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EMI - Equated Monthly Installments
  • By: admin
  • Date: 12 Feb 2020
  • Tax
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Equated Monthly Installment, commonly known as EMI, is a fixed amount payable by the borrower to a lender at a specific date of each month. EMI's are used to pay both the principal and the interest amount every month over the number of years specified.

When the financial lending institutions lend a loan, the repayment is made in monthly instalments for specified years. The EMI is decided by calculating the principal amount of loan, and tenure along with the interest rate. The EMI amount should be paid on a fixed date to the bank by cheque or by any electronic forms. The principal component is always less than the interest component in the initial period of repayment, whereas the rate of interest decreases gradually.

The advantages and disadvantages of the EMI scheme are as follows:

Benefits of EMI:

  • Freedom to Buy Expensive things: The consumers can buy expensive utilities like jewellery, a vehicle, house, gifts etc; on EMI easily.  As they get a chance to divide the amount in monthly instalments and pay quickly, they prefer to make purchases and enjoy the benefits.
  • Easy on Wallets: The borrowers can pay the loans in monthly instalments by opting the scheme of EMI.  The amount of EMI is determined based on the principal amount of loan, tenure, interest rate and the ability of repayment. It is easier to pay off the said amount in small chunks every month. Thus they don’t have to filch their monthly expenses to afford the expensive utilities.
  • EMI Options by Banks: The banks are offering flexible EMI options to the borrowers as the EMIs are adjusted as per the needs of the borrower. They can choose the amount of instalment and tenure as per their convenience.
  • Absence of Agent: The EMI is directly paid to the lender, and there are no hassles of an agent or a middleman.

Disadvantages:

  • Longer Debts: The EMIs are paid by the borrowers until they are done with the principal amount along with the applicable interest rate. In terms of home loans or vehicle loan, the period to pay the EMI goes as long as 20 to 30 years. They spend nearly half of the life in repaying the instalments of the loan.
  • Early Repayment: If a borrower craves to pay the loan amount by using his extra savings, banks do not offer an easy option for repayment. The banks and NBFCs charge an early repayment fee to such borrowers. It is difficult for the borrowers to pay off the loan earlier even if they are capable of doing so.
  • Charges for Skipping EMIs: If a borrower craves to pay the EMI on or by the specified date, banks and NBFCs charge the borrower with late fees. They have strict terms when it comes to repayment through EMIs. Skipping the EMIs may lead the borrower to face legal action or their collateral can be taken away by the bank.
  • Extra Costs: The borrower is liable to pay an extra amount in the form of interest rate as compared to the actual amount borrowed. As the principal amount and interest rate are combined to form an EMI, he cannot regret paying the extra amount.
  • Additional Costs: If the borrower makes the payment at once while purchasing the commodity, then there is no need to pay any additional cost.
  • Prepayment Penalty: Prepayment of EMI is not allowed in many institutions, and if done, the borrower has to pay penalties for prepayment.

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Amnesty Scheme

By: admin Tax 17 Apr 2019

Tax amnesty is an opportunity to pay a fixed amount, in exchange for the remission of liability of tax (including interest and penalties) relating to a previous tax period and without fear of criminal prosecution for limited. 

Amnesty Scheme is introduced in the fiscal year to help treasury of State raising revenue from the tax to add beneficiaries in tax base who have failed to declare their assets previously. Under this scheme, the recipient has to pay some tax on the total assets which are proclaimed in Amnesty scheme. This scheme was introduced when the state believes that citizens are concealing their wealth from their respective authority.

Tax revenue raised through these amnesty schemes is used for the betterment of State. Every individual and company has to report annually about their business activities in a tax return and should file the same to Revenue and Tax authorities of State. Those who remain glassy in declaring their assets and liabilities to the bodies of tax do not get inquiries or investigations.

Tax Amnesty scheme is beneficial to those who are hiding or not declaring their assets transparently for years; they can make their assets legitimate by informing them whether they exist within or outside Country. When such schemes were introduced State Revenue, and the Tax department gave time to declare their wealth without any penalty. Once the time elapses there will be penalty addition to original Amnesty tax rate.

As we know in the city like Mumbai and its Suburbs, the prices of the residential and commercial premises are too high. Also, the government generates revenue from the properties sold in the form of Stamp Duty and Registration charges. Hundred of the transaction of residential premises to purchase/sold is done every year, in that case, most of the purchasers and sellers obediently pay the registration and stamp duty. But it has observed that few hundreds of them have successfully avoided the stamp duty and other charges to save few rupees.

In 2008, the Maharashtra Government had implemented a successful Registration charges and stamp duty Amnesty  Scheme known as "ABHAY YOJANA 2008" where thousands of flat-owners benefited by regularising their flat-ownership agreements and the Government earned revenue from it. The Government closed the said scheme, but there exist more thousand of old and new evaders to save the said duty and charges.

In the year 2019, the Maharashtra Government announced the stamp duty amnesty scheme, where the property purchasers have not paid stamp duty on purchase agreements could regularise the sale by paying tax with a nominal penalty.

The flat owners who did not pay stamp duty on their home – purchase agreements will get a chance to regularise their purchase by paying stamp duty within the specified time under this scheme. Property conveyance cannot be executed unless stamp duty is paid on flat-purchase agreements, which leads to problems later, especially when owners wish to redevelop their buildings. Besides that, getting bank loans against such properties also becomes difficult.

The Amnesty Scheme would help in increasing the goodwill and popularity of the respective government and would also increase the revenue by thousands of crores rupees in return.

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