Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |8132 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 27, 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
Asked by Anonymous - Jan 31, 2024Hindi
Listen
Money

Sir i am 40 years old, wanted to retire early by 45 or 47. 1-daughter age 7. Invested 27 lac in MF, 30 lac in sbi life privilege plan ulip linked, 45 lac in EPF, 32 lac in PPF, 3 plots total worth 45 lac. Let me know how much should i need to retire in another 5 years. My monthly expenses is around 60 to 75k

Ans: To determine how much you need to retire in another 5 years, we'll need to assess your current investments and estimate your future expenses. Here's a rough breakdown:

Current Investments:
Mutual Funds: 27 lac
SBI Life Privilege Plan ULIP: 30 lac
EPF: 45 lac
PPF: 32 lac
Plots: 45 lac
Future Expenses:
Monthly Expenses: 60,000 to 75,000 INR
Retirement Planning:
Estimate your annual expenses in retirement by multiplying your monthly expenses by 12. Let's assume it's 9 lakhs to 11.25 lakhs per year.
Multiply your annual expenses by the number of years you expect to live in retirement. Since you plan to retire at 45 or 47 and may live until 80 or beyond, let's assume you'll need retirement income for 35 to 40 years.
Factor in inflation to adjust for the increasing cost of living over time. A conservative estimate of inflation is 5% per year.
Given these assumptions, you can use a retirement calculator or consult with a financial advisor to determine the lump sum amount you'll need to retire comfortably. They can help you assess your current investments, estimate future expenses, account for inflation, and identify any gaps in your retirement plan. Adjustments may be needed based on your risk tolerance, investment returns, and other factors unique to your situation.
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.
Money

You may like to see similar questions and answers below

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8132 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 24, 2025

Listen
Sir, can a Karta or any other member of HUF transfer interest free loan to its HUF with an intention of repayment though the repayment schedule is not fixed ( like HUf may repay as and when funds are available) such transfer of funds by karta or any member will lead to clubbing in the hands of transferor ??If such transfer doesn't lead to clubbing then any documentations are required such as loan agreement or so and are they required to be notarized or informal written agreement will work ??
Ans: A Karta or any member of a Hindu Undivided Family (HUF) can provide an interest-free loan to the HUF.

The repayment can be flexible, depending on the availability of funds with the HUF.

There is no restriction under the Income Tax Act on such transactions if they are genuine.

The loan amount should be properly recorded in the books of the HUF.

There should be a clear distinction between a loan and a gift to avoid tax complications.

Clubbing of Income – Will It Apply?
If a member gives an interest-free loan, the clubbing provisions under Section 64 of the Income Tax Act do not apply.

The loan amount remains a liability in the hands of the HUF and does not generate taxable income for the lender.

Clubbing applies only if a gift is made to the HUF and income is generated from that gift.

If a Karta or member gives a gift instead of a loan, any income earned on that gift will be clubbed with the donor’s income.

If the loan is genuine and documented, there is no tax liability for the lender due to clubbing.

Documentation Requirements for Loan to HUF
Proper documentation is essential to prove the authenticity of the loan.

A loan agreement should be created, stating the principal amount, repayment flexibility, and interest (if any).

The agreement should mention that the repayment will be made as and when funds are available.

Notarization of the agreement is not mandatory but is advisable for legal clarity.

An informal written agreement may be sufficient, but a notarized or stamped document adds legal strength.

The transaction should be reflected in the bank statements of both the lender and the HUF.

The loan should be recorded in the HUF’s books under liabilities.

Taxation of Interest-Free Loan to HUF
Since the loan is interest-free, there is no tax deduction for interest payments by the HUF.

The lender does not earn any taxable income from the loan, so no tax liability arises.

If the HUF invests the loan amount and earns income, that income is taxable in the hands of the HUF.

The income earned by the HUF will not be clubbed with the lender's income, as long as the transaction is a loan and not a gift.

Repayment Considerations
The HUF can repay the loan in installments or lump sum, depending on financial availability.

The repayment should be properly recorded in the books of accounts.

Partial repayments should be documented to track the outstanding balance.

If the HUF is dissolved in the future, the loan should be settled before asset distribution.

Alternative Approaches to Fund the HUF
Instead of a loan, members can contribute capital to the HUF, but this will change the tax implications.

Gifts from members to HUF can be made, but the income from such gifts may be clubbed with the donor’s income.

If a loan is given with nominal interest, the lender can earn interest income, which will be taxed as per their slab rate.

Final Insights
A Karta or member can provide an interest-free loan to the HUF without tax complications.

Clubbing of income does not apply if the transaction is structured as a loan.

Proper documentation is necessary to ensure tax compliance and legal validity.

A written agreement is advisable, and notarization can provide additional legal protection.

The HUF should maintain clear accounting records to track the loan and its repayment.

Consulting a tax professional can help structure the transaction in the most tax-efficient manner.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8132 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 24, 2025

Money
Hello sir, i hope you are doing good. I am planning to invest a lumpsum amount of 30 lakhs in the following funds. 1. Parag parikh flexi cap fund- 15 lakhs. 2. Kotak Nifty midcap 150 momentum 50 fund - 9 lakhs 3. Mirae assets nifty smallcap 250 momentum quality 100 fund - 6 lakhs. My investment tenure of these funds are for 20 years. Please suggest me whether these funds are right pick or do i need to make any changes. Thank you.
Ans: You have chosen a lumpsum investment of Rs. 30 lakhs in three different funds.

Your investment horizon is 20 years, which allows compounding benefits.

It is important to assess the risk, diversification, and return potential of these funds.

Your selection includes a flexi-cap fund, a midcap momentum fund, and a smallcap momentum-quality fund.

Each of these funds has unique characteristics that need careful evaluation.

Flexi-Cap Fund Allocation – Strengths and Risks
A flexi-cap fund invests across market capitalisations.

It provides diversification across large, mid, and small companies.

The fund manager has the flexibility to shift allocations based on market conditions.

This flexibility can lead to better risk-adjusted returns in the long run.

Large-cap exposure ensures stability, while mid and small caps provide growth potential.

The allocation of Rs. 15 lakhs in this fund forms the core of your portfolio.

It acts as a balanced investment with exposure across various sectors.

However, performance depends on the fund manager’s ability to select winning stocks.

Actively managed flexi-cap funds have historically outperformed passive options.

If held for 20 years, this fund can provide wealth creation with lower volatility.

Midcap Momentum Fund – Evaluating Suitability
Midcap stocks have higher growth potential but also higher risk.

A momentum-based fund invests in stocks with strong recent performance.

The strategy works well in strong market cycles but can be volatile in downturns.

Midcap stocks require patience, as they experience fluctuations.

If markets correct sharply, momentum funds can fall quickly.

The allocation of Rs. 9 lakhs in this fund increases portfolio risk.

You need to monitor whether momentum-based investing is sustainable long term.

Momentum investing requires rebalancing to maintain high-performing stocks.

Over 20 years, midcaps can outperform large caps, but with higher volatility.

A mix of growth-oriented midcap and flexi-cap funds may reduce downside risk.

Smallcap Momentum-Quality Fund – Potential and Risks
Smallcap stocks have the highest return potential over long periods.

However, they are also the most volatile and prone to deep corrections.

A smallcap momentum-quality fund invests in strong-performing stocks.

Quality screening reduces the risk of poor fundamentals.

The allocation of Rs. 6 lakhs in this fund increases aggressive exposure.

Smallcap momentum funds perform well in bull markets.

In bear markets, smallcaps can decline sharply and take longer to recover.

This fund is suitable for long-term wealth creation but requires discipline.

You must stay invested despite periodic downturns.

A staggered investment approach (SIP or STP) can reduce volatility impact.

Portfolio Diversification Analysis
Your portfolio consists of flexi-cap, midcap, and smallcap funds.

There is no dedicated large-cap exposure, increasing risk.

Large caps provide stability during market corrections.

Momentum-based investing can work well, but timing is crucial.

Market cycles affect momentum strategies more than diversified funds.

Your portfolio is tilted towards mid and small caps, which increases risk.

A balanced portfolio should have more stability from large-cap exposure.

If you prefer high growth, your portfolio is well-structured.

If you want lower volatility, adding a large-cap or multi-cap fund can help.

Lumpsum Investment Strategy – Timing Considerations
Investing Rs. 30 lakhs in one go increases timing risk.

Market conditions at the time of investment impact returns.

If the market is at a peak, a lumpsum investment may face short-term declines.

A staggered approach like STP (Systematic Transfer Plan) reduces risk.

STP helps in averaging the purchase cost over a period.

If investing lumpsum, be prepared for short-term fluctuations.

Long-term holding is crucial to benefit from compounding.

Active vs Passive Fund Selection
You have selected momentum-based index funds for midcap and smallcap.

Index-based funds have lower fund manager intervention.

They track specific indices and follow a mechanical investment process.

Actively managed funds can outperform by identifying strong stocks early.

Passive funds do not adjust allocation based on market conditions.

Actively managed funds have higher flexibility to navigate different market cycles.

If you seek better risk-adjusted returns, consider actively managed midcap and smallcap funds.

Active fund managers can avoid overvalued stocks, unlike index-based funds.

Your flexi-cap fund is actively managed, balancing the portfolio.

Tax Implications of Your Investment
Equity funds attract long-term capital gains (LTCG) tax if held for over one year.

LTCG above Rs. 1.25 lakh is taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20% if sold within one year.

Holding for 20 years allows tax-efficient compounding.

Tax planning should consider partial withdrawals after the lock-in period.

Alternative Allocation Suggestions
If you prefer stability, add a large-cap or balanced advantage fund.

A multi-cap fund can provide better risk-adjusted returns.

Avoid overexposure to momentum-based investing for a long horizon.

Ensure your portfolio has exposure to defensive sectors like FMCG and IT.

Consider an actively managed midcap and smallcap fund for better flexibility.

Finally
Your portfolio is growth-oriented, focusing on flexi-cap, midcap, and smallcap funds.

The flexi-cap allocation provides diversification and flexibility.

Midcap and smallcap funds add aggressive growth potential.

Momentum-based investing works well in bullish phases but is volatile.

A staggered investment approach (STP) may reduce market timing risk.

If you want stability, adding a large-cap or multi-cap fund is advisable.

Actively managed funds may offer better risk-adjusted returns than index-based momentum funds.

Tax efficiency will be high if investments are held for 20 years.

A long-term commitment is required to handle market fluctuations.

Regular review of the portfolio ensures alignment with financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8132 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 24, 2025

Asked by Anonymous - Feb 21, 2025Hindi
Listen
Hello I am based in New Zealand and have current account with SBI NRE. I was pitched SBI smart privilege with most money invested in midcap fund with returns almost doubling in 5 years. I was thinking to invest 6 lakhs per year for next five years. However I am confused regarding transferring money once it matures, would I be liable for any taxation apart from capital gains tax in India? I have heard being New Zealand I would have to pay further tax on that income. So considering all is it worth it or not? Would appreciate your guidance.
Ans: The investment is a unit-linked insurance plan (ULIP) that allocates most of the money to midcap mutual funds.

The projected return is that the invested amount could double in five years.

You plan to invest Rs. 6L per year for five years, totaling Rs. 30L.

The plan is structured under your SBI NRE account, meaning the returns may be repatriable.

The key factors to evaluate include charges, expected returns, liquidity, taxation, and alternative options.

Charges and Cost Impact
ULIPs have multiple charges, including premium allocation, fund management, policy administration, and mortality charges.

Even if the fund generates high returns, these charges can significantly reduce your net returns.

Midcap mutual funds, when invested separately through a Certified Financial Planner (CFP), have lower costs than ULIPs.

Liquidity is limited, as ULIPs have a five-year lock-in period, restricting withdrawals.

If the expected returns are 15% CAGR, a direct investment in midcap mutual funds might offer better returns due to lower costs.

Taxation in India
As an NRI, capital gains from ULIPs may not be taxable in India if the annual premium does not exceed Rs. 2.5L.

If the premium exceeds Rs. 2.5L in a year, ULIP proceeds are subject to capital gains tax.

For traditional mutual funds, long-term capital gains (LTCG) above Rs. 1.25L are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

If this investment were in a mutual fund instead of a ULIP, the taxation rules above would apply.

Taxation in New Zealand
New Zealand taxes worldwide income, meaning you may have to pay additional tax on returns from this investment.

If the investment is classified under the Foreign Investment Fund (FIF) tax regime, taxation depends on the type of investment.

ULIPs may be classified as a life insurance product, which can have different tax treatments than mutual funds.

If you invest in mutual funds directly, taxation under New Zealand law will be applicable based on their classification.

You should consult a tax expert in New Zealand to determine the exact tax liability.

Repatriation of Funds
SBI NRE accounts allow full repatriation of both principal and returns.

If the investment is held under an NRO account, repatriation is restricted beyond Rs. 1 million per financial year.

If the funds are taxable in India, you may need to submit Form 15CA and 15CB for remittance.

The process of transferring the maturity proceeds should be planned based on repatriation rules.

Alternative Investment Options
Instead of ULIPs, direct investment in mutual funds through a CFP offers better flexibility and cost efficiency.

Actively managed midcap funds have historically delivered strong returns, but a diversified portfolio is better.

Investing through a Systematic Investment Plan (SIP) allows better risk management.

You can choose funds that align with your risk profile and liquidity needs.

Instead of investing Rs. 6L per year in ULIPs, investing in a mix of midcap, flexicap, and sectoral mutual funds may offer better long-term returns.

Final Assessment – Is It Worth It?
The investment has potential, but the structure and charges of ULIPs reduce its efficiency.

Taxation in both India and New Zealand must be considered, as it could lower net returns.

Mutual funds offer better flexibility, lower costs, and transparency.

Investing via a CFP ensures proper diversification and strategy.

Given these factors, reconsidering the investment strategy with mutual funds might be a more effective approach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Anu

Anu Krishna  |1568 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Mar 24, 2025

Asked by Anonymous - Mar 18, 2025Hindi
Listen
Relationship
Dear Madam, I am 42 years old and have accumulated over 15 years of experience across various roles, including operations, report writing, quality management, and business development. Before the onset of COVID-19, I worked in an office environment and had a job that required travel, which I thoroughly enjoyed as it allowed me to engage face-to-face with people and discover new places. Since the pandemic, I have transitioned to working from home, where I have been compensated well. This arrangement has allowed me to spend quality time with my family, enjoy flexibility in my work schedule, and significantly reduce my commute. However, over the past 4-5 years, I have found myself increasingly disliking remote meetings. I often experience anxiety before these meetings, even when I am not directly participating. I feel a sense of relief when meetings are canceled or on days when I have none scheduled. I understand that remote work and virtual meetings are likely to be a lasting trend, and I would appreciate your guidance on how to overcome my disinterest in attending these remote team meetings. Thank you for your support.
Ans: Dear Anonymous,
Many people have disliked the 'work from home' option that involves a lot of virtual interface. But do remind yourself: What is the need of the hour? There are a lot of things that you may dislike as eating options but you do anyway knowing that they are good for health, right?
When you start obsessing over something that you don't want, it makes it bigger in your mind to tolerate and that can cause you a lot of struggle. So, why not instead find ways of dealing with the inevitable?
How can you make things better for yourself when you have virtual meets and presentations? What are the advantages/perks of doing these virtually? When you start to look at the brighter side of things, the disinterest kind of starts to fade away and it makes it easier for you to be a part of what your work demands.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

...Read more

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x