I AM 40 RIGHT NOW, SUPPOSE I GET 1 CRORE (GIFT FROM DAD) FROM THE SALE OF PROPERTY. HOW CAN I SAVE MAXIMUM ON TAX ON 1 CRORE IF I PUT IT IN FD. SUPPOSE I HAVE 5 BANK ACCOUNTS ( 3 IN MY NAME AND 2 IN WIFES NAME) AND DEPOSIT EQUALLY. HOW MUCH TAX I HAVE TO PAY ON THE INTERST EARNED. SUPPOSE IF I DONT WORK CAN I CLAIM IN IT RETURNS IF I DONT HAVE ANY OTHER SOURCE OF INCOME OTHER THAN FD INTEREST...?

Ans: Amount given to spouse is not an income in the hands of spouse (wife). However, income received from said amount will be clubbed in the hands of husband (gift giver) as per clubbing provisions of income tax.

Ans: Given your scenario, let's address each aspect step by step:

Maximizing Tax Efficiency on FD Interest:

If you deposit 1 crore equally into 5 bank accounts, the interest earned on each account would be considered separately for tax calculation.
Under the current tax laws in India, interest income from FDs is taxable as per your applicable income tax slab.
For the financial year 2023-24, if you are below 60 years old, the tax slabs are:
Up to 2.5 lakhs: No tax
2.5 - 5 lakhs: 5%
5 - 10 lakhs: 20%
Above 10 lakhs: 30%
Considering your personal expenses of 20,000 per month, or 2.4 lakhs per year, your total income from FD interest could be around 10 lakhs per year (assuming an interest rate of 6-7%).
With no other sources of income, your tax liability on the FD interest would depend on the applicable tax slab.
Claiming Tax Deductions without Working:

Even if you don't have any active income from employment, you can still claim certain tax deductions under various sections of the Income Tax Act, such as:
Section 80C for investments in instruments like PPF, EPF, life insurance premiums, etc.
Section 80D for health insurance premiums.
Section 80TTA for interest earned on savings accounts.
However, deductions under these sections may not fully offset the tax liability on FD interest income.
Retirement Planning:

With 1 crore invested in FDs and assuming a conservative interest rate, you may earn around 6-7 lakhs annually.
If your annual expenses are around 2.4 lakhs, you'll have a surplus for investments in mutual funds and other avenues.
Considering your life expectancy till 75-80 years, it's essential to ensure your investments generate sufficient returns to maintain your lifestyle and cover potential medical expenses.
Diversifying your investments across equity mutual funds, debt funds, and other avenues can help mitigate risks and achieve long-term growth.
In conclusion, while FDs offer stability and guaranteed returns, it's crucial to optimize tax efficiency and explore other investment avenues to sustain your retirement lifestyle and achieve long-term financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Evaluating Your Financial Situation

You are 40 years old and received Rs 1 crore from the sale of property. You aim to save on taxes and ensure financial stability. Your current personal expense is Rs 20,000 per month, and you have a child aged 3.5 years. Let’s explore the best ways to manage your funds and secure your future.

Tax Savings on Rs 1 Crore

Fixed Deposit Taxation: Interest from FDs is taxable. Spreading the amount across multiple accounts in your and your wife's names will not reduce the tax liability.

Income Tax: Interest is added to your total income and taxed as per your slab. For example, if you earn Rs 7 lakh annually from FD interest, it falls into the 30% tax bracket.

Suggestions:

Invest in tax-saving instruments like PPF or NPS.
Utilize the Rs 1.5 lakh deduction under Section 80C.
Consider investing in tax-free bonds.
Claiming Interest Income

Non-Working Scenario: If you don’t work, FD interest remains taxable. You can file IT returns and claim deductions under Section 80TTA for interest up to Rs 10,000.

Tax Liabilities: Your wife can file returns separately if she has no other income, reducing the overall tax burden.

Sustaining Retirement

Monthly Expenses: Your monthly expense is Rs 20,000, totaling Rs 2.4 lakhs annually. With careful planning, Rs 1 crore can cover your expenses for many years.
Investment Options

Mutual Funds: Diversify your investment. Consider equity and debt funds for balanced growth. This can provide higher returns than FDs.

Systematic Withdrawal Plan (SWP): An SWP from mutual funds can offer regular income. It helps in managing your cash flow efficiently.

Certified Financial Planner (CFP) Advice

Child’s Education: Plan for your child’s education expenses. Consider investing in child education plans or mutual funds for long-term growth.

Emergency Fund: Keep an emergency fund equivalent to 6-12 months of expenses. This ensures financial stability in unforeseen situations.

Life Insurance: Ensure adequate life insurance coverage. It provides financial security for your family in case of any unfortunate events.

Final Insights

Tax Planning: Utilize all available tax-saving instruments. Spread investments across multiple options to minimize tax liability.

Diversified Portfolio: Invest in a mix of FDs, mutual funds, and tax-saving schemes. This balances risk and returns, ensuring long-term financial health.

Regular Review: Regularly review your portfolio. Adjust investments based on performance and changing financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in