## Tax on Short Term Capital Gains from Shares & Eq. MFs

April 29, 2013

I thank Nikhil for giving the Idea for this article. (Here is the background). How the STCG tax liability ‘ll be decided if the income source for the person in question is only interest + STCG?

If a person has only interest income + Short Term Capital Gain income, First we should check the gross income figure before deciding the tax liability. To understand the concept better, I’m providing the different cases. (Tax slabs are considered for FY 2013-2014). It’s assumed that Securities Transaction Tax is paid for both shares & Eq. MFs to keep the tax calculation simple.

Case – 1 –  age less than 60Y, interest income 125000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 125000+55000 = 180000 which is less than taxable income limit of 200000.

So even after earning 55000 Rs. STCG amount, the tax liability is zero.

Case – 2a –  age less than 60Y, interest income 175000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 175000+55000 = 230000 which is more than taxable income limit of 200000. Now what ‘ll be tax rate here for excess amount of 30000 Rs? it ‘ll be same 15.45% as applicable for STCG from shares or Eq. MFs.

So tax payable = 30000*15.45% = 4635 Rs.

Case – 2b –  age less than 60Y, interest income 175000 Rs. & STCG 55000 Rs. 50000 Rs. nvestment in section 80c.

Here Gross income = 125000 (adjusted for section 80C 50000 Rs. benefit)+55000 = 180000 which is less than taxable income limit of 200000. So even after earning 55000 Rs. STCG amount, the tax liability is zero due to benefit of section 80c on interest income.

Case – 3 –  age more than 60Y, interest income 175000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 175000+55000 = 230000 which is less than taxable income limit of 250000. (applicable for Sr. Citizen)

So even after earning 55000 Rs. STCG amount, the tax liability is zero.

Case – 4a –  age more than 60Y, interest income 225000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 225000+55000 = 280000 which is more than taxable income limit of 250000. Now what ‘ll be tax rate here for excess amount of 30000 Rs? it ‘ll be same 15.45% as applicable for STCG from shares or Eq. MFs.

So tax payable = 30000*15.45% = 4635 Rs.

Case – 4b –  age more than 60Y, interest income 225000 Rs. & STCG 55000 Rs. 50000 Rs. nvestment in section 80c.

Here Gross income = 175000 (adjusted for section 80C 50000 Rs. benefit)+55000 = 230000 which is less than taxable income limit of 250000. So even after earning 55000 Rs. STCG amount, the tax liability is zero due to benefit of section 80c on interest income.

Case – 5 –  age more than 80Y, interest income 375000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 375000+55000 = 430000 which is less than taxable income limit of 500000. (applicable for Very Sr. Citizen)

So even after earning 55000 Rs. STCG amount, the tax liability is zero.

Case – 6a –  age more than 80Y, interest income 475000 Rs. & STCG 55000 Rs. No investment in section 80c.

Here Gross income = 475000+55000 = 530000 which is more than taxable income limit of 500000. Now what ‘ll be tax rate here for excess amount of 30000 Rs? it ‘ll be same 15.45% as applicable for STCG from shares or Eq. MFs.

So tax payable = 30000*15.45% = 4635 Rs.

Case – 6b –  age more than 80Y, interest income 475000 Rs. & STCG 55000 Rs. 50000 Rs. nvestment in section 80c.

Here Gross income = 425000 (adjusted for section 80C 50000 Rs. benefit)+55000 = 480000 which is less than taxable income limit of 500000. So even after earning 55000 Rs. STCG amount, the tax liability is zero due to benefit of section 80c on interest income.

Please feel free to discuss the related issues on the basis of info provided above.

## Income Tax saving: How much is too much?

April 25, 2013

I’m thankful to dear Sonadhi for providing the Idea for this article. (Click here to know the background). When we are asking for tax saving, a question should be asked to ourselves. How much is too much? Should we solely focus on the tax saving alone & forget the bigger picture of our financial life? What about our dreams, aims, goals?

In the shared background above, the person in question is having an yly taxable income of 700000 Rs. Already claiming section 80C 100000 Rs. in full as well as home loan interest related benefit also for 150000 Rs. Another deduction is there for prem. paid towards health insurance for self & Sr. citizen parents of 35000 Rs. So After these deductions, what is the tax liability for this person?

A. Gross taxable income = 700000

B. Loss from house property = 150000

C. Net Taxable Income = 550000

D. Chapter VIA deductions = 135000

F. Net Taxable Income = 415000

G. Applicable Tax Slab (as per Fy 2013-2014) = 10%

Now interestingly, whatever more deductions are tried out, the benefit in tax saving ‘ll be limited to just 10% as the person is in that slab. For the charity or donations related deduction, the 25000 Rs. paid by this person ‘ll provide the tax benefit of 1288 Rs. (@10.3% rate, including edu cess). Now is it worth to opt such tax saving ways.

Now if the same person opts to pay tax, the effective amount with him is 23712 (25000-1288) Rs. which can be used as per free choice or invested for future use. Please do note, this discussion is purely for financial impact on the finance of the person in question & do not ask to stop charity.

April 23, 2013

## TAN

TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates.

Format of TAN:

## Procedure for getting TAN :

It can be obtained by filing an application in form no. 49B to any of the TIN facilitation Centres (TIN-FC) namely NSDL. Addresses of the TIN-FC as well as the forms can be downloaded from the website www.incometaxindia.gov.in or http://tin-nsdl.com. The fee for processing TAN application is Rs.  60/-. This can be paid by:

?   Cash at TIN-FC counter

?   Demand draft or

?   Cheque or

?   Credit card

The demand draft/ cheque shall be in favour of ‘NSDL-TIN’.

TAN number will be communicated to the deductor by NSDL.

What is the importance of TAN for a common tax payer having PAN?

The Tax deducted against each PAN has to be reflected under the deductee’s TAN in the National Data of Income Tax deduction & collection. Also Known as Form 26AS. In case your Tax was deducted by your employer or bank against FD interest or anywhere else but the same is not available in Form 26 AS or there is a mismatch of TAN in your Form 26AS, the Income Tax department ‘ll treat it as non payment of Tax & ‘ll issue demand notice for collection of Tax.

Please feel free to discuss your queries on TAN as well as PAN.

## Understanding PAN

April 22, 2013

1. What Is PAN?

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application.

PAN enables the department to link all transactions of the “person” with the department. These transactions include tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, correspondence, and so on. PAN, thus, acts as an identifier for the “person” with the tax department.

PAN was introduced to facilitates linking of various documents, including payment of taxes, assessment, tax demand, tax arrears etc. relating to an assessee, to facilitate easy retrieval of information and to facilitate matching of information relating to investment, raising of loans and other business activities of taxpayers collected through various sources, both internal as well as external, for detecting and combating tax evasion and widening of tax base.

.

### Structure of a PAN Number

A typical PAN is AFZPK7190K.

• First three characters i.e. “AFZ” in the above PAN are alphabetic series running from AAA to ZZZ
• Fourth character of PAN i.e. “P” in the above PAN represents the status of the PAN holder. “P” stands for Individual, “F” stands for
• Firm, “C” stands for Company, “H” stands for HUF, “A” stands for AOP, “T” stands for TRUST etc.
• Fifth character i.e. “K” in the above PAN represents first character of the PAN holder’s last name/surname.
• Next four characters i.e. “7190” in the above PAN are sequential number running from 0001 to 9999.
• Last character i.e. “K” in the above PAN is an alphabetic check digit.

2. Why Is It Necessary To Have PAN?

It is mandatory to quote PAN on return of income, all correspondence with any income tax authority. From 1 January 2005 it will

be mandatory to quote PAN on challans for any payments due to Income Tax Department.

It is also compulsory to quote PAN in all documents pertaining to the following financial transactions :-

(a) sale or purchase of any immovable property valued at five lakh rupees or more;

(b) sale or purchase of a motor vehicle or vehicle, [the sale or purchase of a motor vehicle or vehicle does not include two

wheeled vehicles, inclusive of any detachable side-car having an extra wheel, attached to the motor vehicle;]

(c) a time deposit, exceeding fifty thousand rupees, with a banking company ;

(d) a deposit, exceeding fifty thousand rupees, in any account with Post Office Savings Bank;

(e) a contract of a value exceeding one lakh rupees for sale or purchase of securities;

(f) opening a bank account;

(g) making an application for installation of a telephone connection (including a cellular telephone connection);

(h) payment to hotels and restaurants against their bills for an amount exceeding twenty-five thousand rupees at any one time ; (i) payment in cash for purchase of bank drafts or pay orders or banker’s cheques for an amount aggregating fifty thousand

rupees or more during any one day;

(j) deposit in cash aggregating fifty thousand rupees or more with a bank during any one day;

(k) payment in cash in connection with travel to any foreign country of an amount exceeding twenty-five thousand rupees at any

one time.

{Kindly refer Section 139A (5) (c) read with Rule 114B for more details}

3. How does Income Tax Department ensure that PAN is quoted on transactions mentioned above?

It is statutory responsibility of a person receiving document relating to economic or financial transactions notified by the CBDT to

ensure that PAN has been duly quoted in the document.

{Kindly refer Section139A (6)}

4. Is it compulsory to quote PAN on return of income?

Yes, it is compulsory to quote PAN on return of income. A penalty of Rs.10,000/- is leviable in case of any default.

{Kindly refer Section 272B}

5. How will these authorities verify PAN?

A facility for verifying PAN is available on the website of the Income Tax department. Kindly click

https://incometaxindiaefiling.gov.in/portal/knowpan.do

6. Who must have a PAN?

i. All existing assesses or taxpayers or persons who are required to furnish a return of income, even on behalf of others, must

obtain PAN.

ii. Any person carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed five

lakh rupees in any previous year;

iii. Any person, who intends to enter into financial transaction where quoting PAN is mandatory, must also obtain PAN.

iv. The Assessing Officer may allot PAN to any person either on his own or on a specific request from such person.

7. Can a person obtain or use more than one PAN?

Obtaining or possessing more than one PAN is against the law, for which penalty of Rs.10,000/- may be imposed

{Section 139A (7) read with Section 272B }

8. Where to apply for PAN?

In order to improve PAN related services, the Income Tax department has authorized UTI Investor Services Ltd (UTIISL) to set up

and manage IT PAN Service Centers in all cities or towns where there is an Income Tax office and National Securities Depository

Limited (NSDL) to dispense PAN services from TIN Facilitation Centers. For convenience of PAN applicants in big cities, UTIISL has

set up more than one IT PAN Service Center and likewise there are more than one TIN Facilitation Centers.

9. How to apply for a PAN? Can an application for PAN be made on plain paper?

PAN application should be made only on Form 49A. A PAN application (Form 49A) can be downloaded from the website of Income Tax department or UTIISL or NSDL  (www.incometaxindia.gov.in,www.utiisl.co.in or www.tin-nsdl.com) or printed by local printers or photocopied (on A4 size 70 GSM paper) or obtained from any other source. The form is also available at IT PAN Service centers and TIN Facilitation centers.

10. Can an application for PAN be made in Form 49A obtained from anywhere?

Yes, PAN application may be made on Form 49A obtained from any source other than IT PAN Service Centers or TIN Facilitation

Centers. For instance, a PAN application may be made on form downloaded from the website of Income Tax department or UTIISL

or NSDL; or on form printed by local printers or a photocopy of downloaded or printed form.

11. Can an application for PAN be made through Internet?

Yes, application for fresh allotment of PAN can be made through Internet. Further, requests for changes or correction in PAN data or request for reprint of PAN card (for an existing PAN) may also be made through Internet. Online application can be made either through the portal of NSDL (https://tin.tin.nsdl.com/pan/index.html) or portal of UTITSL (http://www.utitsl.co.in/utitsl/uti/newapp/new-pan-application.jsp). The charges for applying for PAN online are the same i.e. Rs. 94 (including service tax) for Indian communication address and Rs.744 (including service tax) for foreign communication address, i.e. there are no additional charges. Payment of application fee can be made through credit/debit card or net-banking. Once the application and payment is accepted, the applicant is required to send the supporting documents through courier/post to NSDL/UTITSL.

12. Is there any TATKAL facility for allotment of PAN?

No.

13. How to find an IT PAN Service Center or TIN Facilitation Center?

Location of IT PAN Service Centers or TIN Facilitation Centers in any city may be obtained from local Income Tax Office or any

office of UTI/UTIISL or NSDL in that city or from websites of the Income Tax department (www.incometaxindia.gov.in or UTIISL(www.utiisl.co.in) or NSDL (http://tin.nsdl.com)

14. What services are provided by these IT PAN Service Centers or TIN Facilitation Centers?

IT PAN Service Centers or TIN Facilitation Centers will supply PAN application forms (Form 49A) and forms for ‘Request For New PAN Card Or/ And Changes In PAN Data’, assist the applicant in filling up the form, collect filled form and issue acknowledgement slip. After obtaining PAN from the Income Tax department, UTIISL or NSDL as the case may be, will print the PAN card and deliver it to the applicant.

15. What if I submit incomplete Form 49A?

IT PAN Service Centers or TIN Facilitation Centers shall not receive any incomplete and deficient PAN application. However, these centers will assist applicants to correctly fill up form 49A or ‘Request For New PAN Card Or/ And Changes In PAN Data’, as the case may be.

16. What documents and information have to be submitted along with the application for Form 49A?

a. Individual applicants will have to affix one recent, coloured photograph (Stamp Size: 3.5 cms x 2.5 cms) on Form 49A;

b. Any one document listed in Rule 114 must be supplied as proof of ‘Identity’ and ‘Address’; and

c. Designation and code of the concerned Assessing Officer of Income Tax department will have to be mentioned in Form 49A.

17. Which documents will serve as proof of ‘Identity’ in case of Individual applicants, including minors and HUF applicants?

Copy of school leaving certificate or matriculation certificate or degree of a recognized educational institution or depository

account or credit card or bank account or water bill or ration card or property tax assessment order or passport or voter identity

card or driving license or certificate of identity signed by a MP or an MLA or a Municipal Councilor or a Gazetted Officer;

In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof

of Identity;

In case PAN application is made on behalf of a HUF, any of above documents in respect of Karta of the HUF will serve as proof of

Identity.

18. What is proof of ‘Address’ for Individual applicants, including minors and HUF applicants?

Copy of electricity bill or telephone bill or depository account or credit card or bank account or ration card or employer certificate

or passport or voter identity card or property tax assessment order or driving license or rent receipt or certificate of address

signed by a MP/ MLA/Municipal Councilor / a Gazetted Officer;

In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof

In case PAN application is made on behalf of a HUF, any of above documents in respect of Karta of the HUF will serve as proof of

19. What documents will serve as proof of Identity and Address for other applicants?

IT PAN Service Centers or TIN Facilitation Centers will supply PAN application forms (Form 49A) and forms for’Request For New

PAN Card Or/ And Changes In PAN Data’, assist the applicant in filling up the form, collect filled form and issue acknowledgement

centers will assist applicants to correctly fill up form 49A or ‘Request For New PAN Card Or/ And Changes In PAN Data’, as the Copy of Certificate of Registration issued by the Registrar of Companies or Copy of Certificate of Registration issued by the

Registrar of Firms or Copy of Partnership Deed or Copy of Trust deed or Copy of Certificate of Registration Number issued by

Charity Commissioner or Copy of Agreement or Copy of Certificate of Registration Number issued by Charity Commissioner or

Registrar of Co-operative Society or any other Competent Authority or any other document originating from any Central or State

Government Department establishing Identity and Address of such person.

20. How to find ‘Assessing Officer code’?

Assessing Officer code may be obtained from Income Tax Office where you submit your return of income. Applicants who have

never filed return of income may find out Assessing Officer code with the help of IT PAN Service Center or TIN Facilitation Center

or jurisdictional Income Tax Office.

21. Is a photograph compulsory for making an application for PAN?

A photograph is compulsory only in case of ‘Individual’ applicants.

22. What is the procedure for applicants who cannot sign?

In such cases, Left Hand Thumb impression of the applicant should be affixed on Form 49A or ‘Request For New PAN Card Or/ And Changes In PAN Data’ at the place meant for signatures and got attested by a Magistrate or a Notary Public or a Gazetted Officer, under official seal and stamp.

23. Is father’s name compulsory for female (including married/divorced/widow) applicants?

Only father’s name is required to be filled in the PAN application (Form 49A). Female applicants, irrespective of marital status,

should write only father’s name in the PAN application

24. Is it compulsory to mention telephone numbers on Form 49A?

Telephone number is not compulsory, but if provided it may help in faster communication.

25. Who can apply on behalf of non-resident, minor, lunatic, idiot, and court of wards?

Section 160 of IT Act, 1961 provides that a non-resident, a minor, lunatic, idiot, and court of wards and such other persons may

be represented through a Representative Assessee. In such cases, application for PAN will be made by the Representative

Assessee.

26. I had applied to the department but I do not know my PAN?

27. Are there any charges to be paid at IT PAN Service Centers or TIN Facilitation Centers?

UTIISL and NSDL have been authorized to collect Rs.85 + Service Tax as applicable, per PAN application and this includes cost of

a tamper proof PAN card. This amount will have to be paid in cash at IT PAN Service Center or the TIN Facilitation Center.

28. Do you need to apply for a PAN when you move or transfer from one city to another?

Permanent Account Number (PAN), as the name suggests, is a permanent number and does not change during lifetime of PAN

holder. Changing the address or city, though, may change the Assessing Officer. Such changes must, therefore, be intimated to

nearest IT PAN Service Center or TIN Facilitation Center for required correction in PAN databases of the Income Tax department.

These requests will have to be made in a form for ‘Request For New PAN Card Or/ And Changes In PAN Data’

29. I had applied to UTITSL/ NSDL a month ago but I have not received my PAN card and I have to file my return of income.

Please contact Aaykar Sampark Kendra (0124-2438000 or 95124-2438000 from NCR) or www.incometaxindia.gov.in or send an email to pan@incometaxindia.gov.in.

30. Will the existing PAN cards issued by the Department remain valid?

All PAN allotted and PAN card issued by the Department will remain valid. All persons who have been allotted a PAN need not apply again.

31. Income Tax Department has issued me a PAN card; can I obtain a new tamper proof PAN card?

For obtaining the tamper proof PAN card an application will have to be made in the form for ‘Request For New PAN Card Or/ And Changes In PAN Data’ to IT PAN Service Center or TIN Facilitation Center, in which existing PAN will have to be indicated and old PAN card surrendered. The payment of Rs.60 + Service Tax as applicable, will also have to be made.

32. I had applied for PAN and received PAN number but have not received the PAN Card?

Apply in the form for ‘Request For New PAN Card Or/ And Changes In PAN Data’ at any IT PAN Service Center or TIN Facilitation Center quoting the PAN allotted to you.

33. How will the new PAN card be delivered to me?

The UTIISL or NSDL, as the case may be, will ensure delivery of new PAN card at the address indicated by you in the PAN application form or form for ‘Request For New PAN Card Or/ And Changes In PAN Data’

34. I want to pay taxes today but I do not have a PAN?

It takes about 15 days to get a new PAN allotted. However, PAN can be obtained in around 5 days if application is made through

Internet and processing fee paid through credit card. It is advisable to initiate action for obtaining PAN will in time.

35. Who should be contacted for inquiries regarding PAN applications?

All such inquiries should be addressed to:

 For UTIISL For NSDL The Vice President IT PAN Processing Centre, UTI Investor Services Ltd Plot No. 3, Sector – 11 CBD_ Belapur Navi Mumbai-400 614 e-mail.- utiislgsd@mail.utiisl.co.in Tel No. 022-27561690 Fax No. 022-27561706 The Vice President Income Tax PAN Services Unit, NSDL 4th Floor, Trade World, A Wing Kamala Mills Compound, S. B. Marg, Lower Parel, Mumbai-400 013 e-mail.- tininfo@nsdl.co.in Tel No. 022-2499 4650 Fax No. 022-2495 0664

Coupon number or Acknowledgement number, as the case may be, should be mentioned in all communications. (Source)

## SBI Max Gain: Some FAQs

April 14, 2013

First of all, I thank to Mr. VKSNathan who gave the idea for this article. (Click here to know the background). Now a days many home loan borrowers are opting a particular type of home loan from SBI which is called Max Gain. In this home loan, an Overdraft (OD) account is assigned to the customer’s home loan & any amount parked by customer is treated as loan repayment for the purpose of interest calculation, for the days, the amount stays there in that OD account. As on date following banks are offering similar types of home loan to their customers.

SBI, IDBI, CITI, HSBC & Standard Chartered. Punjab National Bank can also be added in this list but it’s offering a combo of normal loan + OD. In this article, we are going to discuss only SBI Max Gain as in OD linked home loan, for the fact that the maximum business is with SBI & the most discussed topic on JI forum is also related to SBI Max Gain (click here).

What is an Overdraft account?

Before we discuss Max Gain, first understand, what is an OD account? All of us are well aware of functioning of an ordinary saving bank (SB) account. Here account operates between zero to positive & positive to zero. As we deposit our money, it’s used by bank & we get interest on our money from bank. In case of an OD account, bank first ask for a security & then assign a credit limit on the basis of the market value of that security. This security may be Fixed Deposits, Insurance Policies, National Saving Certificates, Shares, Mutual Fund units, house/commercial property etc. Now when we are using this assigned credit limit, the amount is going from zero to negative zone & when we are repaying, it’s coming from negative to zero. As we are using bank’s money in this case, the interest ‘ll be paid by us to bank. That’s how an OD account works.

So what is the correlation between Max Gain home loan & Over Draft account?

For Max Gain borrowers, SBI opens an Over Draft account where the Credit limit as discussed above is equal to the loan value assigned to the borrower. Here underlying security is the home you have purchased or constructed from that loan amount. Now as & when you are parking any surplus amount into this OD accout, the parked amount is treated as payment towards loan (effectively you are bringing down your loan liability from negative towards zero position) and thus the interest ‘ll be charged only on the difference amount i.e. total loan amount – parked surplus amount.

What is the primary benefit of Max Gain?

Well the primary benefit of MG is to keep your liquidity intact & still bringing down your interest outgo. To understand it better, please imagine a situation you are running a home loan of 30L Rs. & now you do have 2L Rs. with you to prepay. In normal home loan, your 2L Rs. ‘ll be accepted by bank & adjusted towards home loan & your amount is gone forever so no liquidity for you of that 2L Rs. amount. On the other hand, if you are MG customer, simply park those 2L Rs. in your MG account & your interest outgo ‘ll be lower from that month itself till those 2L Rs. or a part of it is there as surplus in MG account.

What is Drawing Power ?

Drawing Power is nothing but your as on date actual outstanding loan amount. Before final disbursal or start of loan repayment, it’s your sanctioned loan amount. Once your EMI starts, it’s your as on date actual outstanding loan amount. Please check Image below, Drawing Power here is 1867053 Rs. as on date. (Click here to understand it better)

What is Available balance?

Before final disbursal, it’s the sum of undisbursed amount + parked surplus & post final disbursal, it’s your parked surplus amount which is available to withdraw. Please check Image below, Available Balance here is 1084177.72 Rs. as on date. (Click here to understand it better)

What is Book balance?

It’s the adjusted loan amount arrived after deducting the Available Balance amount from Drawing Power. In your account statements it’s shown with a negative sign. Please check Image below, Book Balance here is  – 782875.28 Rs. as on date. (Click here to understand it better)

Is there any extra interest for Max Gain?

No, the interest for home loan is same in SBI be it for normal home loan or for Max Gain.

I’m an existing SBI home loan customer. Can I convert my old term loan to Max Gain?

Yes, you can. Please contact your loan serving branch or RACPC for the required paperwork to be done. This may be an outdated info so please do check with your loan serving branch for current day rules on conversion.

I have taken the Max Gain for an Under Construction Property. Can I park surplus amount to save on interest outgo?

The answer is yes & no both. Yes you can park your surplus during under construction phase but do remember SBI is disbursing partially at this juncture & in case due to any emergency you want to liquidate your surplus, SBI ‘ll not allow the same. So park only that much surplus, you feel you ‘ll not need even in an extreme emergency.

If I’m parking some money on monthly basis or in lump sum, will my loan term come down or EMI go down?

No. Neither your EMI ‘ll come down nor your loan term. The only saving is in terms of interest outgo. To understand it better, Let’s assume a test case of loan amount 30L Rs. @ 10% Rate of Interest for 20Y term. The normal EMI for these nos. ‘ll be 28951 Rs. The break up of your EMI for first month ‘ll be 25000 Rs. interest & 3951 Rs. for principal repayment.

Now if you do have 2L Rs. surplus in the very first month & prepay the same as below –

Case – 1 Normal home loan

Your 2L Rs. is gone & outstanding loan amount ‘ll come to 2796049 & interest outgo ‘ll still be 25000 Rs. but the no. of months ‘ll come down from original 240 to 198 months.

Case – 2 Max Gain home loan

Your 2L Rs. are parked in that OD account & the interest for the very first month ‘ll be calculated on 28L Rs. & thus it ‘ll be 23334 & thus there‘ll be an interest saving of 1667 Rs. which‘ll remain available in your OD account as surplus along with your parked surplus 2L Rs. so for next month, the parked surplus amount ‘ll be 201667 Rs.

Please do note in case 2 above, Your loan term is still 240 months but the saving of interest ‘ll keep on increasing on mly basis from the parked surplus & of course the liquidity of those 2L Rs. is there.

How can I calculate my saving in Max Gain?

To know your actual saving, first of all please demand a loan amortization schedule from your loan serving branch & now for each month compare the scheduled interest outgo as per your loan amort. schedule & the actual interest outgo.

What should I do to maximize the savings in Max Gain?

If you are paying your EMIs from SBI’s SB account, you can maximize your benefits. How? here it goes. Say 15th is the EMi date on which EMi amount is debited from your SB acct. Now in a normal home loan, people ‘ll keep at least 2-3 months’ EMI amount as buffer in SB account. but in case of Max Gain, you do not need to keep buffer in SB account. Keep this buffer amount also in your MG account along with your routine surplus amount. now use the power of netbanking of SBI for your own good & create a schedule transaction of your EMI amount 28951 Rs. (in the above example) to be transferred on 13th of every month from MG account to SB account. At a time you can schedule for next 12 months by using standard instruction. So it’s technology that’s helping you.

I can transfer money to MG account from my existing netbanking enabled SB account but reverse is not happening. why?

The answer lies in the fact that Netbanking transaction rights on your MG account is not enabled yet by your loan serving branch. if final disbursal is done, you can apply for transaction rights. if only partial disbursement has been done, sorry, you can’t apply for transaction rights till final disbursal.

Is it mandatory to purchase property insurance & life insurance along with Max Gain?

Having property insurance as well as sufficient life insurance is compulsory but purchasing the same from SBI’s sister cos. like SBI General ins. & SBI Life ins. is not at all mandatory. If you feel that policies are being cross sold to you to exploit your position (home loan seeker), please contact the AGM of your local RACPC where your loan application is under processing.

Is SBI charging higher processing fee for Max Gain?

No, as on date there is no differentiation in fee for term loan & Max Gain but SBI reserves the rights to charge different fee.

Can I claim section 80C principal repayment benefit for the surplus amount parked in Max Gain?

The answer is NO. Only the regular principal repaid by you from your EMI as part of your loan amortization schedule is available for tax benefit under section 80C. the parked surplus amount is liquid money & you can withdraw it any time, hence it’s not considered as actual repayment of loan & thus not eligible for tax benefit.

Can I avail cheque book & ATM card for my Max Gain account?

Yes, as & when you‘ll demand these, SBI ‘ll offer you the same. In case you are already holding an SBI SB acct. linked ATM card, you have the option to link your MG acct. also with this existing ATM card.

Can I enroll my MF SIPs in Max Gain?

Yes but do note, there should be a surplus balance i.e. available balance on the date of SIP, else your ECS or SI mandate ‘ll bounce.

Can i pay for my utility bills, credit card payments, online shopping from Max Gain?

Yes, you can do all this & more. In fact it’s in your best interest that you treat your MG account as your primary money parking account & route all your transactions through it so that money is lying there for maximum possible time & thus helping you to bring down your interest outgo.

I used my MG account ATM card to withdraw cash from other bank’s ATM & I was charged the money very first time in the month. Why?

The reason is, as per RBI’s circular 5 transactions on other banks’ ATM are free only for SB account & in this case, you forget the point that your MG account is not SB account. it’s an overdraft account.

For an imaginary situation, my loan amount is 30L Rs. & parked surplus amount is also 30L Rs. Does it mean, my loan is closed & I can claim my property papers from SBI?

No, your loan is not closed. Only interest outgo ‘ll become zero & EMI ‘ll remain continue as it is. Yes the interest part of your EMI ‘ll keep on accumulating in your MG account. If you want to close your loan at this point, you w’d have to inform SBI in written & now SBI ‘ll adjust your parked surplus amount towards the outstanding loan amount. you ‘ll lose the liquidity of your money but loan ‘ll be over & now you can get your property papers back.

How can I transfer my loan from other banks to SBI Max Gain?

For loan transfer, first of all contact your existing lender & ask for following things.

1. Loan Account statement from day one.

2. List of Documents, which were submitted by you at the time of availing original loan. In day to day language of bankers, it’s called LOD.

3. As on date outstanding loan balance with applicable interest, penalty & any other fee to close the loan.

Now contact, the nearest SBI Branch (if you do have an existing SB account with SBI, it’s advisable to contact there for ease of operation). Inform in that branch that you want to transfer your loan from existing bank to SBI Max Gain. fill the application form, submit the necessary papers & SBI’s RACPC ‘ll do the back gorund job.

Once SBI is ready to accept the transfer, it ‘ll issue you a sanction letter of the loan amount & ‘ll ask you to go for loan related agreement documentation work with SBI. If you are not having property insurance, SBI may ask to purchase one. Same ‘ll be the case for your life insurance. Once legal documentation is over, the cheque of the loan balance ‘ll be issued directly into the name of the bank in question. After the amount is credited to your existing bank, within next 20-30 days, you ‘ll get the original documents submitted by you, from the existing bank. Now you w’d have to submit these documents to SBI. In some states like Gujarat, Maharashtra, Karnataka, SBI may ask to go for registration of mortgage deed on your property in the office where your property was originally registered in your name.

Comparison of SBI Max Gain to Normal Home loan

 SBI Max Gain Normal Home Loan Liquidity of your part prepayments is there No Liquidity. Money is gone for ever, once you prepay. A bit complex to understand Easy to understand For people who can generate regular surplus amounts For people who can only manage regular EMIs

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