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Ramalingam

Ramalingam Kalirajan  |7159 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 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
Debashish Question by Debashish on Mar 26, 2024Hindi
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Money

I had invested Rs 15 lac on Mutual Fund. I got Rs 60,000 in this financial year as swp on this fund. Shall i require to file tax return on itr2?

Ans: Yes, you are required to file a tax return on ITR-2 for the financial year if you have received income from SWP (Systematic Withdrawal Plan) on your mutual fund investment. SWP income is considered as capital gains and needs to be reported in your income tax return.

Reporting SWP Income in ITR-2
In ITR-2, you need to report SWP income under the head "Income from Capital Gains." Here's how to report it:

Calculate Capital Gains: Determine the capital gains on your mutual fund investment from which you received the SWP income. Capital gains can be either short-term or long-term, depending on the holding period of the mutual fund units.

Select the Appropriate Schedule: In ITR-2, navigate to Schedule CG (Capital Gains). Here, you need to fill in the details of your capital gains from different sources, including mutual funds.

Enter Details of Mutual Fund Transactions: Provide details of the mutual fund investment from which you received the SWP income. Include information such as the name of the mutual fund, sale consideration (amount received through SWP), and cost of acquisition.

Calculate Taxable Capital Gains: Calculate the taxable capital gains by deducting the cost of acquisition (purchase price) from the sale consideration (SWP amount). Depending on the holding period, apply the applicable tax rates for short-term or long-term capital gains.

Enter Taxable Capital Gains in ITR-2: Enter the taxable capital gains in the relevant section of Schedule CG. Ensure accurate reporting to avoid any discrepancies.

Additional Considerations
Tax Implications: SWP income from mutual funds is subject to capital gains tax. Short-term capital gains (STCG) are taxed at your applicable income tax slab rate, while long-term capital gains (LTCG) are taxed at 10% without indexation if they exceed Rs. 1 lakh.

Tax Deduction at Source (TDS): If TDS has been deducted on your SWP income, ensure that you claim credit for the same while filing your tax return. Mention the TDS details in the appropriate section of ITR-2.

Conclusion
Filing a tax return on ITR-2 is mandatory if you have received SWP income from your mutual fund investment. Ensure accurate reporting of capital gains from SWP in Schedule CG of ITR-2 to comply with income tax regulations. If you have any doubts or require assistance, consult a tax professional or Certified Financial Planner (CFP) for guidance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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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Dear Mr. Parikh, I am 86 years age and retired from IOCL (PSU). Last year I sold 2 nos. of Mutual Fund. The difference between sale and cost price was about Rs. 13296 which is less than the taxable limit of Rs. 100000/-. A sum of Rs. 10834/- was deposited as TDS. I propose to fill - ITR Form 1 including the Capital Gain of Rs. 13296 in the Exempt Income (for Reporting Purpose). Kindly advice whether this is in order or should I fill - ITR Form 2 ?
Ans: Dear Rajesh,

Firstly, I appreciate your diligence in managing your taxes. Now, coming to your query, the choice between ITR-1 and ITR-2 depends on the nature of your capital gains.

ITR-1, also known as Sahaj, is for individuals with income up to Rs. 50 lakh from salary, one house property, other sources (interest, etc.), and agricultural income up to Rs. 5,000. However, it does not allow you to report capital gains.

On the other hand, ITR-2 is for individuals and HUFs not having income from profits and gains of business or profession. It includes the provision to report capital gains.

In your case, since you have capital gains from the sale of mutual funds, even if it's less than the taxable limit, it would be more appropriate to file ITR-2. The TDS that has been deducted can be claimed as a refund in your return if your total income is below the taxable limit.

Please consult with a tax professional or chartered accountant to ensure you're following the correct procedure as per the latest tax laws.

Remember, it's always better to be accurate in your tax filings to avoid any future discrepancies or issues with the tax department.

I hope this helps.

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Tejas Chokshi  | Answer  |Ask -

Tax Expert - Answered on Jul 22, 2023

Asked by Anonymous - Jul 20, 2023Hindi
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Tejas ji, I am a teacher by profession. Last FY, I opted for the old tax scheme and using all available options brought my taxable income to just under 5 lakhs. So no TDS was deducted by my employer. However, in March 2023, I withdrew Rs. 65000 from my tax saver mutual fund due to urgent needs. Can you please tell me if there is any tax due coz of this withdrawl? Which ITR form do I need to file this year?
Ans: Respected Sir,

you may file either ITR- 1 or ITR-2 depending on the complexity of the income. Yes, the lock in period of 3 years applies on ELSS schemes and if withdrawn before that it would attract taxability. Please look at the below a detailed note, which would be helpful to you. Withdrawal from Tax Saver Mutual Fund: If you made a withdrawal of Rs. 65,000 from your tax saver mutual fund, it's important to note that withdrawals from equity-linked saving schemes (ELSS) are subject to tax implications.

- ELSS investments have a lock-in period of three years. Withdrawals made before the completion of the lock-in period are considered as short-term capital gains.

ITR Form: Since you are a teacher by profession, your income is likely from salary and other sources. If you do not have any business income, you would typically file your income tax return using ITR-1 (Sahaj) or ITR-2, depending on the complexity of your income sources.

ITR-1 (Sahaj): For individuals having income from salary, one house property, other sources (like interest income), and total income up to Rs. 50 lakh.
ITR-2: For individuals and Hindu Undivided Families (HUFs) not eligible to file ITR-1 and having income from salary, house property, capital gains, and more than one house property, etc.

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Do you all live together? If YES, maybe it's time to actually live separately where there is a healthy space between both families. This may not go well with a lot of families where joint family system have ruled for a long time BUT what's the point spoiling relationships and living under one roof. Of course, your husband also needs to be in alignment with this thought.
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Ramalingam

Ramalingam Kalirajan  |7159 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 26, 2024

Asked by Anonymous - Nov 21, 2024Hindi
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Hello, I need some opinions/advice/guidance in the following matter. I am 68 yrs old and I have invested 40Lakh in various equities & 50Lalk in Equity based M/F’s since last 14 years. Current market value is around 1.8crore & 1.6crore respectively & it may grow by 20% CAGR as per my assumption in the next 7 years and total market value may hit around 10crore mark. I have a land property valued 3crore where I am planning to build a 5 floor residential apartment on it. For this I need a fund around 2crores for construction & I am planning to raise funds from overdraft loans against my Equity shares & M/F at the rate 10.35%.approx . I do not have any other source to raise the required funds as I am retired now and I do not have any other liabilities. I am planning SWP of 10lacs every year to repay interest on OD. I wish that I would be able to pay off any loans and OD WITHOUT having to sell any apartment/unit. Will this be possible? Is there any other way? Thanks
Ans: Your efforts in building a substantial equity and mutual fund portfolio are commendable. Planning the construction of a residential apartment is an ambitious goal. Let us evaluate your plan step by step and explore alternatives.

Financial Overview
Equity Investments: Current market value of Rs 1.8 crore.
Equity Mutual Funds: Current market value of Rs 1.6 crore.
Expected Growth: Assuming 20% CAGR over 7 years, the portfolio may grow significantly.
Land Value: Rs 3 crore.
Construction Funding Needed: Rs 2 crore.
Plan for Funds: Overdraft loan against equities and mutual funds at 10.35%.
Assessment of Overdraft Loan Plan
Advantages
No Asset Liquidation: You retain ownership of your investments, benefiting from potential growth.
Flexible Repayment: Overdraft loans allow partial repayments, easing financial pressure.
Concerns
High Interest Rate: 10.35% on Rs 2 crore results in an annual interest of Rs 20.7 lakh.
Repayment through SWP: An annual SWP of Rs 10 lakh may not fully cover the interest.
Market Volatility: Fluctuations in market value could affect the collateral margin.
Risk of Insufficient Growth
If investments fail to achieve 20% CAGR, loan repayment may become challenging.
Exploring Alternatives
1. Partial Liquidation of Investments
Sell a Portion of Portfolio: Liquidating Rs 1 crore from your equity portfolio can reduce loan dependency.
Benefits: Lower loan amount decreases interest burden significantly.
2. Phased Construction
Stagger Construction Phases: Build the apartment in phases, reducing immediate fund requirements.
Benefits: Spreads out financial pressure and allows cash inflows from initial unit sales or rent.
3. Explore Joint Venture Options
Partner with a Developer: Share the construction cost and revenue with a reputed builder.
Benefits: Reduces upfront financial strain while retaining ownership of some units.
4. Leasing Out Units Post-Construction
Generate Rental Income: Post-construction, lease out units for regular cash flow.
Benefits: Supports loan repayment without liquidating the portfolio.
Revised Strategy for Loan Repayment
Systematic Withdrawal Plan (SWP)
Increase SWP Amount: Consider an SWP of Rs 15-20 lakh annually instead of Rs 10 lakh.
Combine with Partial Liquidation: Use SWP and proceeds from partial liquidation for interest repayment.
Mitigate Loan Risk
Prepay Loan with Surplus Income: Allocate any excess cash flows or savings to reduce loan tenure.
Reassess Growth Assumptions: Lower expected CAGR to 12-15% for a conservative approach.
Tax Implications
Equity Gains Tax: Long-term capital gains above Rs 1.25 lakh are taxed at 12.5%.
Plan Withdrawals Efficiently: Use tax-efficient strategies to minimise outgo.
Final Insights
Your plan to raise funds through an overdraft loan is viable but carries risks. Combining this with a partial liquidation of investments or phased construction can reduce stress. Joint ventures or rental income from units could provide additional financial stability. Consult a Certified Financial Planner to design a comprehensive strategy and avoid over-leveraging.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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

...Read more

Ramalingam

Ramalingam Kalirajan  |7159 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 26, 2024

Asked by Anonymous - Nov 20, 2024Hindi
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I’m a 20yr old student , currently doing internship and getting stipend of 30k, going to get package of 10LPA in 6 months. I want to save money and also get atleast minimal returns. I’ve very less idea about share market also. How can I save money and create a plan for me to save max and also get maximum returns.
Ans: You are at an ideal stage to start building wealth. Your internship stipend and future salary provide a strong foundation. With structured planning, you can save and earn better returns while managing risks. Let’s create a simple, actionable strategy for you.

Setting Clear Financial Goals
Short-Term Goals (1–3 Years):
Emergency fund, higher studies, or any immediate personal goals.

Medium-Term Goals (3–5 Years):
Buying a vehicle, planning vacations, or career enhancement expenses.

Long-Term Goals (5+ Years):
Buying a home, retirement savings, or wealth creation.

Creating an Emergency Fund
Importance of Emergency Fund:
Build a fund equal to 6 months' expenses. It provides financial stability during unexpected situations.

Where to Invest:
Use a mix of liquid mutual funds and high-interest savings accounts for easy access.

Budgeting Your Income
Stipend Allocation Plan:
Save at least 40–50% of your Rs 30,000 stipend. The rest can cover expenses and small indulgences.

Future Salary Planning:
After getting the Rs 10 LPA package, aim to save 30–40% monthly.

Investing in Mutual Funds for Returns
Equity Mutual Funds for Growth:
Equity funds are ideal for long-term wealth creation. Actively managed funds offer better growth than index funds due to expert management.

Systematic Investment Plan (SIP):
Start SIPs to invest consistently. Begin with Rs 5,000–10,000 based on affordability.

Avoid Direct Funds:
Regular plans with a Certified Financial Planner provide better guidance and monitoring.

Tax-Saving Investments
Utilise Section 80C:
Invest up to Rs 1.5 lakh annually in tax-saving instruments like ELSS mutual funds.

Consider NPS for Retirement:
NPS offers tax benefits under Section 80CCD. It also builds retirement wealth gradually.

Staying Cautious with Stocks
Learn Before Investing in Shares:
Direct stock market investing requires knowledge. Avoid risky investments until you gain expertise.

Start Small with Blue-Chip Companies:
If you wish to explore stocks, invest small amounts in reliable, large-cap companies.

Exploring Debt Instruments
Invest in Debt Mutual Funds:
Debt funds offer stability and are tax-efficient for your income bracket.

Avoid Over-Reliance on Fixed Deposits:
Fixed deposits provide safety but offer lower returns compared to mutual funds.

Managing Risks
Insurance for Protection:
Get health insurance for yourself. It ensures financial stability during medical emergencies.

Avoid ULIPs or Endowment Policies:
These provide low returns compared to mutual funds. Focus on term insurance when needed.

Tax Planning with New Income
Understand Tax Slabs:
With a Rs 10 LPA salary, you will fall in the 20–30% tax bracket.

Plan for Deductions:
Use Section 80C, 80D (health insurance), and other exemptions to minimise taxable income.

Steps to Monitor and Adjust
Review Portfolio Regularly:
Evaluate your investments every 6 months. Adjust as per market conditions and goals.

Increase SIP Amount Gradually:
As your income grows, increase your SIP contributions to grow wealth faster.

Final Insights
Starting early gives you a significant advantage in wealth creation. Focus on disciplined saving and investing with a mix of equity and debt funds. Avoid unnecessary risks and prioritise financial security through insurance and emergency funds. Monitor and adjust your portfolio regularly to stay aligned with your goals.

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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