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Ramalingam Kalirajan  |4803 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 13, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Ayushman Question by Ayushman on Jun 12, 2024Hindi

Sir I am 36 now and working in PSB . My monthly Gross is around Rs 1.40 lakhs . Perk value is around Rs 4.00 lakhs annualy. Apart from monthly deduction like home loan ,nps,pf,a substantial part,approx about Rs 35k is being deducted as income tax . My 80c is already full. Car loan of 15 lakhs ,housing loan outstanding of Rs 36 lakhs repayble till 70 years is present. My first questions is how to reduce the income tax amount. My 80C investments is more than Rs 2.5 lakhs while loss from housing return is also being claimed by me Second is I have a flat that i have acquired through loan at Raipur. I have also got a G plus 1 storey building built by my father avquired 6amily settlements. The constructiion about 30 years old but property is at prime location at raipu.My wife want to settle at bhubaneswar where average price for 3 bhk is around rs 1.5 cr but will fetch good rental values. However I would like to demolish the house at Raipur and build a one with modern outlook which will cost around Rs 80 lakhs since land is in my possession. Which will be better option

Ans: Investing wisely is crucial to ensuring a secure financial future. I understand you have several financial commitments and are looking for ways to optimize your investments and reduce your income tax. Let's address your concerns comprehensively.

Reducing Income Tax
Firstly, you mentioned that you are already maximizing your 80C investments and claiming housing loan interest. Here are some additional strategies to reduce your taxable income:

Utilize Section 80D: Under Section 80D, you can claim deductions for medical insurance premiums for yourself, your family, and your parents. The deduction is Rs 25,000 for yourself and your family and an additional Rs 25,000 (Rs 50,000 if parents are senior citizens) for your parents' insurance.

Claim House Rent Allowance (HRA): If you are paying rent and do not live in your own house, you can claim HRA exemptions under Section 10(13A). The exemption amount depends on your salary, rent paid, and city of residence.

Invest in National Pension System (NPS): Contributions to NPS under Section 80CCD(1B) provide an additional deduction of Rs 50,000 over and above the 80C limit of Rs 1.5 lakhs. This can help you save tax and build a retirement corpus.

Interest on Education Loan (Section 80E): If you have taken an education loan for yourself, your spouse, children, or a student for whom you are a legal guardian, you can claim a deduction on the interest paid on such loans.

Donations (Section 80G): Donations to specified charitable institutions qualify for deductions under Section 80G. Ensure the charity is eligible for deductions.

Section 24(b) - Interest on Housing Loan: Beyond your primary residence, if you have a loan on a second house, you can claim deductions for the interest paid without a cap under certain conditions.

Investment Options
Now, let’s discuss where to invest your money for good returns without a lock-in period:

Systematic Investment Plans (SIPs) in Mutual Funds: SIPs are ideal for disciplined investing. They allow you to invest a fixed amount monthly in mutual funds. Opt for equity mutual funds for potentially higher returns over five years. Diversify your portfolio by including large-cap, mid-cap, and balanced funds.

Debt Mutual Funds: For conservative investments, consider debt mutual funds. These invest in fixed-income securities and offer relatively stable returns. They are less volatile than equity funds and provide liquidity.

Liquid Funds: These are a type of debt mutual fund that invests in short-term instruments. Liquid funds provide high liquidity and better returns compared to savings accounts. They are suitable for short-term investments and emergencies.

Ultra-Short Duration Funds: Similar to liquid funds, but with slightly longer investment horizons. They offer better returns and maintain liquidity.

Your Real Estate Decision
You have two main options regarding your properties in Raipur and Bhubaneswar:

Option 1: Demolish and Rebuild in Raipur: Building a new house on your existing land can modernize the property and potentially increase its value. However, consider the cost (Rs 80 lakhs) and whether it will yield a good return on investment, especially if you plan to sell or rent it out.

Option 2: Settle in Bhubaneswar: Bhubaneswar offers a good rental yield and is your wife's preferred location. Purchasing a 3 BHK for Rs 1.5 crores can be a good investment, especially if the property appreciates and offers a steady rental income.

Analysis and Recommendation: Assess the potential returns, convenience, and personal preferences. Bhubaneswar seems more lucrative if it offers good rental income and aligns with your lifestyle. However, rebuilding in Raipur could be worthwhile if the property's location is prime and the new construction significantly increases its value.

Managing Loans
You currently have a car loan of Rs 15 lakhs and a housing loan of Rs 36 lakhs. Here are some strategies to manage and reduce your loan burden:

Prepay High-Interest Loans: Focus on repaying high-interest loans like the car loan first. Use any surplus funds to reduce this debt faster.

Balance Transfer for Home Loan: Consider transferring your home loan to another bank offering lower interest rates. This can reduce your EMI burden and total interest outgo.

Part-Payment of Home Loan: Use bonuses or other windfalls to make part-payments on your home loan. Reducing the principal amount can significantly lower your interest burden over time.

Creating an Emergency Fund
Ensure you have an emergency fund that covers at least 6 months of your expenses. This fund should be easily accessible and kept in a high-liquidity account like a savings account or liquid fund. It provides financial security in case of unforeseen circumstances like medical emergencies or job loss.

Financial Planning for the Future
Retirement Planning: With your home loan payable till the age of 70, it's essential to have a solid retirement plan. Continue contributing to NPS for a pension corpus. Also, consider other retirement-focused mutual funds or pension plans that offer steady returns.

Children’s Education: If you have children, start planning for their education expenses early. Invest in child education plans or equity mutual funds with a horizon aligned with your child’s age.

Regular Monitoring and Rebalancing: Regularly review your investment portfolio to ensure it aligns with your goals and risk tolerance. Rebalance your portfolio as needed to maintain the desired asset allocation.

Enhancing Financial Literacy
Improving your financial knowledge can empower you to make better decisions. Consider reading books on personal finance, attending workshops, or following credible financial blogs and news sources. Understanding basic financial concepts will help you navigate investments and tax planning more effectively.

Final Insights
Balancing your income, expenses, and investments is key to achieving financial stability. By strategically investing Rs 36,000 monthly, utilizing tax-saving options, managing your loans efficiently, and planning for the future, you can secure a robust financial foundation. Regularly monitor and adjust your plans to stay on track with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Ramalingam Kalirajan  |4803 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 18, 2024Hindi
Hi , I am 44 yrs old and having working wife and two son of 17 yrs & 5 yrs... elder son is down syndrom.. joint monthly take home is 2 lacs.. having 85 lacs of mutual fund.. 18 lacs in PPF, 32 lacs in EPF, & around 25 lacs in others like FD, saving, shares etc.. monthly saving around 1.2 lacs including 75K SIP, 18K PPF, 25K EPF etc... Having Own home at my native place.... Want to know that should I go for new Flat purchase at location where I am residing in rented house of monthly 14K excluding electricity or continue my investment in place of Home loan... I hv opted new tax slab and my wife is in old tax... my target to have 15 CR at the age of 60
Ans: Assessing Your Current Financial Situation
Income and Savings
Your combined monthly take-home income is Rs. 2 lakhs. Your current savings include:

Mutual Funds: Rs. 85 lakhs
Public Provident Fund (PPF): Rs. 18 lakhs
Employees’ Provident Fund (EPF): Rs. 32 lakhs
Other Investments (FD, Savings, Shares): Rs. 25 lakhs
Your monthly savings distribution is as follows:

SIP in Mutual Funds: Rs. 75,000
PPF: Rs. 18,000
EPF: Rs. 25,000
You live in a rented house with a rent of Rs. 14,000 per month.

Evaluating the Decision to Buy a New Flat
Current Housing Situation
Living in a rented house at Rs. 14,000 per month is relatively affordable, especially given your high monthly income. Renting provides flexibility and lower maintenance costs compared to owning.

Financial Impact of Buying a New Flat
Purchasing a new flat would involve a significant financial commitment, including a home loan, maintenance costs, property taxes, and other associated expenses. This would reduce your investable surplus and potentially impact your ability to meet your financial goals.

Comparative Analysis: Rent vs. Buy
Renting: Offers flexibility, lower upfront costs, and avoids long-term debt.
Buying: Provides stability and potential appreciation in property value but requires a large financial commitment and ongoing expenses.
Long-term Financial Goals
Target: Rs. 15 Crores by Age 60
To achieve your target of Rs. 15 crores by age 60, you need to focus on maximizing your investments' growth while maintaining a balanced risk profile.

Current Investments and Growth Potential
Mutual Funds: Your Rs. 85 lakhs in mutual funds can grow substantially with continued SIPs and market performance.
PPF and EPF: These provide stable, long-term growth with tax benefits, contributing to your retirement corpus.
Other Investments: FDs, savings, and shares add diversification but should be reviewed for optimal growth potential.
Investment Strategy
Enhancing SIP Contributions
Continuing and potentially increasing your SIP contributions will leverage the power of compounding. Focus on a mix of equity and debt funds to balance growth and risk.

Recommendation: Consider increasing your SIP by a percentage each year to keep pace with inflation and maximize returns.
Diversification and Rebalancing
Ensure your portfolio is diversified across various asset classes to minimize risk and optimize returns. Periodically review and rebalance your portfolio to stay aligned with your financial goals.

Recommendation: Include large-cap, mid-cap, and multi-cap funds for equity exposure. Balance with debt funds for stability.
Utilising Tax-efficient Investments
Maximize your contributions to tax-efficient instruments like PPF and EPF. These not only provide stable returns but also offer significant tax benefits.

Recommendation: Continue maximizing your PPF contributions and ensure your EPF contributions are optimized.
Emergency Fund Management
Maintaining a robust emergency fund is crucial. Your current Rs. 25 lakhs in FD and savings can be used to cover unexpected expenses.

Recommendation: Keep at least 6-12 months of living expenses in easily accessible liquid assets.
Estate Planning and Insurance
Life and Health Insurance
Ensure adequate life and health insurance coverage for your family, especially considering your elder son's needs. This will protect your family's financial stability in case of unforeseen events.

Recommendation: Opt for a comprehensive health insurance plan and term insurance for sufficient coverage.
Estate Planning
Create a comprehensive estate plan, including a will, to ensure your assets are distributed according to your wishes and your family is taken care of.

Recommendation: Consult a legal expert to draft a will and set up any necessary trusts.
Education and Future Planning for Children
Special Needs Planning
Given your elder son's Down syndrome, consider creating a financial plan that ensures his long-term care and support.

Recommendation: Look into setting up a special needs trust and explore government schemes and benefits available for children with disabilities.
Education Fund for Younger Son
Start a dedicated investment plan for your younger son's education. This can include child-specific mutual funds or education-focused investment plans.

Recommendation: Allocate a portion of your monthly savings towards an education fund.
Final Insights
Given your strong financial position and disciplined saving habits, you are well on your way to achieving your long-term goals. However, buying a new flat at this stage might not be the best financial decision if it significantly impacts your investment capacity.

Focusing on growing your investment portfolio and maintaining a balanced, diversified approach will help you accumulate the desired Rs. 15 crores by age 60. Ensuring adequate insurance coverage and planning for your elder son's special needs will further secure your family's future.

Stay disciplined with your investments, periodically review your portfolio, and make adjustments as needed to stay on track. Consulting with a Certified Financial Planner can provide personalized advice and help optimize your financial strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,


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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.


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