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Ramalingam

Ramalingam Kalirajan  |6997 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 22, 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
Asked by Anonymous - May 18, 2024Hindi
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Hello Sir, I am not sure if you will be able to answer my query. This is with regards to Income tax deductions. My gross salary is around Rs.1 lakh per month. Have done investment declaration mentioning the investment in NPS 50 K, 80 C upto Rs.1.5 lacs. 80D mediclaim insurance for self Inspite of the same there is a tax of around 7000 every month's it's getting deducted. Pls advise if there are any other investments which I can do to save on tax deductions.

Ans: You seem to be on the right track with your tax-saving strategies! Here's a breakdown and some suggestions to potentially reduce your monthly tax deduction:

Current Deductions:

NPS (Section 80CCD(1B)): This allows an additional deduction of up to Rs.50,000 on top of the Rs.1.5 lakh limit under Section 80C.
Section 80C Investments: Great! You're utilizing the full Rs.1.5 lakh limit for deductions on various investments like PPF, ELSS Mutual Funds etc.
Medical Insurance (Section 80D): This covers premiums paid for health insurance for yourself.
Potential Additional Deductions:

House Rent Allowance (HRA): If you pay rent, check if you can claim an HRA exemption. This can significantly reduce your taxable income. The exempted amount depends on your rent payment, city type, and your salary structure.
Leave Travel Concession (LTA): If your employer provides Leave Travel Allowance (LTA), ensure you utilize it for travel and submit the necessary proofs to claim exemption.
Interest on Home Loan (Section 24): If you have a home loan, you can claim deductions for the interest paid on the loan amount.
Here are some additional tips:

Review your Investment Choices: Ensure your Section 80C investments are spread across different options to balance risk and return.
Professional Tax (PT): Since you mentioned monthly deductions, it's possible a part of it might be Professional Tax (PT). PT varies depending on your state and salary.

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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Hardik

Hardik Parikh  | Answer  |Ask -

Tax, Mutual Fund Expert - Answered on Aug 22, 2023

Asked by Anonymous - Aug 21, 2023Hindi
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I work for a private company with annual CTC of Rs 17.6 lakh, What are the investments which I must do in order to save the tax, Currently I have 4 Life Insurance policies with premium Rs 1 lakh Senior Citizen health insurance of Rs 25k I have a 3 year old daughter, this year I m planning for Sukhanya Samruddhi of Rs 1.5 lakh
Ans: Hi,

Given your annual CTC of Rs 17.6 lakh and your current investments, here are some tax-saving investment options you can consider for the financial year 2023-24:

1. Equity Linked Savings Scheme (ELSS): This is a type of mutual fund that not only helps you save tax but also gives you an opportunity to grow your money. They have a lock-in period of 3 years.

2. Public Provident Fund (PPF): You've mentioned planning for Sukanya Samriddhi for your daughter, which is a great choice. In addition to that, you can also consider investing in PPF. It's a long-term investment option that offers tax-free interest.

3. Unit Linked Insurance Plan (ULIP): Since you already have life insurance policies, you might want to look into ULIPs. They offer both insurance and investment under a single integrated plan.

4. National Savings Certificate: This is another safe investment option that you can consider.

5. New Pension Scheme (NPS): It's a voluntary, long-term retirement savings scheme designed to enable systematic savings. It is a mix of equity, fixed deposits, corporate bonds, liquid funds, and government funds.

6. Fixed Deposits: Some fixed deposits offer tax-saving benefits. However, the interest earned might be taxable.

7. Senior Citizen Saving Scheme (SCSS): Since you've mentioned senior citizen health insurance, if you or your family members qualify, SCSS can be a good option. It offers a good interest rate.

Remember, the key is to diversify your investments and not put all your money into one basket. It's also essential to keep in mind the lock-in periods, returns, and tax implications of each investment option.

I hope this helps!

..Read more

Ramalingam

Ramalingam Kalirajan  |6997 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 22, 2024

Asked by Anonymous - May 22, 2024Hindi
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Hi Sir, I am currently earning 1 lakh per month Regarding the investment purpose i am having a house loan emi per month, also doing fixed deposit after every 3-4 months and also investing in ppf and nps I cannot invest in term life insurance due my medical issues and cannot also invest in medical insurance for parent they are also facing medical issues so what can be done in this case monthly around 16k tax is getting deducted
Ans: Your current financial situation reflects a well-structured approach towards savings and investments despite the constraints posed by medical issues. You have a steady income of ?1 lakh per month, and you are diligently paying off a home loan EMI, investing in fixed deposits (FD), Public Provident Fund (PPF), and the National Pension System (NPS). This detailed guide aims to help you navigate your financial strategy effectively while considering your limitations and future goals.

Understanding Your Current Financial Position
Income and Expenses
Your monthly income is ?1 lakh, with an approximate deduction of ?16,000 for taxes. This leaves you with ?84,000 per month.

Home Loan EMI
Your home loan EMI is a significant fixed expense. Ensure this is a manageable proportion of your income to avoid financial strain.

Investments
You are making regular investments in FDs, PPF, and NPS. This is a prudent approach for tax savings and long-term financial security.

Medical Insurance Constraints
You cannot invest in term life insurance or medical insurance for your parents due to medical issues. This presents a unique challenge that requires a tailored financial strategy.

Optimizing Investments
Public Provident Fund (PPF)
PPF is a secure, long-term investment that offers tax benefits. Continue maximizing your PPF contributions up to the permissible limit.

Benefits
Tax-free interest
Long-term growth
Safe investment option
National Pension System (NPS)
NPS is excellent for retirement planning. It offers tax benefits and the potential for higher returns due to market-linked investments.

Benefits
Additional tax deduction under Section 80CCD(1B)
Flexibility in choosing the investment mix
Pension income post-retirement
Fixed Deposits (FD)
FDs offer guaranteed returns, making them a safe investment. However, their returns are generally lower compared to other investment options.

Considerations
Ensure you ladder your FDs to manage liquidity.
Compare interest rates across banks for better returns.
Exploring Additional Investment Options
Mutual Funds
Actively managed mutual funds can provide higher returns compared to FDs. They offer diversification and professional management.

Equity Mutual Funds
Suitable for long-term investments.
Higher potential returns but with market-linked risks.
Debt Mutual Funds
Lower risk compared to equity funds.
Suitable for short to medium-term investments.
Systematic Investment Plans (SIP)
Investing through SIPs in mutual funds helps in averaging out the market volatility and compounding returns over time.

Benefits
Disciplined investment approach
Flexibility in investment amount and tenure
Potential for higher returns compared to lump-sum investments
Tax-saving Investments
Consider other tax-saving instruments under Section 80C and 80D to reduce your taxable income further.

Examples
Equity Linked Savings Schemes (ELSS)
National Savings Certificate (NSC)
Senior Citizens Savings Scheme (SCSS) (if applicable for your parents)
Managing Medical Expenses
Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of living expenses. This fund will provide a financial cushion for unexpected medical expenses.

Strategies
Keep this fund in a high-interest savings account or a liquid mutual fund for easy access.
Regularly review and adjust the fund amount based on your expenses.
Government and Employer Schemes
Explore any government or employer-provided health schemes that might offer some coverage for medical expenses.

Benefits
Reduced medical costs
Additional financial support for treatments
Financial Planning for Your Parents
Health Savings
Since insurance isn't an option, allocate a portion of your savings specifically for your parents' medical expenses.

Strategies
Create a dedicated medical fund.
Invest in low-risk, high-liquidity options like savings accounts or liquid funds.
Estate Planning
Ensure that you have an estate plan in place. This includes having a will to manage and distribute your assets efficiently.

Benefits
Clear instructions for asset distribution
Minimizes legal complications
Budgeting and Expense Management
Monthly Budget
Create a detailed monthly budget to track your income, expenses, and savings.

Steps
List all sources of income.
Categorize and list all expenses.
Allocate funds for essential expenses first (EMI, utilities, groceries).
Set aside a portion for savings and investments.
Review and adjust the budget regularly.
Expense Tracking
Use expense tracking apps or maintain a manual record to monitor your spending habits.

Benefits
Identifies unnecessary expenses
Helps in sticking to the budget
Reducing Tax Liability
Explore ways to reduce your taxable income through various deductions and exemptions.

Strategies
Maximize contributions to tax-saving instruments.
Claim deductions for home loan interest under Section 24(b).
Long-term Financial Goals
Retirement Planning
Continue contributing to your NPS and PPF for a secure retirement. Evaluate the corpus required for your retirement and plan accordingly.

Strategies
Review and adjust your retirement corpus based on inflation and lifestyle changes.
Diversify retirement investments for better risk management.
Child’s Education and Future
Start planning for your child’s education early to ensure you have sufficient funds when needed.

Education Fund
Consider starting an education fund through SIPs in equity mutual funds.
Use PPF and other long-term instruments for this purpose.
Investment Diversification
Diversify your investments across different asset classes to balance risk and return.

Examples
Equity and debt mutual funds
PPF and NPS
FDs and other fixed-income instruments
Conclusion
Your financial journey requires a balanced approach given the constraints on insurance and the need to manage medical expenses. By optimizing your current investments, exploring additional options, and maintaining a disciplined budgeting approach, you can secure a stable financial future for yourself and your family. Consulting a Certified Financial Planner can provide personalized guidance tailored to your unique situation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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