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Should I pay tax on my LIC and Max Life annuity income of ₹297,000?

Vivek

Vivek Lala  | Answer  |Ask -

Tax, MF Expert - Answered on Feb 11, 2025

Vivek Lala has been working as a tax planner since 2018. His expertise lies in making personalised tax budgets and tax forecasts for individuals. As a tax advisor, he takes pride in simplifying tax complications for his clients using simple, easy-to-understand language.
Lala cleared his chartered accountancy exam in 2018 and completed his articleship with Chaturvedi and Shah. ... more
Chander Question by Chander on Feb 10, 2025Hindi
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I am getting monthly annuity of 10000 from Max and I have received Rs177800 maturity amount from LIC and total become 297000. Is this amount of LIC & Max annuity taxable. I don't have any other income exept interest in saving account.

Ans: Annuity payouts are generally taxable as income under the head 'Salaries' in the year they are received so if your income from salaries and interest is below the taxable limit then no tax
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  |8271 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 22, 2025

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Hello sir. I have invested Rs.1.00 lac in SBI Magnum Children's Benefit Fund- Investment Plan- Direct Plan - Growth. Actually I was planning to invest this amount in gold. However, after an intense inquiry and research from the Internet I decided to invest in SbI plan. Please let me know whether I did the best thing not opting for gold investment and investing in SBI Plan.
Ans: First of all, congratulations on taking the time to research and make an informed investment decision. That’s always the first step toward wealth creation. You’ve taken a thoughtful approach, and that is something to truly appreciate.

Let’s now evaluate your decision with a 360-degree view.

Why Choosing Mutual Funds Over Gold Can Be a Wise Decision

Gold is often used for preserving wealth, not creating it.

Over the long term, gold gives moderate returns.

Gold does not produce income or dividends.

It only grows based on price appreciation.

Mutual funds, especially equity-based ones, are better wealth creators.

They compound your money with professional fund management.

Equity funds outperform gold over long durations like 10–15 years.

Mutual funds are more aligned with long-term goals like child’s education or marriage.

Equity funds, though volatile in the short term, deliver better inflation-beating returns.

So yes, not choosing gold and opting for a fund is a better long-term move.

About SBI Magnum Children’s Benefit Fund – Investment Plan

This fund is not a typical diversified equity fund.

It is a hybrid fund meant for child-centric goals.

It has exposure to equity and debt.

Its goal is to provide long-term capital appreciation with some safety.

It’s structured with a lock-in for a few years.

This prevents premature withdrawal and keeps investments stable.

Suitable if your time horizon is long (8 to 10 years or more).

Also ideal if this money is for your child’s future education or marriage.

What This Fund Does Well

Offers equity upside with controlled risk.

Invests in equity (for growth) and debt (for safety).

Encourages long-term goal-based investing.

Limits withdrawal temptation with lock-in.

What You Should Be Aware Of

It may not perform as strongly as aggressive equity funds.

Returns may be moderate compared to pure equity funds.

Fund performance can vary depending on fund manager's strategy.

Lock-in means you can’t redeem early if needed.

Did You Make the Right Choice?

Yes, considering:

You had Rs 1 lakh and considered gold.

You switched to a goal-based mutual fund for children.

You moved from wealth preservation to wealth creation.

That’s a good decision for long-term financial planning.

You are now in a product with better potential and strategy.

Few Suggestions Going Forward

Don’t stop at just one-time investment.

Plan a monthly SIP if the goal is 5 years or more away.

Align it with a long-term goal like education or marriage.

Don’t redeem mid-way due to market dips.

Review this fund every year.

Check if it continues to match your goal and risk appetite.

Better Than Gold – Here’s Why

Gold gives no compounding; mutual funds do.

Gold is volatile during uncertain times.

It has storage issues and taxation headaches in physical form.

Mutual funds are digitally held and easy to manage.

Long-term gains in equity mutual funds are tax efficient.

For child goals, equity funds offer the best mix of returns and growth.

Final Insights

You’ve made a smart choice by avoiding gold and choosing a goal-based mutual fund.

Gold is emotional and traditional. Mutual funds are logical and long-term focused.

For children’s goals, equity-based hybrid funds are more aligned.

Just make sure you review it once every year with a Certified Financial Planner.

If you’re serious about this goal, continue investing more in small steps.

SIP is the best tool for building big wealth slowly and safely.

This one-time investment is a good start. But do plan further contributions.

Your money now has a higher chance of growing meaningfully.

And most importantly, it’s aligned with a real life goal.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

Ramalingam

Ramalingam Kalirajan  |8271 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 22, 2025

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Sir, I am 45 years old and want to invest in equity mutual funds. I have time horizon of 10 years . Can you suggest me some good funds in large cap category, IT sector theme fund, 1 or 2 small/midcap funds or any other fund you think would be good for long term. I want to start SIP of Rs 40000/- across 4 mutual funds.
Ans: Your intent to invest Rs 40,000 per month in equity mutual funds for 10 years is a strong move.

Your fund choices across large-cap, IT sector, and mid/small-cap categories are sensible.

Let’s look at how to structure this investment efficiently.

Investment Objective Assessment

You have a long-term vision.

Ten years is a healthy horizon for equity.

SIP is the right approach.

Rs 40,000 monthly is a good contribution.

Your Ideal Asset Allocation Strategy

Diversify across categories.

Blend large-cap, sectoral, and mid/small-cap funds.

Avoid putting too much in one theme.

This lowers risk and boosts consistency.

Large-Cap Mutual Fund (Rs 14,000/month)

These funds invest in stable, top companies.

Ideal for long-term wealth growth.

Less volatile than mid/small-cap funds.

Good for capital preservation with growth.

IT Sector Fund (Rs 6,000/month)

IT sector can give high returns.

But it’s highly cyclical and sector-dependent.

Limit allocation to protect from volatility.

Use as a return booster, not a core.

Mid and Small-Cap Funds (Rs 14,000/month)

These funds carry high growth potential.

But they are more volatile and risky.

Suitable for your long-term horizon.

Split the allocation between mid and small caps.

Keep an eye on market trends regularly.

Flexi Cap or Multi Cap Fund (Rs 6,000/month)

This gives you market-wide exposure.

Fund manager picks across market segments.

Offers balance and flexibility in returns.

Helps when market cycles shift.

Avoid Direct Mutual Funds for Long-Term SIPs

Direct funds miss advisor insights.

You might make emotional, untimely exits.

They lack personalisation and professional guidance.

Regular plans via a CFP-MFD give strategy support.

Expert monitoring helps long-term discipline.

Stay Away from Index Funds

Index funds don’t beat the market.

They lack fund manager expertise.

No downside protection in falling markets.

Actively managed funds aim to outperform indices.

They adapt during market changes.

Review Your Plan Regularly

Review performance every year.

Rebalance based on life changes.

Switch underperforming funds if needed.

A Certified Financial Planner will guide you.

Monitoring is as important as starting.

Taxation Aspects You Must Know

Equity mutual funds have two tax rules.

Long-term gains above Rs 1.25 lakh: taxed at 12.5%.

Short-term gains: taxed at 20%.

Holding for 10 years is tax efficient.

Stay invested to maximise post-tax returns.

Emergency Fund Planning Before SIPs

Keep at least 6 months of expenses saved.

Don’t invest this in mutual funds.

Use liquid funds or bank deposits.

This protects your SIPs during emergencies.

Systematic Withdrawal Plan Later

After 10 years, use SWP for income.

It gives tax-efficient regular withdrawals.

Avoid lump sum exits.

Plan withdrawal strategy 1-2 years before maturity.

Should You Include Sectoral Funds Beyond IT?

Sectoral funds are risky.

Don’t add too many of them.

You already plan IT sector exposure.

Focus more on diversified equity.

This improves overall stability.

Insurance and Health Coverage Are Essential

Review your term plan now.

Make sure it covers all your liabilities.

Have health cover for your family.

Don’t rely only on employer policy.

Your SIP Distribution Suggestion (Rs 40,000)

Large Cap Fund: Rs 14,000

IT Sector Fund: Rs 6,000

Mid Cap Fund: Rs 7,000

Small Cap Fund: Rs 7,000

Flexi or Multi Cap Fund: Rs 6,000

Strategy to Add More SIPs Yearly

Increase SIP by 10% annually.

This boosts compounding significantly.

You’ll reach bigger goals faster.

Link SIP increase to your salary hike.

Final Insights

Your investment plan is smart and timely.

Your SIP amount and time horizon are ideal.

Diversify smartly across fund types.

Avoid direct plans; take regular funds via CFP.

Stay away from index funds and too many sector bets.

Review your plan yearly with your Certified Financial Planner.

Tax efficiency and goal focus are key to success.

Your long-term wealth is built step by step.

A clear path and steady discipline will help you achieve it.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...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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