Here is how you can manage multiple credit cards efficiently

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Fear of overspending falling into a debt trap may be keeping you from applying for an additional credit card. However, having multiple credit cards can be beneficial if you follow a disciplined approach towards credit card spends repayment.

Let us look at how efficiently you can manage make the most of multiple credit cards.

First, you must plan your credit card spends according to interest-free periods, i.e. the duration between the date of a credit card transaction the due date of repaying the bill. No interest is levied on credit card transactions, barring ATM cash withdrawals, during the interest-free period as long as you repay the entire bill amount within its due date.

“This period can range anywhere between 18 55 days, depending on the transaction date. If you have multiple credit cards, you can make the most of this interest-free period by distributing your big-ticket expenses across different cards, based on the residual interest-free period,” said Sahil Arora, senior director, Paisabazaar.com.

Second, spread your transactions based on reward points other benefits. Credit card issuers design their reward point programmes, cash backs other benefits based on target consumer segments.

If you spend a sizeable amount across multiple categories such as shopping, fuel travel, you can accrue higher benefits by spreading it across multiple cards based on their reward point structure other benefits.

Third, you should compare equated monthly instalment (EMI) options offers on various credit cards. Credit card issuers tend to offer no-cost EMIs on select products services.

“Merchants bear the interest costs of no-cost EMIs the cardholders are required to repay the purchase cost in EMIs. However, the GST levied on the interest cost component of the EMI has to be borne by the cardholder. Some credit card issuers offer additional discounts to cardholders upon choosing the no-cost EMI option,” said Arora.

Fourth, redeem accumulated reward points before expiry. The accumulated reward points close to their expiry dates should be used for purchasing vouchers, merchandise, etc., from the partners listed in the reward catalogues. “You can also use the accumulated reward points to pay off your outstanding credit card dues in case your card issuers allow you to do so,” said Arora.

Fifth, you must keep track of credit card due dates by setting reminders. Various apps wallets offering credit card bill repayment facilities also extend bill repayment reminders to their users.

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Reits now within easy reach, but learn more before you take the plunge

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With the minimum lot size reduced, should you consider investing in Reits? Reits are a good way of taking exposure to real estate, but it is important that you understhow they work before you invest in them.

Let’s understwhat the new change would mean for you.

The change: Reits are products like mutual funds through which investors can own income-generating properties, such as commercial buildings office spaces, which they otherwise can’t afford to invest in. Just like mutual funds, if you invest in the initial public offering (IPO) of a Reit, you will be allotted units. Before the change, the minimum lot size of a Reit was 200 units. It meant you needed a minimum investment of 50,000-60,000 to purchase a lot, if, say, the price of a Reit was about 300 per unit. However, now—although there is limited clarity on the minimum investment required as finalized guidelines are awaited—experts say the minimum investment requirement is likely to apply for buying units in the IPO, but one will be able to buy sell a single unit of Reit on stock exchanges just like a share.

“We understthat the minimum application amount of 15,000 for Reit units is in the case of an IPO. But since the trading lot has been reduced to one unit, investors will be able to buy sell a single unit of a Reit in the secondary market,” said Michael Holland, chief executive, Embassy Reit.

The new regulation will help increase the investor base improve the trading volume of Reits.

“The change facilitates access to Reits by a much broader investor base. We started with 4,000 investors, today we have around 12,000 investors. The three-month average daily trading value (ADTV) of Embassy Reit is about $4.4 million (about 33 crore), while that of one of the big listed real estate developers is around $35 million. The developer has a higher trading volume in part because of the single share trading lot size, which in turn leads to a higher number of shareholders more liquidity. It’s a virtuous circle,” said Holland.

Higher trading volume means better liquidity, which, in turn, means investors can enter exit easily. “The reduction in lot size will benefit investors the entire Reit industry. It is a welcome move shows the increased trust placed on industry participants. The previous limit of 50,000 was high for small investors. The decrease in minimum size will bring these investors to the market lead to increased retail participation, improved liquidity efficient price discovery,” said Amit Bhagat, chief executive officer managing director, ASK Property Investment Advisors.

Also, reducing the lot size to one unit brings Reits at par with equity.

“With this, it also opens access to various indices like any other stock, which would further enhance liquidity,” added Holland.

If a stock is part of an index, it helps in further improving the liquidity as the trading volume goes up.

Investing in Reits: Reits are a good product for someone looking for exposure in commercial real estate is willing to remain invested for long. By investing in Reits, the investor can get some predictable returns in terms of dividend also benefit from the appreciation of share price.

Sebi regulations require Reits to invest 80% of their assets in developed income-generating assets. Currently, Reits are allowed to invest only in commercial real estate office spaces. They need to distribute 90% of the rental income as dividends. Reits also receive interest income from special purpose vehicles (SPVs) through which they hold properties. They lend money to SPVs distribute the interest income among unitholders.

The returns from Reits can increase with the rise in rents leasing of vacant space, the addition of new properties to the portfolio through new development or leasing of under-construction projects, among other things.

The earnings of a Reit may be impacted by a slowdown in new leasing renewal of leasing contracts. Oversupply of commercial space in a location can affect the rate at which the rent rises. There are concerns about the ongoing pandemic impacting the demfor commercial real estate, but experts feel the impact will be in the short term; in the long run, Reits could do better.

“Investors should look at Reits for long-term stable income with potential for capital gains. They should invest a percentage of their income in the segment based on their risk appetite current exposure to the real estate sector,” said Bhagat.

Reits should be used as an asset that can help in delivering better than fixed income return over the long term.

However, rather than concentrating on one Reit, it will be better if an investor spreads his/her investment in the segment over two-three Reits.

Currently, there are three Reits listed in India.

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Tax implications for gift from father’s HUF to son’s HUF

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My HUF consist of me, my wife, one unmarried daughter a son. I wish to gift 15 Lakhs to my son’s HUF with consent to all the members. My son’s HUF consists of himself, his wife two minor daughters. Will this gift be treated as income for my son’s HUF? Will the income from such gift be clubbed with the income of my HUF?

Answer: As per Section 56 of the Income Tax Act the gifts received are not taxable in the hands of the recipient as long as the aggregate value of all the gifts received by a person during the year does not exceed fifty thousrupees. Once the aggregate amount crosses the threshold limit of fifty thousrupees, whole of the value of all the gifts received during the year become taxable in the hands of the recipient.

Gifts received from specified relatives are not treated as income. Members of an HUF are treated as relatives of the HUF for this purpose. So the gifts received by an HUF from any of its members is not treated as income of the HUF. Your HUF can not be treated as member of your son’s HUF. So the full value of the gift given from your HUF will be treated as income of your son’s HUF as the aggregate value of the gifts received by your son’s HUF exceeds the threshold of fifty thousrupees. The clubbing provisions apply when the gift is received by an HUF from its members as explained your HUF can not be treated as member of your son’s HUF, the clubbing provisions will not apply any income earned on this gift shall be taxed in the hands of your son’s HUF.

Balwant Jain is a tax investment expert can be reached at [email protected]

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I have 3 house properties. How to calculate tax on income from them

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Question: I have 3 house properties. One house is self-occupied; 2nd one was let out @ 24000 per month for 4 months. The third one is occupied by my parents. I have taken a housing loan for the 3rd house am paying EMI. Interest on home loan is Rs. 2,40,000 per annum (approx.) How do I compute my income from house property? Can I claim home loan interest of one house against another house’s Income?

Answer: As per the income tax laws a person can have maximum of two self-owned houses as self-occupied. In case the tax payer has more than two self-owned houses as self-occupied, he has to select any two of the house as self-occupied treat the other house/s as deemed to have been let out. Any house occupied by relatives on which no rent is received can be treated as self-occupied so you can claim the first third house as self-occupied.

For a house property which is let out either during the year or even in the past, you get vacancy allowance for the period for which the property could not be let out. So in respect of the second house you need to offer the rent for four months only for which it was actually let out.

In respect of all the properties treated as self-occupied, you are allowed to claim interest for money borrowed for such house only upto Rs. 2 lakhs in a year. So you can claim interest only upto Rs. 2 lakhs on home loan for the third house the excess of Rs. 40,000/- will have to be ignored. Had the third house been let out, you would have been able to claim full interest against the rental income of this house. In case the loss under the house property head for all the properties taken together exceeds two lakhs rupees in a year, you are allowed to set off only two lakhs of loss against other income during the year the loss not so set off is allowed to be carried forward for eight years for being set off against house property income.

Strictly speaking you cannot claim interest paid in respect of one house against rental income of other house but you can set off income of one house property against loss of another property.

Balwant Jain is a tax investment expert can be reached on [email protected]

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Bought lfor ₹5 lakh sold at ₹59 lakh. How to save income tax

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Question: I had purchased a plot of lin January 2004 for Rs. 5 lakh sold it in March 2021 for 59 lakh. How much tax will I have to pay or what can I do for saving the tax. (Name withheld on request)

Answer: Since the plot was held by you for a period more than 24 months, the gain on sale of this shall be treated as long term capital gain. The long term capital gain shall be calculated by deducting the indexed cost of purchase of the plot from the sale price. The cost inflation index for 2003-2004 was 109 whereas for the year 2020-21 it was 301. Based on the respective cost inflation index of purchase sale, the indexed cost for your plot comes to Rs. 13.81 lakh. Therefore, the indexed long term capital gains shall be Rs.45.19 lakh. You have to pay tax at flat rate of 20% cess of 4% on such tax if you do not wish to avail any avenue for exemption of long term capital gains.

In order to save tax on long term capital gains on sale of this plot you have the following two options.

First option is to invest the sale consideration to purchase a house within two year or get a house constructed within three years from the date of sale of the plot as per the provisions of Section 54 F of the Income Tax Act. In case the full sale consideration is not utilized for acquisition of a residential house before the due date of filing of your income tax return, which as extended is 30th September 2021, you need to deposit the unutilized amount in an account under Capital Gain Account Scheme with a bank. This money should be used within the original time of two years or three years for purpose of purchase or construction of the house. In case you fail to do so the same will become taxable in your hafter expiry of the period.

The second option is to invest the indexed long term capital gains of Rs. 45.19 lakh in capital gains bonds of specified financial institutions within a period of six months from the date of sale of the plot under section 54EC of the income tax Act. Please note that you cannot invest more than 50 lakhs under Section 54 EC in one financial year. The bonds have a duration of three years presently carry annual interest rate of 5%.

Please note that in case you do not invest the full sale consideration for acquiring the house or invest full indexed capital gains in the bonds, you will get exemption only proportionately.

Balwant Jain is a tax investment expert can be reached at [email protected]

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