroborate these requirements due to the higher levels of automation that the online system provides.
Conclusion: Definitely a Boon
From the above points it is easy to conclude that the introduction of the system that allows individuals to pay income tax online is nothing short of godsend. The system is indeed a boon for both tax payer and the collection agency. Furthermore, the system will work even better as it gets even more streamlined in the future with the introduction of more efficient systems and technologies.
PAN or Permanent Account Number is a ten digit alphanumeric number issued by the Income Tax Department of India to individuals and companies. This important ID proof is mandatory for Indian residents, NRIs and international companies in order so that the government can track any financial transactions in the country and avoid any tax evasion.
Need of PAN Card in India
Other than serving as an important identity proof, PAN card is also needed to carry out important functions like:
- To start a business in India
- To open a bank account
- To apply for credit/debit card
- To file income tax returns
- To apply for passport or visa
- To apply for a loan
- For sale/purchase of property above Rs. 5 lakh
- To make an investment in mutual funds or shares above Rs. 50,000.
- To exchange foreign currency
- To deposit any more above Rs. 50,000 in bank
- to pay for life insurance premium above Rs. 50,000 in a year
- To purchase or sell vehicle/s
How To Apply For PAN Card In India?
Applying for a PAN card is extremely easy. One can apply for a PAN card by two means – Offline and Online.
Online Application of PAN Card
One can apply for PAN card online using Form 49A (for Indian residents and NRIs) and Form 49AA (for foreign citizens). This application form is available online on the official NSDL and UTIITSL website. Both are government authorized portals that issue new PAN card or make changes in the existing one. Here’s how it works:
- Visit the official UTIITSL or NSDL website to fill the form. Ensure that one needs to fill Form 49A in case of Indian Residents or NRIs or Form 49AA for foreign citizens.
- Fill in all the details in the form carefully. Recheck before you submit.
- Once verified, you can click on “Make Payment” to proceed with the online payment.
- You will be directed to the payment gateway where you can make a payment via credit card/debit card or net banking. You need to pay Rs. 107 (inclusive of service tax) in case of Indian citizen or Rs. 994 (inclusive of service tax) in case of foreign citizen.
- Once the payment has been successfully done, you will get an acknowledgement number. Save that for future reference.
- After this, take a print out of your application and affix same photographs and sign in the space given. Along with this form, send necessary documents (self-attested copies) through post to NSDL or UTIISL for verification. These documents are one proof of identity, one proof of address and one proof of date of birth. Don’t forget to mention the acknowledgment number on the envelope.
- After successful verification, your PAN card will be delivered to your resident within 15-20 days.
Things to Remember While Applying For PAN Card
- Some of the supporting documents that can serve as a proof of identity are Aadhaar card, voter’s ID card, passport, driving license, photo ID issued by central or state government. For proof of address, you can submit self-attested copies of electricity bill/water bill/landline bill/gas bill/credit card system/bank account statement under your name, passport, driving license, Aadhaar card, etc. The documents that can serve as a proof of date of birth are birth certificate issues by the municipal authority, marriage certificate, matriculation certificate, passport, driving license, etc.
- If you have applied through UTIISL, send the documents to any of the following address
New Delhi region
UTI Infrastructure Technology And Services Limited
1/28 Sunlight Building, Asaf Ali Road,
NEW DELHI -110002
UTI Infrastructure Technology And Services Limited
Plot No. 3, Sector 11, CBD Belapur
NAVI MUMBAI – 400614
UTI Infrastructure Technology And Services Limited
29, N. S. Road, Ground Floor,
Opp. Gilander House and Standard Chartered Bank,
KOLKATA – 700001
UTI Infrastructure Technology And Services Limited
D-1, First Floor,
Thiru -Vi-Ka Industrial Estate, Guindy,
CHENNAI – 600032
- In case you have applied through NDSL, send the documents to the following address:
Income Tax PAN Services Unit,
NSDL e-Governance Infrastructure Limited,
5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8,
Model Colony, Near Deep Bungalow Chowk, Pune – 411016′
- Ensure that the documents and application should reach the concerned office within 15 days of filling the online application.
Most of us don’t like the idea of taking debt unless needed. However, the vicious circle of credit wants us to first borrow money in order to build a positive credit history that would, in return, help us take a loan at considerable rate of interest in case of financial emergencies. Whether one has to lend money loan due to an emergency, to fulfil certain life goal or just to build credit, people tend to pay the loan amount early when they have extra cash in order to stay away from deb. But is it recommended? And how will it affect your credit score? Let’s find out! But, before we understand the effect of early loan repayment, let’s understand how loans affect our credit score.
Impact of Loans on Your Credit Score
Surprisingly, taking a loan is a step ahead towards creating a positive credit score, given that you pay the debt amount on time. Here’s how it affect your credit score.
If you already have a credit bill, then opening a new loan account will add diversity to your existing credit, which will enhance of your credit score
Duration of Credit History
Another thing that installment loans help you is to manage your credit over a long period of time. If you have a long history of great credit, then it will not only increase your credit score, thus making loan process easier for you.
Raise Credit Score with Timely Payments
Since, on time payments play the biggest role when it comes to increasing credit score, timely loan payments will not only improve your credit score but will make you an attractive borrower for future.
So, Should One Go For Early Loan Repayment?
Well, experts suggest that having an open loan/debt account is beneficial for your credit score rather than a closed one, which is what your installment loan becomes once it is paid off. So, if you have multiple debts, then you might consider closing one earlier. But in case of single loan, then you might consider it paying as per the schedule. Also, one must remember that paying off loans early will not have any positive impact of your credit score. However, depending upon your credit history, closing your loan account is not recommended in the following cases:
Limited Credit History
According to Experian, one of the major credit bureaus in India, open and active credit account enhances your score. So, in case you have limited or only open loan account, then it is not advisable to close it early. Yes, it will help you save money in interest but will not help in your credit score.
Establish Credit History
In case you have an established credit history, then with too much debt, the lender may see you as a risk. It is important to maintain the debt-to-income ratio. This is basically the percentage of your gross monthly income applied towards debt. This means that the gross income should be able to afford the debt taken.
Instead of paying off the loan, you can pay down the balance. One of the major factors affecting the credit score is the percentage of the available credit compared to the limit. Therefore, if you have taken a new loan or having an outstanding credit card bill, then paying off your personal loan can help lower the ratio.
Hence concludes that if you are paying off the loan early just to enhance your credit score, then don’t go ahead. Instead, you can invest that money in various schemes like mutual funds or fixed deposits or just save it for financial emergencies. Whether you pay the loan amount early or as scheduled, one thing that every borrower should keep in mind is to always pay the due bill on time.
When it comes to lending money, even the banks needs to be assured about the person to whom they are giving loan. Approximately 5 years back, customer background verification for credit worthiness was a difficult task. However, Credit Information Companies (or Credit Bureaus) have made this task easier. Credit Information Companies are financial institutions who collect and maintain credit and loan related information of individuals and commercial entities. Based on this information, they generate a credit report and score of every individual that helps the bank in approving or rejecting the individual’s loan application.
As per the latest guidelines, it is mandatory for every bank and financial institution to be a member of atleast one Credit Information Company in India. These companies collect and maintain the credit/loan information of every individual who has a PAN card from the member credit institutions. This information is updated regularly every month or on short intervals.
How Does Credit Bureaus Work In India?
As mentioned above, Credit Bureaus of Credit Information Companies collect, maintain and provide credit information (related to credit cards and loans) of an individual from banks and other member institutions and share the same with them that defines the credit worthiness of an individual. This helps the bank authorities to make a decision of whether to lend money and if yes, then at what terms and conditions. Here, one must note that CIC does not act as a watchdog. It caters the information related to salary, savings account, fixed deposits and other information are not shared by the members.
For example, if you wish to take a personal loan from a bank, your bank will contact the credit bureau for your credit report and score. This report contains all the payment history, including past defaults (if any). Based on the credit score and report, your bank will make a decision on whether the loan should be granted to you or not. More credit score means higher chance of getting a loan at a considerate interest rate.
In India, there are four credit bureaus namely TransUnion CIBIL, Equifax, Experian and Highmark.
India’s first credit bureau/credit information company, TransUnion CIBIL plays an important role by helping banks and other financial institutions to manage their business. It is organized into 3 divisions, namely consumer bureau, commercial bureau and MFI bureau.
Year Of Establishment – August 2000
Scoring System – 300-900 (900 is the best credit score)
Charges – Free credit report once a year. Beyond that, it charges Rs. 550
Time taken to generate report – 7 days
Equifax India is a joint venture between Equifax USA, State Bank of India, Kotak Mahindra Bank, Bank of Baroda, Religare Finvest Ltd., Sundaram Financial Services and Union Bank of India. It offers a range of credit services including information, business analysts and risk management.
Year Of Establishment – 2010
Scoring System – 1-999 (1 being the lowest)
Charges – Free credit report once a year. Beyond that, it charges Rs. 400 (+taxes)
Time taken to generate report – 10 days
Experian Credit Information Company of India or simply Experian is a joint venture of GUS Holdings, Axis Bank, Union Bank of India, Indian Bank, Federal Bank, Punjab National Bank, Sundaram Finance Ltd, Magna Fincorp Ltd and VIC Enterprises Private Ltd to provide credit information services to banks and individuals in India. It has also tied up with online financial marketplaces like Paisabazaar to offer free credit report and score to its customers.
Year Of Establishment – 2006 (got license in 2010)
Scoring System – 300-900 (900 is the best credit score)
Charges – Free credit report once a year. Beyond that, it’s Rs. 399 (including taxes)
Time taken to generate report – 20 days
CRIF Highmark is the only credit bureau in India that caters the need of segments like MSME, commercial borrowers, retailer, micro-finance borrowers. It provides analytics, data management and related credit services in order to sustain the financial needs of business and customers.
Year Of Establishment – 2007 (got license in 2010)
Scoring System – Not Available
Charges – Rs. 399
Time taken to generate report – 5 minutes
This year, Union Budget and the subsequent reforms brought good news for homebuyers in the form of lower interest rates on home loans. Banks rushed to reduce their home loan interest rates to offer buyers with better deals to buy the home of their dreams. The reduction in rates is good for new homebuyers who will get home loans at the lower rates. But how will the existing borrowers get benefits of these revised rates?
Existing borrowers have the option of home loan balance transfer which means that they can transfer the remaining amount of their home loan to another bank that is offering a lower interest rate. Since it a competitive market, some banks also give the option of resetting the interest rate so that the customers do not go to another bank.
To understand these two options better, we first need to know how home loan interest rates are charged by the banks.
What are the two types of home loan interest rate models?
Of late, banks have started following the MCLR models. On the other hand, independent housing finance companies are still using the prime-lending model. MCLR stands for Marginal Cost of fund-based Lending Rate. It is a benchmark rate below which the bank cannot lend. Parameters like marginal cost of funds, operational cost, negative CRR cost and the tenure premium are taken into consideration to calculate the MCLR. Prime lending rate model is treated as reference rate for lending. Banks offer rates lower than prime rate to applicants with good credit score, whereas those who have poor credit score will be charged a higher home loan interest rate.
Benefits of MCLR over PLR
MCLR has been recently rolled out by the RBI to offer more transparency in the Indian lending market. Some of the advantages of MCLR model are-
- These home loan interest rates are more dynamic and determined by the money market conditions and prevailing reforms. This dynamic environment is beneficial for the borrowers.
- MCLR reflects the incremental cost of the sum and changes every month, thus offering the benefits of a lower rate to the homebuyers.
- As opposed to PLR, MCLR actively reacts to the changes in the market.
One should remember that the home loan interest rates under MCLR model change only at a date predetermined at the time of taking the loan. Between two rate-reset dates, an MCLR works similar to the fixed lending rate.
Why should you transfer your home loan when interest rates drop?
Policy reforms and rate reductions make the environment better to take new home loans. However, existing borrowers can also make the most of this situation by transferring the balance of their home loan to another bank that offers better rates. This is a wise step to take in the early periods of your loan. Under this, the entire unpaid principal amount is transferred to another bank at a lower home loan interest rate. The new bank pays the entire outstanding amount to your previous bank and now you have to pay the EMIs for the same amount to the new bank at lower interest rates.
For example, if 50 Lakhs of your principal amount stands unpaid at 12% interest and you transfer it for a reduction of 50 basis points bringing the interest rate to 11.5%; you will save around 2.87 Lakhs in interest which is a considerable amount.
Here you should also know that home loan balance transfer is a lengthy process and involves documentation and formalities just like taking a new home loan. The bank will check your credit score and will take on the transfer only when fully satisfied. You will also have to pay certain amount as processing fee.
How to negotiate with your bank to reset your home loan interest rate?
Resetting your interest rate at the same bank is a much simpler process. Given the competitive sentiments in the market, banks do not want their customers to go to a different bank. You can simply do this by writing to your bank. There are two scenarios- the bank can either reduce your tenure or the interest rate. When tenure is reduced, though the EMI remains same, interest component reduces and principal repayment is increased. When the bank reduces your interest rate, it requires you to submit a new ECS and cancelled cheques.
A home is more than just a roof over your head; it is a feeling, a dream that you have nurtured for a long time. And in making this dream a reality, home loans play a very important role. Over the last two decades, home loan has come out as the best and most preferred way of buying a house. Not only the middle-class buyers, but the rich are also taking the home loan route to finance their home purchase. Sensing the high demand, several banks and financial institutions offer a variety of home loan products at attractive interest rates. One such lender is DHFL.
DHFL stands for Dewan Housing Finance Corporation Ltd., established in the year 1984. It is essentially a home financing company and offers home loans at competitive rates of interest. The company envisions transforming the standard of living in Indian households by giving them greater access to home ownership.
DHFL Home Loan
The interest rate on a loan is the most important factor to be considered by a borrower as it determines the amount that he/she has to shell out in the form of EMIs. DHFL offers home loans at attractive rates of interest to make home buying easier for the people. However, the interest rate differs for salaried and self-employed applicants. The lender also ensures that the home loan process is easy and hassle-free for its customers by keeping the documentation formalities minimal.
The table below gives a glimpse of DHFL Home Loan Interest Rates for salaried and self-employed applicants:
|Loan Amount||Interest Rates for Salaried||Interest Rates for Self-Employed|
|Up to Rs.25 Lacs||9.00%||9.10%|
|Above Rs.25 Lacs to Rs.75 Lacs||9.00%||9.10%|
|Above Rs.75 Lacs to Rs.100 Lacs||9.15%||9.25%|
|Loans above Rs.100 Lacs to Rs.150 Lacs||9.15%||9.25%|
|Loans above Rs.150 Lacs to Rs.300 Lacs||9.35%||9.45%|
|Loans above Rs. 300 Lacs||9.75%||10.00%|
Eligibility Criteria for DHFL Home Loan
DHFL offers its home loan services to salaried and self-employed candidates. Though the maximum loan amount is Rs 5,00,00,000 (minimum amount Rs 1 Lakh), it should not exceed 85% of the property cost. However, the exact loan amount that will be sanctioned to an applicant depends on several other factors like-
- Job stability and continuity of income
- Co-applicant’s income
- Educational qualification
- Assets, liabilities and saving habits
- Repayment capacity
- Credit score
Processing Fees on DHFL Home Loan
Much like other home loan providers, DHFL also charges a nominal processing fee for its home loan product. For the salaried individuals and self-employed professionals, the processing fee ranges between Rs 5,000 and Rs 20,000 whereas for the self-employed non-professionals, it is charged at the rate of 1.5%. One should also note that additional service tax and cess are applicable on the mentioned processing fee. Also, this amount is non-refundable.
Other Features and Benefits of DHFL Home Loan
Following are the features of DHFL Home Loan-
- The tenure of this loan ranges from 1 to 30 years but it does not extend beyond the retirement age or 60 years, whichever is earlier. This limit is 65 years for the self-employed individuals.
- This loan can be taken for financing the purchase of a ready-to-move house or an under-construction house/flat.
- The interest rate applicable on the loan is based on the Retail Prime Lending Rate (RPLR) of DHFL, which is subject to change as per the money market conditions.
- There are two options to pay your home loan EMIs- Electronic Clearance Services (ECS) or post-dated cheques drawn on your salary/savings account.
- DHFL also allows you to avail loans along with other co-applicants provided that they meet the eligibility criteria set by the lender.
Documentation for DHFL Home Loan
For salaried individuals, the lender will ask for the last two months’ salary slip or Form 16, copy of bank passbook and company profile (if it is not a well-known organization) along with the general KYC documents like ID Proof and Residence Proof.
On the other hand, self-employed applicants will have to submit the copy of ITR for the last two years, profit and loss statement and balance sheet, last 6 months’ bank statement, copy of shop/business establishment license and a brief profile of the business along with KYC documents.
A home loan is one of the most popular types of retail loans availed by people across the country. Individuals can apply for a home loan to purchase a property or a plot. They can also apply for a housing loan to renovate, repair or extend their existing home.
Applying for a home loan can be emotionally quite taxing. When people apply for a home loan, they eagerly wait for approval and expect to get the go-ahead from the lender. As such, it can be quite a crushing blow if the loan application is rejected by the bank or the non-banking financial organisation.
However, instead of getting disheartened, these applicants can take concrete steps to ensure their application loan will get approved if they reapply for a home loan.
Here are a few of the common reasons why a home loan application may be rejected and the steps to make sure that you get your home loan when you reapply.
Reason 1: Bad Credit Score
Resolution: A bad credit score is one of the major reasons behind a rejected home loan application. One of the key factors that severely hits the credit score of an individual are missed loan repayments or credit card bill payments. You can start by clearing off any debt that you might have and then strive to improve your credit score.
If you do not have a credit score, which means that you have no credit history, there are fewer chances of you getting a home loan. If your application is rejected for this reason, then you should start to work on your credit score. The way to do is to take small loans or credit cards and pay back on time. This increases your score over time. If you want the home loan on an urgent basis, then you should take someone with a good credit history as a co-applicant. Their score will allow you take the loan without the risk of rejection.
Reason 2: Improper Documentation
Resolution: Another major reason behind the rejection of a home loan application is improper filing or documentation of the loan. It is important for an applicant to fill and sign the application properly and also submit the documents required by the bank to approve the loan application.
To file the application again, the applicant must check out the documentation requirements of the bank for the home loan and submit the application form along with the required documents. It may make sense to talk to the bank or a financial advisor before you apply for the loan.
Reason 3: Multiple Financial Obligations
Resolution: The repayment capacity of an applicant is important to the bank to approve a loan. If an applicant has too many financial obligations such as multiple loans, credit cards, etc., the bank may question the repayment capacity of the individual. They may reject the loan on the assumption that these financial obligations will come in the way of home loan repayment since the applicant is already committed to paying other loans and credit card bills.
In this case, the applicant must first try to clear off any debt that he can and then reapply for the loan. If he has too many loans, then he can pay off all the other debts with a single loan. This will show a sense of financial responsibility and he will be seen as a good candidate for a home loan.
Reason 4: Low Income
Resolution: Low income is another reason why banks reject home loan applications. Basically, the bank assumes that the applicant will not be able to repay the loan on time if his income is below a certain level. In such a case, the applicant can add a spouse or family member with a good income as a co-applicant to reapply for the loan.
Since different banks have different criteria, the candidate can also choose to go to another bank for a home loan. Another solution to this problem is to choose a lower loan amount or a longer loan tenure so that the monthly instalment turns out to be manageable as compared to the income of the applicant.
Reason 5: Unreliable Builder/Area
Resolution: Some banks have more stringent rules than others and check the credibility and reputation of a builder from whom a candidate is planning to buy the property. If the builder does not seem genuine or credible to them, they may reject the home loan application of the applicant. In such cases, the candidate can apply to a different bank for a home loan or choose a different builder.
Sometimes, a bank may have a few areas within a city or town blacklisted for a home loan. If you are planning to purchase a property in this area, you can apply for a home loan from another bank or start looking for a property in a different area.