36 Lakhs Black Money: How Can I Make It White?

My father in law wants to sell a property of 76 lakhs and the buyer is ready to show 40 lakhs as white and remaining 36 lakhs as black due to Chennai govt limitations. So how he can diversify this 36 lakhs in different account no. and others to make it white ? Because I am employed in MNC and husband is searching for job.

Ans: It is important to deal only with accounted, legal transactions. Receiving or handling unaccounted money (black money) is illegal under Indian law and can lead to severe penalties. To ensure compliance with the law:

Full White Transaction: Your father-in-law should insist on a full white transaction for the property sale. This ensures transparency, legality, and avoids future scrutiny from tax authorities.

Pay Capital Gains Tax: If the property is sold fully in white, any capital gains arising from the sale will need to be reported, and applicable taxes paid. He can also claim exemptions under Sections 54 or 54EC by reinvesting the gains in eligible options like another residential property or specified bonds.

Consult a Chartered Accountant (CA): A CA can guide on tax planning, reporting the transaction, and utilising exemptions to minimise tax liability.

Avoid Structuring Unaccounted Money: Splitting unaccounted money into multiple accounts or investments to bypass tax laws is illegal and can attract serious consequences.

Encourage transparency and legality in financial dealings to ensure peace of mind and avoid complications with authorities.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: High Reliance on Property

– You have rental income of Rs.2 lakh monthly, with house value of Rs.15 crore.
– You also have land worth Rs.2 crore appreciating at 12–15% annually.
– Gold is Rs.10 lakh and savings are Rs.3 lakh.
– You have a personal loan of Rs.8 lakh, with EMIs of Rs.20,000 monthly.

Your wealth is heavily tied to real estate. You rely on that for both income and appreciation. That creates concentration risk. And it makes your financial future sensitive to property market trends or regulatory changes.

Why You Need Portfolio Diversification

– Having all wealth in one asset class is risky.
– Property prices can fall or be taxed more.
– Exposure to interest rates and occupier demand is high.
– Liquidity is poor; you cannot sell fast at good value.
– Lack of diversification limits upside and increases downside.

A more balanced portfolio gives you stability, regular income, and better access to opportunities outside of Bangalore real estate.

Clearing Personal Loan First

– You have Rs.8 lakh loan with Rs.20k monthly EMI.
– Interest on this adds burden to your cash flow.
– Priority is to clear it quickly.
– Freeing up Rs.20k per month helps your investments.

Reducing debt is key before channeling money into new assets.

Retain Emergency Buffer

Your savings are just Rs.3 lakh. After repaying loan, keep at least 6 months’ expenses. That must be Rs.6 lakh.
This is essential to cover unexpected costs without dipping into investments.

Assessing Your Goals

– Your current monthly surplus is approx Rs.1 lakh (Rs.2 lakh rental minus Rs.1 lakh expenses and Rs.20k EMI).
– Goal 1: Ensure cash flow remains stable.
– Goal 2: Grow and diversify wealth via multiple assets.
– Goal 3: Plan for child’s future and your retirement.

We need a 360-degree plan that addresses each goal carefully.

Do You Need to Sell Property?

Selling land can help diversify.
But think about:

– Liquidity requirement: How much do you need now?
– Tax impact: On long-term capital gain on land sale; reinvest into new assets.
– Property pipeline: Will you lose appreciation potential?

A balanced strategy may include partial sale to diversify. You don’t need to sell everything. You can keep some land if future growth is expected and liquidity is not urgent.

Diversify into Debt Instruments for Stability

Once personal loan is cleared, channel about Rs.50k per month into fixed income tools:

– Bank fixed deposits or corporate FDs
– Debt mutual funds with safety and monthly income
– Recurring deposit for discipline

These options provide:

– Regular interest payouts
– Low volatility
– Liquidity for near-term needs

This will give you a stable income base beyond rent.

Choose Actively Managed Funds for Growth

For medium to long-term goals, invest in actively managed equity or hybrid mutual funds via regular plans (through MFD guided by a CFP).

Why actively managed funds?

– Managers can shift holdings based on market conditions
– They can protect capital during downturns
– They have the potential to outperform index returns
– They can adapt allocation between sectors

Do not invest in index funds or ETFs. They lack flexibility and downside management. Their passive structure prevents proactive defence during market stress.

Why Avoid Direct Mutual Funds

Direct fund investing can be tempting because of lower fees. But:

– You lose expert guidance on portfolio shifts
– No one helps with tax-efficient redemption timing
– Behavioural bias can lead to panic selling
– You may select wrong funds due to lack of research

Regular plans via a Certified Financial Planner give you:

– Fund selection support
– Periodic portfolio review
– Discipline in rising or falling markets
– Tax-aware exit planning

Asset Allocation Across Asset Classes

Here’s a structured mix for your surplus:

– Debt and fixed income (35–40%)
– This supports your monthly income and short-term goals
– Equity mutual funds (30–35%) via active management
– Provides long-term growth and inflation protection
– Hybrid/dynamic funds (10–15%)
– Helps balance equity and debt automatically
– Gold/alternative assets (5–10%)
– Gold already present; consider systematic gold plans
– Property (remaining allocation)
– Keep rental house and selected land parcels

This allocation reduces concentration risk while preserving real estate exposure.

Systematic Investment Plan for Equity

– Start SIP with Rs.30k–50k per month into actively managed equity funds
– Increase SIP annually as surplus grows
– Choose funds with consistent performance and good management
– A Certified Financial Planner helps select based on risk and goals

This builds wealth steadily with professional oversight.

Tapping Reinvested Rental Income

Your rental income surplus should be reinvested systematically instead of being spent.
This helps compound wealth without touching your capital base.

Monitoring and Rebalancing Strategy

– Conduct annual portfolio reviews
– Rebalance back to original allocation if any class strays more than 5%
– Exit or top-up based on performance
– A Certified Financial Planner will guide this process
– This keeps your plan aligned to risk and goal needs

Tax Efficiency Matters

– Be aware of capital gain taxes if you sell land
– Equity fund LTCG above Rs.1.25 lakh taxed at 12.5%
– Debt fund gains taxed as per your slab
– Using long-term holding reduces taxes
– A CFP helps schedule sales to minimise tax impact

Proper tax planning can save several lakhs over time.

Plan for Child’s Future and Education

You have one child. Future education needs should be funded.
This is a 7–15 year goal.

How to plan:

– Allocate part of your equity investments for child goal
– Use debt for near-term milestones
– Keep education corpus separate from your retirement and lifestyle funds

A CFP helps create those goal-based buckets.

Retirement Income Planning

Although property gives rental income, it can vary.
Set up a retirement corpus via mutual funds and fixed income.

– Aim for ?30–40 lakh corpus initially
– Invest monthly in debt and hybrid funds
– Once children’s education is funded, shift equity towards retirement corpus

This ensures steady passive income post-retirement.

Maintain Liquidity Reservoir

– After loan clearance, aim for liquidity of Rs.10–15 lakh
– Keep in high-interest savings or liquid funds
– Use only for emergencies or sudden expenses
– Avoid disrupting your investment plan

Liquidity keeps you stable even during volatility.

Insurance and Risk Cover

You did not mention health or life insurance. Review these:

– Term cover for you and child’s future security
– Health cover for hospital and illness expenses
– Protects savings and assets from unexpected events

Insurance is necessary support but not a substitute for investment.

Should You Sell Land Now?

Selling some land can:

– Release Rs.2 crore capital
– Provide funds for alternative investments
– Help diversify
– You could keep part if you expect future appreciation in Bangalore

Rather than selling all, consider partial sale. Use released funds to:

– Clear debt
– Build liquid investments
– Diversify with equity and debt

Role of Certified Financial Planner

A CFP will:

– Analyse your full financial picture
– Help select and review investment funds
– Guide you on tax optimisation
– Assist in portfolio rebalancing
– Counsel you during market turbulence

This support ensures your plan stays on track.

Lifestyle and Spending Habits

Your living expenses are Rs.1 lakh monthly including education.

– Keep lifestyle expenses consistent
– Avoid unnecessary upgrades if they damage savings
– Use rental surplus to enhance lifestyle gradually

This approach balances comfort with fiscal prudence.

Action Plan Summary

Clear your personal loan quickly

Keep emergency fund of 6 months expenses

Reinvest rental surplus into debt and equity

SIP in actively managed equity funds via CFP

Maintain liquidity buffer of Rs.10–15 lakh

Consider partial land sale for diversification

Review and rebalance annually with CFP

Plan child’s education with separate investment pool

Build retirement corpus in debt and equity mix

Ensure proper insurance is in place

Finally

– Your current wealth is strong but too realty-heavy
– You have surplus cash flow each month
– Start diversifying now to handle future uncertainty
– Use a Certified Financial Planner to guide investments
– Education, liquidity, retirement all need secure funding
– Proper plan and discipline will make this shift smooth

Your foundation is strong. Diversifying carefully will help you grow wealth safely and meet life goals with confidence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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