Latest news with #AvinashPolepally
News18
2 days ago
- Business
- News18
RBI's 50 bps Repo Rate Cut: Impact On Your Home Loan And Tax Benefits Explained
Last Updated: Lower home loan interest rates also have a direct impact on tax benefits for homebuyers; Here's how In a significant move aimed at boosting economic growth and supporting borrowers, the Reserve Bank of India (RBI) has cut the repo rate by 50 basis points (bps). This brings the repo rate down to 5.75%, the lowest in several years, signaling an accommodative stance by the central bank. What is the Repo Rate? The repo rate is the interest rate at which the RBI lends money to commercial banks in India. It is a critical tool of monetary policy that influences borrowing costs in the economy. When the repo rate is reduced, banks typically lower their lending rates, making loans cheaper for borrowers. Impact on Home Loan Interest Rates With a 50 bps reduction in the repo rate, home loan interest rates are likely to come down as well. Many banks have already announced cuts in their external benchmark-linked lending rates. This means that both new borrowers and existing borrowers with floating rate home loans can expect lower EMIs (Equated Monthly Installments). For example, a home loan of Rs 50 lakh for 20 years at an interest rate of 9% would see a monthly EMI reduction of roughly Rs 1,500 if the rate drops to 8.5%. Link to Home Loan Tax Benefits Lower home loan interest rates also have a direct impact on tax benefits for homebuyers. Under the Income Tax Act, home loan borrowers can claim deductions on both principal and interest payments: A reduction in interest rates means the total interest paid over the year also reduces. Consequently, the amount that can be claimed as a deduction under Section 24(b) might come down slightly. Avinash Polepally, Business Head, ClearTax, explained that 'a 0.5% repo rate cut on a Rs 1 crore, 20-year home loan lowers EMIs by Rs 3,138 monthly, saving Rs 7.53 lakh in interest over the loan term, where interest is reduced to 8.00% from 8.50%. These tax benefits significantly reduce the net cost of borrowing. Floating-rate loans excel in a falling rate environment, offering substantial savings. Banks may adjust either EMI or tenure post-rate cut, impacting overall benefits." Relief to Home Loan Borrowers The RBI's decision to cut the repo rate by 50 bps offers welcome relief to home loan borrowers. While the lower interest payments could slightly reduce the quantum of tax deductions available under Section 24(b), the overall savings in loan servicing costs far outweigh this effect. It's an opportune time for potential homebuyers to step in, and for existing borrowers to explore refinancing or part prepayment to further reduce their interest burden.
India Today
02-06-2025
- Business
- India Today
Rs 1 crore in 5 years: Check this guide for 40-year-olds earning Rs 2.5 lakh/month
Turning 40 often brings a fresh focus on future goals, especially when it comes to your children's education. For many parents, the big question is: Can I save Rs 1 crore in the next five years for my daughter's studies? If you're earning Rs 2.5 lakh a month, the goal may sound ambitious, but it's certainly achievable with the right planning, discipline, and smart investments. However, one needs to follow a well-planned, disciplined, approach and choose the right GROWTH SHOULD BE THE PRIORITYWith only five years to reach the Rs 1 crore mark, you'll need to focus on high-growth investments rather than playing it Polepally, Business Head at ClearTax, says, 'If a 40-year-old investor aims to build a Rs 1 crore corpus in just five years, they'll need to aggressively invest in high-growth assets. Investing Rs 1 lakh per month into a mix of equity mutual funds, especially flexi-cap, mid-cap, and thematic funds, can help target returns of around 16–18% per year, assuming consistent investing is maintained.'SAFER OPTIONS MAY NOT BE ENOUGH You might feel tempted to go for stable options like PPF, hybrid funds or endowment plans. But for a short-term goal like this, they may fall short.'Given the short investment horizon, safer options like PPF, endowment plans, or hybrid funds might not offer attractive returns and could lead to missed growth opportunities,' Polepally a better approach is to aim for higher returns while managing risk efficiently. It's also important to monitor risk indicators such as standard deviation, Sharpe ratio and downside capture to make informed decisions, he SHOULD YOU INVEST? A SAMPLE MONTHLY PLANadvertisementAvinash Polepally shared a simple example of how to divide your Rs 1 lakh monthly SIP smartly. Photo Credit: Avinash Polepally, Business Head, ClearTax Avinash Polepally recommends allocating Rs 35,000 to flexi-cap funds for broad equity exposure with an expected 18% return, likely yielding Rs 34,37,295. Rs 25,000 (25%) should go into mid-cap funds targeting a 20% CAGR, potentially growing to Rs 26,18,125. Next, Rs 10,000 (10%) in small-cap funds can target 27% returns, offering a projected value of Rs 12,72,735 in the next five years, while the same amount can be invested in thematic funds, with a CAGR of 26%, resulting in Rs 12,35,935 after five he said that for stability, Rs 10,000 (10%) in arbitrage or balanced advantage funds (7% CAGR) can grow to Rs 7,19,030 towards the end of five years. Finally, Rs 5,000 (5%) each in corporate bonds and gold ETFs add a safety cushion, both expected to deliver Rs 3,50,745 at the end of five other words, with a solid monthly income, saving Rs 1 crore in 5 years is absolutely doable. But it requires commitment, wise investment choices, and avoiding distractions. Start now, stay consistent, and your daughter's education fund will be ready right on time.
