Clarification on re-investment of LTCG amount from Equity MF redeemed during FY 2021-22 [AY2022-23] to save Tax.

I am a retired professional and have been filing the returns under ‘old tax regime’ to claim the benefits of deductions u/s 80C, 80D, 80TTB, Standard Deduction, etc.

I had purchased the units of equity oriented close-ended mutual fund on April 11, 2018 with a lock-in period of 1300 days i.e., > 3years, which I have automatically redeemed after the lock-in period; and the redemption proceeds [deposit amount plus the Long-Term Capital Gain] have been received on Nov 1, 2021. The total LTCG gain is of more than Rs 100,000.

I understand that out of total LTCG gain an amount of Rs 100,000 will be fully exempted from the tax, and only the balance amount will be subjected to tax @10% plus cess without indexation. Kindly confirm.

Since this has been my first time investing in such a scheme, I am not well versed. 

I hope you will look into the above queries and will arrange to provide the answers at the earliest, in order to make the investment in the Bond well within the time-limit up to 30th March 2022, and to avoid last day rush. Further, since the amount has been received in 1st week of Nov 2021, can it be invested till 30th April 2022 i.e., within 6 months from the date of receipt to get the tax relief against FY 2021-22 or shall it be invested before 31st March 2022? 

Ans: Dear Anonymous,
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Ans: 1. Understanding Your Financial Position
You are 36 years old with a goal of financial independence in 10 years.

Your annual post-tax income is Rs 40 lakh, with an additional rental income of Rs 50,000 per month.

Your monthly expenses are Rs 40,000, which are fully covered by rental income.

Your current investments include:

Rs 2.5 lakh SIP per month
Rs 28 lakh in mutual funds
Rs 25 lakh in RD
Rs 10 lakh in ULIP
Rs 50 lakh in gold
Rs 10 lakh emergency fund
You have no loans or credit cards, which is a strong financial position.

Your health insurance is Rs 25 lakh, which is good but may need a review later.

2. Defining Financial Independence
Financial independence means having passive income that covers all expenses.

You need enough wealth to generate returns that sustain your lifestyle.

Your target should be to build a portfolio that provides stable income after 10 years.

3. Optimising Your Current Investments
Mutual Funds – Increase Allocation
Your Rs 2.5 lakh SIP is excellent, but it needs active management.

Actively managed funds provide better returns than index funds.

Direct mutual funds lack professional management. Investing through an MFD with CFP credential helps maximise returns.

Maintain a mix of large-cap, mid-cap, and hybrid funds for stability and growth.

Recurring Deposit (RD) – Shift to Growth Assets
Rs 25 lakh in RD earns lower returns compared to equity.

Consider shifting RD funds gradually into mutual funds for better compounding.

Keep only a portion in fixed-income instruments for stability.

ULIP – Consider Surrendering
ULIPs mix insurance with investment, which reduces returns.

Surrendering and reinvesting in mutual funds can improve returns significantly.

Keep insurance separate from investments for better wealth creation.

Gold – Maintain a Balanced Allocation
Rs 50 lakh in gold is a significant portion of your portfolio.

Gold is good for diversification but does not generate passive income.

Consider reducing gold exposure and reallocating to growth-oriented assets.

4. Asset Allocation for Financial Independence
A well-diversified portfolio ensures long-term stability and wealth growth.

Your asset allocation can be:

60% in equity mutual funds
20% in debt funds and bonds
10% in gold and other assets
10% in liquid funds for short-term needs
Adjust allocation every year based on market performance.

5. Passive Income Strategy
Your goal is to generate passive income through investments.

SIPs will build a strong equity base over the next 10 years.

A mix of mutual funds and debt instruments will provide steady cash flow.

Rental income already covers monthly expenses, which is an advantage.

After 10 years, your investments should generate returns covering all financial needs.

6. Emergency Fund and Insurance Review
Emergency Fund
Your Rs 10 lakh emergency fund is good.

Keep this amount in liquid funds or fixed deposits for easy access.

Maintain at least six months of expenses as a backup.

Health Insurance
Your Rs 25 lakh health cover is decent, but medical costs rise over time.

Consider increasing coverage to Rs 50 lakh if affordable.

Ensure it covers critical illness and long-term care needs.

7. Retirement and Children’s Education Planning
Retirement Planning
Financial independence should include a secure retirement plan.

Your investments will continue growing even after achieving independence.

Keep investing to ensure financial security beyond the next 10 years.

Children’s Education
Education costs will rise significantly over time.

Start a dedicated investment plan for your children’s higher education.

Equity mutual funds with a long-term horizon will help meet this goal.

8. Tax Efficiency and Wealth Preservation
Efficient tax planning ensures you maximise post-tax returns.

Long-term capital gains tax is lower on equity investments.


Regularly review your tax liability to optimise investment returns.

9. Monitoring and Adjusting the Plan
Review your portfolio every six months.

Rebalance investments if market conditions change.

Keep track of financial independence progress based on wealth accumulation.

10. Final Insights
Your financial position is strong, and your goal is achievable.

Shifting from low-return assets to equity will help in long-term wealth creation.

Active management of investments will ensure better returns and financial security.

Keep insurance separate from investments to avoid lower returns.

A disciplined approach to investing and spending will lead to financial independence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

Ans: Hello dear.
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If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

Ans: Hello Mr. Anuj,
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Online Reselling via Dropshipping
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Freelancing Services
If you have skills in content writing, graphic design, or video editing, freelancing can be a lucrative option. A laptop and internet connection are the only real requirements. Building a strong online presence on LinkedIn or Fiverr can help secure consistent clients.

Home Tutoring/Coaching
With increasing competition in academics, home tutoring is a stable business. Charging ?1,000–2,000 per student per month ensures recurring income. The demand peaks during exam seasons, making it a great long-term option.

Event Decoration
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Ans: Hello dear.
Yes. You can appear for JEE. But why you are thinking about three attempts? Try to appear in the exam like JEE almost 2 times. Even in 2nd attempt, most of the students get fed up. Best of luck for your upcoming exam.

If satisfied, please like and follow me.
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Thanks.

Radheshyam

Ans: Hello Ashokreddy.
Are you asking for PAN India, or is your state not clear? Are you an aspirant of JEE or state engineering entrance test is also unclear. Pl mention the details to guide you properly. Thanks

Ans: Hello;

You may plan your investments as 50% in a flexicap type mutual fund and 50% in large cap type mutual fund.

Both are taxed as equity, being equity funds hence have 12.5% LTCG applicable on profits(beyond threshold) after one year, if withdrawn.

Happy Investing;
X: @mars_invest

Ans: Hello;

You may keep max 3-4 L in your savings account and invest the balance funds in mutual funds as per your risk profile.

Apart from this you need to continue with PPF and open NPS account and invest regularly for retirement planning.

Do not fall for any endowment insurance policies because they provide abysmal return on your investment.

It is your personal choice to buy gold jewellery as much as you like but for investment sake best way to invest in gold is through SGBs or gold mutual funds.

Best wishes;
X: @mars_invest

Ans: Hello;

How much is your monthly household expenses?

How much pension does your Mom get? Is she covered under SGHS/CGHS for medical issues?

Please provide answers to these queries so as to advise you suitably.

Thanks;