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Mihir Tanna  |961 Answers  |Ask -

Tax Expert - Answered on Feb 16, 2023

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more
Asked by Anonymous - Feb 15, 2023Hindi
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Is it better to still invest in NPS with contribution above (PPF+NPS) 750,000 being taxed...

Ans: Every person should have mix basket of Investment with some portion of secured investment. PPF+NPS - still one of the best secured and constant growing investment avenue.
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

Ramalingam Kalirajan  |6986 Answers  |Ask -

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

Asked by Anonymous - May 14, 2024Hindi
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I 35 year old and come under the category of 'professional' for income tax computation. I have been investing in mutual funds and have a corpus of 6 lakhs. Should I also invest in ppf, nps, FDs?
Ans: Considering your age and tax category as a 'professional', let's assess whether diversifying your investment portfolio with PPF, NPS, or FDs would be beneficial alongside your existing mutual fund investments.

Evaluating Investment Options
Mutual Funds
Mutual funds offer the potential for higher returns compared to traditional options like PPF, NPS, or FDs. They provide exposure to a diversified portfolio of stocks or bonds, suited to your risk profile and investment horizon.

PPF (Public Provident Fund)
PPF offers tax benefits under Section 80C of the Income Tax Act and provides a guaranteed rate of return. It's a long-term investment option with a lock-in period of 15 years, offering safety and stability to your investment portfolio.

NPS (National Pension System)
NPS is a retirement-focused investment scheme with both equity and debt options. It offers tax benefits under Section 80CCD(1B) over and above the limit of Section 80C. NPS can be beneficial for building a retirement corpus, especially if you seek tax savings and long-term wealth accumulation.

FDs (Fixed Deposits)
FDs offer fixed returns over a specified period, providing stability to your portfolio. However, the returns may be relatively lower compared to mutual funds, PPF, or NPS. FDs can be suitable for short-term goals or as part of your emergency fund due to their liquidity.

Considerations for Your Portfolio
Risk Tolerance
Assess your risk tolerance and investment objectives before making any decisions. Mutual funds involve market risk but offer the potential for higher returns, whereas PPF, NPS, and FDs provide stability but may offer lower returns.

Tax Planning
As a 'professional', tax planning is crucial. Evaluate the tax benefits offered by PPF and NPS, along with the tax implications of your mutual fund investments. Choose investment avenues that optimize your tax liability while aligning with your financial goals.

Diversification
Diversifying your investment portfolio across different asset classes can mitigate risk and enhance returns. Consider a balanced approach by allocating funds to mutual funds for growth, PPF or NPS for tax-efficient long-term wealth accumulation, and FDs for stability and liquidity.

Conclusion
While mutual funds offer growth potential, diversifying your portfolio with PPF, NPS, or FDs can provide stability, tax benefits, and additional avenues for wealth accumulation. Evaluate your financial goals, risk tolerance, and tax planning requirements to make informed investment decisions.

If you need personalized advice or assistance in structuring your investment portfolio, feel free to reach out. I'm here to help you optimize your investments and achieve your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6986 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Asked by Anonymous - Jun 16, 2024Hindi
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Hello sir, My current epf is 10k monthly and 30k annually in ppf. Thus cealing my 80c to 1.5lakhs. I am thinking of starting an NPS of 10k as well for my retirement. Will this 10k of nps be taxable as as i have already capped my 80c i know i have 50k more deductable in 80ccd for nps. But since total will be 120k annually thus wanted to understand if these will be taxable? And will it effect my return after 30 years. As of now i am 30 years old
Ans: You contribute Rs 10,000 monthly to EPF and Rs 30,000 annually to PPF. This totals Rs 1.5 lakhs under Section 80C.

Considering NPS Contribution
You plan to start contributing Rs 10,000 monthly to NPS for retirement. This would amount to Rs 1.2 lakhs annually.

Tax Implications
Section 80C and 80CCD
Your contributions under Section 80C are already maxed out at Rs 1.5 lakhs. However, Section 80CCD(1B) allows an additional Rs 50,000 deduction specifically for NPS contributions.

Taxability of NPS Contribution
The Rs 1.2 lakhs NPS contribution is partly deductible. Rs 50,000 can be claimed under Section 80CCD(1B). The remaining Rs 70,000 will be taxable.

Effect on Return
Long-Term Growth Potential
NPS has a mix of equity and debt investments. This helps in balanced growth. Over 30 years, NPS can grow significantly due to compounding.

Withdrawal Rules
At retirement, 60% of NPS corpus is tax-free. The remaining 40% must be used to purchase an annuity. The annuity income is taxable.

Advantages of NPS
Additional Tax Benefits
NPS offers an extra Rs 50,000 deduction under Section 80CCD(1B). This is over and above the Rs 1.5 lakhs under Section 80C.

Long-Term Growth
NPS investments benefit from compounding. The mix of equity and debt can provide balanced returns.

Retirement Security
NPS provides a steady income post-retirement through annuities.

Disadvantages of NPS
Taxability of Annuity
The annuity income from NPS is taxable. This can reduce your net returns in retirement.

Withdrawal Restrictions
NPS has strict withdrawal rules. Partial withdrawals are allowed only for specific purposes before retirement.

Final Insights
Your current EPF and PPF contributions maximize Section 80C benefits. Starting an NPS contribution of Rs 10,000 monthly is a good idea. You get an additional Rs 50,000 deduction under Section 80CCD(1B). However, the remaining Rs 70,000 will be taxable. NPS has long-term growth potential but comes with some tax implications. Plan your investments considering both the benefits and restrictions of NPS.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6986 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 07, 2024

Asked by Anonymous - Oct 04, 2024Hindi
Money
Hi Vivek, my question is around retirement saving taxation and if one should invest in NPS based on the same. So like anyone with Basic of 41L annual, already has EPF of 5.9L. NPS at 14% means 6.9L, and so the total retirement contribution = 12.8L annually. So should NPS be considered? If yes how much annually?
Ans: At a basic annual salary of Rs 41 lakh, your retirement contributions through EPF and the National Pension System (NPS) are substantial. The current Rs 5.9 lakh from EPF and Rs 6.9 lakh from NPS (at 14% employer contribution) amount to Rs 12.8 lakh annually. Now, the critical question arises: should you further invest in NPS? Let’s evaluate this in detail.

Understanding Your Current Contributions
1. EPF Contributions
The Employees' Provident Fund (EPF) provides a safe and relatively high-interest-bearing retirement savings option. Your EPF contribution of Rs 5.9 lakh annually is a good start toward securing your retirement.

2. NPS Contributions at 14%
The employer contribution to NPS at 14% results in an additional Rs 6.9 lakh towards your retirement savings. NPS, being a market-linked investment, has the potential to grow at a higher rate than EPF, depending on the asset allocation and fund performance.

3. Total Retirement Contribution
With Rs 12.8 lakh already allocated annually, you have a substantial amount being set aside for your retirement. However, you might still want to consider whether this will be enough to meet your long-term goals, factoring in inflation and your future expenses.

Should You Invest More in NPS?
1. Tax Benefits of NPS
NPS provides attractive tax benefits under Section 80CCD(1B), where you can claim an additional Rs 50,000 tax deduction. This is over and above the Rs 1.5 lakh allowed under Section 80C. However, since NPS withdrawals are partially taxed, you need to consider the tax impact on maturity. At retirement, 60% of the NPS corpus is tax-free, while the remaining 40% must be used to purchase an annuity, which is taxable as per your slab.

2. Balancing Tax Savings with Liquidity
While NPS offers tax savings during the accumulation phase, the lack of liquidity and the mandatory annuitisation on retirement limit your control over the funds. If liquidity during retirement is important to you, you may want to reconsider how much more to invest in NPS.

Diversifying Beyond NPS
1. Equity and Debt Mutual Funds
If you are looking for more flexibility and control over your investments, mutual funds offer a better alternative. With a wide range of options in equity, hybrid, and debt funds, you can align your portfolio with your risk appetite. Unlike NPS, mutual funds provide easier access to your funds, should the need arise before retirement.

2. Benefits of Actively Managed Mutual Funds
By investing through regular mutual funds with the guidance of a Certified Financial Planner (CFP), you benefit from active fund management. This allows you to maximise your returns while minimising risks, unlike passive investments such as index funds that lack the flexibility to adjust to market conditions.

Limitations of NPS
1. Taxation at Maturity
As mentioned earlier, while NPS contributions provide tax relief during the accumulation phase, the maturity proceeds are partially taxed. The 40% annuitisation is a significant limitation, as it locks in your funds and subjects the annuity income to your regular tax slab.

2. Lack of Liquidity
NPS does not provide the same level of liquidity as mutual funds. Once invested, your money is locked in until retirement, with only limited withdrawals allowed under specific circumstances like medical emergencies or home purchase.

How Much to Invest Annually?
1. Additional NPS Contributions
If you decide to invest more in NPS, you can contribute an additional Rs 50,000 annually to avail yourself of the tax benefit under Section 80CCD(1B). However, whether to invest more than this amount depends on your overall retirement strategy and liquidity requirements.

2. Diversification Strategy
Instead of increasing your NPS contribution beyond Rs 50,000, you might consider diversifying your retirement savings across different asset classes. A well-balanced portfolio with a mix of equity, debt, and hybrid funds, along with your existing EPF and NPS, will help you achieve your financial goals while managing risks effectively.

Taxation and Withdrawal Planning
1. Managing Taxation Efficiently
Given the tax implications of NPS withdrawals, it is crucial to plan your post-retirement cash flow efficiently. You can stagger your withdrawals from NPS to reduce the overall tax burden, while ensuring that you meet your retirement income needs. Additionally, investments in mutual funds can be structured in a way that minimises the tax impact, especially with the new rules for long-term and short-term capital gains taxation.

2. Tax on Equity and Debt Mutual Funds
When selling equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%. For debt mutual funds, LTCG and STCG are taxed according to your income tax slab. By investing in these funds, you can create a tax-efficient portfolio that balances growth with tax savings.

Long-Term Wealth Creation
1. Power of Compounding
The earlier you start investing, the more you can benefit from the power of compounding. Whether it’s NPS or mutual funds, long-term investments have the potential to grow exponentially over time. A combination of NPS, EPF, and mutual funds will ensure that you have a diversified retirement corpus.

2. Regular Portfolio Review
It’s important to review your portfolio regularly, especially as you near retirement. Your financial situation, risk tolerance, and market conditions will evolve over time. By working with a Certified Financial Planner (CFP), you can ensure that your retirement plan remains on track.

Final Insights
To summarise, NPS offers significant tax benefits and is a solid retirement option, but it comes with limitations like taxation at maturity and mandatory annuitisation. If you wish to further invest in NPS, limit it to Rs 50,000 annually to avail the tax benefits under Section 80CCD(1B).

Instead of putting all your eggs in the NPS basket, consider diversifying your investments across actively managed equity and debt mutual funds. This will provide you with flexibility, liquidity, and potentially higher returns, while allowing you to manage your tax liability effectively.

Regularly review your portfolio and adjust your contributions as you approach retirement. By diversifying your investments and seeking the guidance of a Certified Financial Planner (CFP), you can secure a comfortable and financially stable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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Anu

Anu Krishna  |1281 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Nov 07, 2024

Asked by Anonymous - Oct 07, 2024
Anu

Anu Krishna  |1281 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Nov 07, 2024

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Help me!!! 1.I'm starting new "work" on my own(challenging for me) but my mind says quit it, be quite & do nothing. I myself don't know that wether the result of work will be +ive or uncompleted like alws. 2. My mind has become like order seeker type, when someone orders me, I do those things with dedicated(but sad from inside) manner. But when myself will try something different(which i fear, but necessary) then. "I QUITS IT" & sometimes I don't even start. 3. I'm like stuck no clue what/whom I want to do in life, I'm in cllg(1 yr) doing (CSE) ,. 4. I want to do/try (sports,talking girls,study,stocks,coding..) many things, but myself, my thoughts(overthinker), R like just be in the place where u are[confused,po*n,think about past/future(being billio..re,olympics..), girl (that u liked & never talked), abusive/beating self,.. sometimes feels like end life, but don't hv courage for that also.. 5. I tried self help books, spirituality, god, self affirmation, writing... & thay affected me(sometimes) but for only some time, then again that devil me comes up &these things never get completed. As no one in my family knows about all these, so that's Y ,I hv to fight/loose/try again, the battles with myself.
Ans: Dear Harsh,
If in the past you have had the urge to QUIT, how is this time going to be different? This is not to discourage you from taking up 'new work' but pointing out that there is some amount of work that you need to put to clear the mind out of blockages.
-What is limiting you?
- What is the reason for putting off things?
- What comes first to the mind when you start something new?
Also, focus on one thing at a time; study and go deep into it...what's this thing with work? I don't understand. When the mind is unsettled, take one thing/activity, pursue it and finish it. It could simply be studying for Year 1 of your college...just only do that...once your mind is trained in completing an activity, you can add another one the next year along with studying and then pursue both...it could be some sport and studying...then the next year, you could add a third activity. This is called 'training the mind in discipline'. Discipline will make sure that you start and finish things...So, go slow and do one thing at a time.

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.

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