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Sanjeev

Sanjeev Govila  |458 Answers  |Ask -

Financial Planner - Answered on Jul 23, 2023

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more
Asked by Anonymous - Jul 15, 2023Hindi
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Hi Kirtan. How much amount one needs to have invested and what investments he should choose by 2026 to earn inflation adjusted income of Rs. 70000 every month after 2026 till 2050. Pl respond on the basis of info already provided.

Ans: The amount required in 2026 is Rs. 1.37 cr for which you need to invest Rs 1.3 cr as of today. We have assumed a ROI of 10% and inflation of 6%.

Talking about the investment avenues, always consider a well-diversified investment portfolio that includes a mix of asset classes such as stocks, bonds, commodities etc.

Coming to your query, you need to invest the money in short-term fixed instruments like government, corporate bonds and corporate FD’s with relatively low risk and moderate returns.
You can also consider investing a part in conservative or equity savings funds where you get the exposure of equity markets along with safety of debt.

Please consult with a financial advisor to get personalized advice based on your specific financial situation.
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  |6342 Answers  |Ask -

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

Asked by Anonymous - Oct 30, 2023Hindi
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Hi sir, Now I am 24 and I need a fix monthly income of 3+ lakhs by the age of 50 yrs. How much did I need to invest on monthly basis?
Ans: Achieving a fixed monthly income of Rs 3 lakhs by the age of 50 is a commendable goal. Given your current age of 24, you have a 26-year investment horizon. This long-term horizon allows for strategic planning and disciplined investing to reach your target.

Understanding Your Financial Goal
To generate a fixed monthly income of Rs 3 lakhs, you need a substantial retirement corpus. The exact amount will depend on the assumed rate of return and inflation. Generally, a well-planned investment strategy can help achieve this target.

Importance of Starting Early
Starting your investments early is beneficial. Compounding plays a crucial role in wealth accumulation. The longer your money is invested, the more it grows, making it easier to achieve your financial goals.

Estimating the Required Corpus
A fixed monthly income of Rs 3 lakhs translates to Rs 36 lakhs annually. Assuming a conservative withdrawal rate of 4%, you would need a retirement corpus of approximately Rs 9 crores. This corpus can sustain withdrawals while preserving capital.

Monthly Investment Requirement
To reach a corpus of Rs 9 crores in 26 years, regular and disciplined investments are essential. Based on historical returns of diversified equity mutual funds, you can estimate the required monthly investment. Assuming an annual return of around 12%, you need to invest a significant amount monthly.

Choosing the Right Investment Avenues
Diversification is key to managing risk and achieving stable returns. Here are some recommended investment options:

Equity Mutual Funds: These funds offer high returns over the long term. Diversify across large-cap, mid-cap, and small-cap funds to balance risk and return.

Hybrid Funds: These funds invest in both equity and debt. They provide stability and moderate returns, making them suitable for long-term goals.

Debt Funds: While offering lower returns, debt funds provide stability. They should form a smaller portion of your portfolio to reduce overall risk.

The Benefits of SIPs
Systematic Investment Plans (SIPs) are an effective way to invest regularly. SIPs help in rupee cost averaging and reduce the impact of market volatility. Investing a fixed amount monthly ensures disciplined savings and wealth accumulation.

The Role of Actively Managed Funds
Actively managed funds are preferable over index funds for long-term goals. Fund managers actively select securities to outperform the market. This active management can potentially provide higher returns, aiding in faster accumulation of the required corpus.

Disadvantages of Direct Funds
Direct funds require self-management and in-depth market knowledge. Without professional guidance, it can be challenging to make informed investment decisions. Investing through regular funds with the assistance of a Mutual Fund Distributor (MFD) and a Certified Financial Planner (CFP) offers professional advice and personalized strategies.

Regular Review and Rebalancing
Regularly review your investment portfolio to track performance. Rebalance your portfolio periodically to maintain the desired asset allocation. This involves shifting investments from overperforming to underperforming assets to stay aligned with your financial goals.

Professional Guidance
Engage with a Certified Financial Planner (CFP) for personalized advice. A CFP can help in selecting the right funds, managing risks, and ensuring that your investment strategy aligns with your long-term financial goals.

Inflation and Its Impact
Inflation erodes purchasing power over time. Your investment strategy should aim for returns that outpace inflation. Equity investments generally offer inflation-beating returns, making them essential for long-term wealth creation.

The Importance of Financial Discipline
Consistency is crucial in achieving financial goals. Stay committed to your investment plan, even during market downturns. Financial discipline ensures steady progress towards your target corpus.

Building a Contingency Fund
Maintain a contingency fund to handle unexpected expenses. This ensures that your primary investments remain intact, and you don’t have to liquidate assets prematurely.

Tax Planning
Consider the tax implications of your investments. Opt for tax-efficient investment options to maximize returns. Long-term capital gains from equity funds are tax-advantaged, making them a suitable choice for long-term goals.

Conclusion
Achieving a fixed monthly income of Rs 3 lakhs by the age of 50 is attainable with disciplined investing and strategic planning. Start early, diversify your investments, and seek professional guidance. Regular review and rebalancing of your portfolio will ensure you stay on track and maximize your returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 01, 2024

Asked by Anonymous - Feb 12, 2024Hindi
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Hi I am looking to have incom of approximately 5lakhs per month through my investment.How much money should I invest and where all? Is it only real estate or something else which can give this income.I don't want to invest in stocks or mutual fund as most of time I have faced loss in them.
Ans: To achieve a monthly income of approximately 5 lakhs through investments without relying on stocks or mutual funds, you'll need to explore alternative investment options. Real estate is one avenue, but there are other possibilities as well. Here's a strategy you might consider:

Evaluate Real Estate Investments: Real estate can provide a steady stream of rental income, especially if you invest in commercial properties, residential rental properties in high-demand areas, or vacation rentals in popular tourist destinations. Conduct thorough research on property markets, rental yields, occupancy rates, and potential appreciation before making investments.

Consider Fixed Income Investments: Explore fixed income instruments such as government bonds, corporate bonds, fixed deposits (FDs), and high-yield savings accounts. While these investments typically offer lower returns compared to stocks, they provide stability and regular income. Look for instruments with higher interest rates or coupon payments to maximize your income potential.

Explore Business Ventures: Consider investing in businesses or startups that have the potential for high returns. This could involve becoming a silent partner or providing capital in exchange for equity. However, investing in businesses carries inherent risks, so conduct thorough due diligence and seek professional advice before proceeding.

Dividend-Paying Stocks: While you mentioned avoiding stocks, some dividend-paying stocks offer consistent income streams. Look for established companies with a track record of dividend payments and stable earnings. Dividend income can supplement your overall investment income without the volatility associated with growth stocks.

Alternative Investments: Explore alternative investment options such as real estate investment trusts (REITs), peer-to-peer lending platforms, infrastructure funds, or renewable energy projects. These investments offer diversification and potentially higher returns compared to traditional fixed income instruments.

Diversify Your Portfolio: To minimize risk and enhance income potential, diversify your investments across different asset classes and investment vehicles. Avoid putting all your funds into one asset or investment type. Instead, spread your investments across multiple opportunities to balance risk and return.

Consult with Financial Advisors: Given your specific income target and risk preferences, consider consulting with a financial advisor who can assess your financial situation, goals, and risk tolerance. An advisor can help you develop a customized investment strategy tailored to your needs and objectives.

While achieving a monthly income of 5 lakhs solely through investments requires careful planning and risk management, diversifying your portfolio across multiple income-generating assets can help you work towards your income goal while mitigating risks.

It's important to note that all investments carry some level of risk, and thorough research and professional guidance are crucial when making investment decisions.

..Read more

Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 01, 2024

Asked by Anonymous - Feb 16, 2024Hindi
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I m 44 years. Net salary 96K per month. Considering inflation . How much money should I invest..pls suggest different options MF is one of them, to get at least Rs. 1.25L per month income post retirement ?
Ans: To achieve a post-retirement income of Rs. 1.25 lakhs per month, it's essential to plan your investments strategically, considering factors such as your age, current salary, inflation, and risk tolerance. Here's a general approach you can consider:

1. **Calculate Retirement Corpus**: Determine the retirement corpus required to generate a monthly income of Rs. 1.25 lakhs. This will depend on various factors such as your expected lifespan, inflation rate, and expected rate of return on investments during retirement.

2. **Estimate Monthly Investment**: Based on your current age, desired retirement age, and expected rate of return on investments, calculate the monthly investment required to accumulate the retirement corpus. You can use online retirement calculators or consult with a financial advisor to determine this amount.

3. **Diversified Investment Portfolio**: Build a diversified investment portfolio that aligns with your risk tolerance and investment objectives. Consider allocating your investments across different asset classes such as equities, mutual funds, fixed deposits, real estate, and other suitable investment options.

4. **Systematic Investment Plan (SIP)**: Start a SIP in mutual funds that offer the potential for long-term growth while managing risk. Choose funds that invest in a mix of equity and debt instruments to balance risk and return. Regularly review and adjust your SIP contributions based on changes in your financial situation and investment goals.

5. **Tax Planning**: Optimize your tax planning to maximize your savings and investment returns. Utilize tax-saving investment options such as Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Pension System (NPS), and tax-saving fixed deposits to reduce your tax liability and increase your investible surplus.

6. **Regular Review and Adjustments**: Periodically review your investment portfolio and make necessary adjustments to ensure that you're on track to achieve your retirement income goal. Consider factors such as changes in income, expenses, market conditions, and life events when revising your investment strategy.

7. **Consider Professional Advice**: If you're unsure about the optimal investment strategy to achieve your retirement income target, consider seeking guidance from a qualified financial advisor. An advisor can help assess your financial situation, recommend suitable investment options, and develop a customized retirement plan tailored to your needs and objectives.

Remember that achieving a post-retirement income of Rs. 1.25 lakhs per month requires diligent planning, disciplined savings, and prudent investment decisions. Start early, stay focused on your goals, and regularly monitor your progress to ensure a financially secure retirement.

Best regards.

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Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2024

Asked by Anonymous - Apr 04, 2024Hindi
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Hi I am 34 year old.. monthly salary of 90k as of now.. considering inflation how much amount of money should I invest..
Ans: It's great to see you taking proactive steps towards securing your financial future at the young age of 34. Let's dive into crafting a tailored investment plan to help you navigate the impact of inflation and achieve your financial goals.

Understanding the Impact of Inflation:

Inflation erodes the purchasing power of money over time, making it essential to invest wisely to beat inflation and grow your wealth.

Assessing Your Current Financial Situation:

With a monthly salary of 90k, you're in a good position to allocate a portion of your income towards investments. However, it's crucial to strike a balance between investing for the future and meeting your present financial needs.

Setting Realistic Investment Goals:

Before determining how much to invest, it's essential to define your financial goals, whether it's saving for retirement, buying a home, or funding your children's education. Setting clear and achievable goals will guide your investment strategy.

Analyzing Investment Options:

Considering your age and income, investing in a mix of equity and debt instruments can help you achieve your financial objectives while managing risk.

Exploring Equity Investments:

Equity investments offer the potential for higher returns over the long term, helping you beat inflation and grow your wealth. While they come with higher volatility, investing in quality stocks or equity mutual funds can help you build a diversified portfolio and harness the power of compounding.

Understanding the Disadvantages of Index Funds:

Index funds aim to replicate the performance of a specific market index, offering low costs and broad market exposure. However, they may limit potential returns compared to actively managed funds, which have the flexibility to outperform the market through strategic stock selection and timing.

Highlighting the Benefits of Actively Managed Funds:

Actively managed funds are run by professional fund managers who actively research and select investments to outperform the market. These funds offer the potential for higher returns and can adapt to changing market conditions, making them suitable for investors seeking growth and capital appreciation.

Exploring Debt Instruments:

Debt investments provide stability and steady income, making them ideal for balancing the risk in your portfolio. Options like fixed deposits, bonds, or debt mutual funds can offer predictable returns while preserving capital.

Setting Aside Emergency Funds:

Before investing, ensure you have an emergency fund equivalent to at least six months' worth of expenses. This fund acts as a financial safety net, providing liquidity in case of unexpected expenses or job loss.

Seeking Professional Guidance:

As a Certified Financial Planner, I'm here to provide personalized advice and guidance tailored to your financial goals and risk tolerance. Together, we can develop a comprehensive investment plan that aligns with your objectives and helps you navigate the impact of inflation.

In Conclusion:

By investing a portion of your income in a diversified portfolio of equity and debt instruments, you can beat inflation, grow your wealth, and achieve your financial goals over the long term. Remember to regularly review and adjust your investment strategy based on changing market conditions and life circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

Asked by Anonymous - May 20, 2024Hindi
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I plan to invest 50,000 rs per month. I am 31 years old, for next 10 years I want to invest this amount such that it matches inflation when I turn 41. And generates income suitable to sustain my primary needs like food clothing etc.
Ans: Crafting a Long-Term Investment Strategy
Planning for your financial future is a wise decision at any age. Let's evaluate your investment goals and design a strategy that aligns with your needs.

Understanding Your Financial Goals
Genuine Compliments: It's inspiring to see your proactive approach towards securing your financial future at such a young age.

Empathy and Understanding: I understand that ensuring your investments keep pace with inflation and provide for your essential needs is paramount for your peace of mind.

Assessing Investment Options
Regular Funds through Certified Financial Planners: Investing through Certified Financial Planners (CFP) ensures personalized guidance and a tailored approach to your financial goals.

Disadvantages of Direct Funds: Direct funds require you to make investment decisions on your own, which might not always align with your financial objectives.

Benefits of Regular Funds Investing through MFD with CFP Credential: By investing through Mutual Fund Distributors (MFD) with CFP credentials, you gain access to expert advice and ongoing portfolio management, enhancing your chances of meeting your long-term goals.

Building a Balanced Portfolio
Equity Investments: Allocating a portion of your investments to equities can provide growth potential over the long term, albeit with higher volatility.

Fixed Income Instruments: Diversifying into fixed income instruments like bonds or debt funds can provide stability and income generation.

Asset Allocation: Balancing your portfolio between equity and fixed income based on your risk tolerance and time horizon is crucial for achieving your objectives.

Conclusion
By crafting a well-diversified investment strategy tailored to your needs and working with a Certified Financial Planner, you can navigate the financial markets effectively and work towards a financially secure future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 2024

Money
Namaskar. Sir I am 36 year old having two daughters 9years and 5 years old, i have near about 1 cr as gold, 3 lac in share market, 5 lac in mutual funds and 3 lac in EPF. working in private company salary is 50000 rs per month. now my question is that i want early retirement in age of 50 and want to do a world tour, how i can plan all this. I have no need of any loan in future also. thanks in advance
Ans: At 36 years old, you have set a clear goal of early retirement at 50 and a desire to travel the world. This is a great plan and can be achievable with the right financial strategy. You already have some solid assets:

Rs 1 crore in gold
Rs 3 lakhs in the share market
Rs 5 lakhs in mutual funds
Rs 3 lakhs in EPF
You also have a monthly salary of Rs 50,000 from your private job and no loans to worry about. Having a financial goal is the first step, but the challenge is ensuring that your investments grow steadily to meet your retirement and lifestyle aspirations.

Let’s look at a comprehensive approach to achieve this.

Define Your Financial Goals
You mentioned two key goals:

Early Retirement at 50: This means you have around 14 years to build your corpus. After retirement, you need to ensure that you generate enough income to cover your living expenses.

World Tour: This is a great ambition, but it requires careful planning. World travel costs can vary greatly, so having an estimate in mind will be important.

Now, considering your current savings and earnings, you will need a larger corpus for both retirement and travel. This means that your savings and investments must grow faster than inflation and be sufficient for both goals.

Building a Retirement Corpus
To retire at 50 and sustain your lifestyle, you’ll need a corpus that can generate enough passive income. Here’s how you can plan:

Invest More Aggressively: Currently, you have Rs 3 lakhs in the share market and Rs 5 lakhs in mutual funds. With your goal of early retirement, it would be beneficial to increase your investment in equity mutual funds. Equity has the potential to provide higher long-term returns compared to traditional options.

EPF Contributions: You have Rs 3 lakhs in EPF, which is a good base for retirement. EPF offers stable returns, but it may not grow fast enough to match your early retirement plan. Consider increasing contributions if possible, but don’t rely solely on it for long-term growth.

Gold Holdings: You have Rs 1 crore in gold, which is substantial. While gold is a good asset, it doesn’t generate income and can be volatile. You might want to consider reducing your gold holding over time and reallocating that into more income-generating investments, such as mutual funds or fixed-income instruments. This can provide you with both growth and security.

Increase SIP Investments: Start or increase your systematic investment plan (SIP) in equity mutual funds. SIPs in equity funds over a long period can help in building wealth. Actively managed funds, as opposed to index funds, can provide better growth with professional fund managers making the decisions.

Managing Risks in Investment
You have expressed concerns about market-linked investments like stocks and mutual funds. These concerns are valid, but they can be managed with proper diversification and long-term focus.

Stock Market: While you only have Rs 3 lakhs in the stock market, consider increasing this exposure but with diversification. A well-diversified portfolio can reduce risk while allowing for potential growth. Avoiding high-risk, speculative stocks is key; focus on blue-chip stocks or large-cap companies with strong fundamentals.

Mutual Funds: Investing through mutual funds rather than directly in stocks can also help. Opting for regular mutual funds with the help of a certified financial planner (CFP) ensures that an expert manages your money. Active fund management allows the flexibility to adapt to market changes and potentially achieve better returns.

Tax-Efficient Investment Strategies
One of the key aspects of planning for retirement and travel is minimising tax liability. Here are some strategies you could consider:

Equity-Linked Savings Scheme (ELSS): ELSS investments are tax-saving mutual funds that can help you save on taxes while growing your wealth. The returns from these funds are subject to long-term capital gains (LTCG) tax, which is generally lower than other forms of taxation.

Tax-Efficient Mutual Funds: You can also consider investing in other tax-efficient funds, which allow you to grow your money while reducing the tax burden.

Maximising EPF and PPF: Since you already contribute to EPF, consider starting a Public Provident Fund (PPF) if you haven’t yet. PPF offers tax-free returns and is a long-term savings option, ideal for retirement planning.

Health and Life Insurance: Ensure that you have adequate health and life insurance. These will protect you and your family and offer tax benefits under sections 80C and 80D of the Income Tax Act. The premium paid for health insurance and life insurance qualifies for tax deductions.

Allocating Funds for Your World Tour
While planning for retirement, you’ll also need to set aside a specific fund for your world tour. Here's how you can do this:

Goal-Based Investment: Set a target amount you need for your world tour. For instance, if you plan to take this trip right after your retirement at 50, you’ll need to ensure this amount is separate from your retirement corpus.

Dedicated SIP for Travel: You can create a separate SIP in a balanced mutual fund, which offers stability and growth, to save for this goal. This will allow your travel fund to grow without affecting your retirement savings.

Short-Term Fixed Income Instruments: If you’re looking for a relatively safer option, consider investing in short-term debt funds or fixed-income instruments closer to the time of your world tour. These can provide liquidity and safety for your travel fund.

Estate Planning and Children's Future
With two daughters, planning for their future education and possibly marriage expenses is essential. Here’s how you can ensure this:

Sukanya Samriddhi Yojana (SSY): If you haven’t yet, you could consider investing in SSY for your daughters. This is a government-backed scheme that offers attractive returns and tax benefits. It’s specifically designed to cater to the education and marriage needs of girls.

Children’s Education Fund: You should also start a dedicated education fund for your daughters. Education costs, especially for higher education, are rising, and planning for it early will give you peace of mind.

Nomination and Will: Ensure that you have a proper will in place. This is crucial for ensuring that your wealth is passed on to your loved ones without legal hassles. Include all your major assets such as gold, mutual funds, shares, and other investments in your will.

Managing Gold Holdings Effectively
You hold Rs 1 crore in gold, which is a significant amount. While gold is a hedge against inflation, it doesn’t generate income. Here’s how you can better utilise this asset:

Sovereign Gold Bonds (SGB): Instead of holding physical gold, consider converting some of your gold holdings into SGBs. SGBs provide an interest income along with price appreciation. This way, you’ll continue to benefit from the rise in gold prices while earning a passive income.

Reduce Physical Gold: Consider liquidating a portion of your physical gold to reinvest in higher-yielding assets. The money from this can be used to further invest in equity or mutual funds, thus boosting your retirement corpus.

Contingency Fund and Emergency Planning
While planning for retirement and travel, it’s also important to have an emergency fund. This fund should cover at least 6-12 months of your expenses in case of unforeseen circumstances like job loss or medical emergencies.

Emergency Fund: Since you already have some liquid assets, ensure you keep a portion of your Rs 50,000 salary aside every month for this purpose. Ideally, this should be kept in a liquid fund or savings account for quick access.

Health Insurance: Ensure you have a comprehensive health insurance plan to avoid dipping into your retirement savings during medical emergencies.

Finally
Your financial foundation is strong with gold, mutual funds, shares, and EPF contributions. To retire at 50 and fund a world tour, you need to boost your investments with more strategic and tax-efficient approaches. Focus on building a larger retirement corpus through mutual funds and SIPs. Use your gold more effectively by converting part of it into income-generating assets. Don't forget to plan for your children’s education and secure your family's financial future through proper estate planning.

A well-balanced investment plan, along with disciplined savings, will help you retire early and achieve your dreams.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

...Read more

Ramalingam

Ramalingam Kalirajan  |6342 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 19, 2024

Asked by Anonymous - Sep 19, 2024Hindi
Money
I am 45, I have 3 factories assets leased at 9.30 lacs, 13.80 lacs, 8.5 lacs , i have 3 offices out of which 2 are leased at 40K and 45K per month. The locations of assets are good and market distress value of built up factories is 23 cr , 36 cr , 23 cr. The offices value are 1.5 cr each of 3 offices out of which 2 are leased. I have buffer of around 5 cr in FD's and around 11.58 lacs is the LIC Insurance premium i pay per annum. I have been paying since last 9 years and shall have to pay for another 8 years and Policies get matured 3 and 5 years after payment ends. I have 2 daughters and a wife & mother. I need to retire by 50. My income source right now is 20 lacs per Annum from a new business i have started 2 years back with an investment of 1.5 cr. Prior to this i had a manufacturing unit in DEBT which I sold during Covid to remain liability free... Please suggest me how can i reduce my taxes and increase further my passive income and asset base. The land and new properties have become expensive now and i want to invest in some where different where TAX liability is lower and returns are better. I am not exposed to SHARES , STOCKS , MUTUAL fund and have my reservations as they are market linked and how can i trust my investment on some unknown fund managers. My house i own values around 16.5 cr.
Ans: Assessing Your Current Financial Situation

You have built a strong foundation with a solid asset base, consistent passive income streams, and a clear goal to retire by 50. The leased factories and offices are providing a stable income. Additionally, you have a healthy buffer of Rs 5 crore in FDs and a well-structured LIC policy. Your family is your priority, and you are looking to reduce tax liability while increasing passive income.

At 45, you have a few critical years before retirement. This gives you enough time to optimize your financial portfolio and ensure your goals are met with minimal tax burdens. Let’s break down how you can move forward.

Passive Income: Key to Financial Independence
Your current real estate portfolio provides a dependable source of passive income. With the following income breakdown:

Factories leased at Rs 9.30 lakh, Rs 13.80 lakh, and Rs 8.5 lakh annually.
Offices leased at Rs 40,000 and Rs 45,000 monthly.
Your total passive income from these assets comes close to Rs 32 lakh annually. With the land and property market now expensive, your focus should be on diversifying income streams beyond real estate.

Steps to Increase Passive Income

Invest in Debt Instruments: Given your reservations about market-linked instruments like shares and mutual funds, consider debt instruments. Options like Government Bonds, Corporate Bonds, and Debt Mutual Funds can offer steady returns with lower market volatility. These also have tax-efficient structures if held for the long term (3+ years), benefiting from long-term capital gains tax with indexation benefits.

Diversify with International Investments: You could explore international bonds or debt-based mutual funds focused on developed economies. These offer diversification beyond India and can help protect your investments from domestic economic fluctuations.

Sovereign Gold Bonds (SGBs): Since land is expensive, another safe, government-backed option is SGBs. They provide interest along with capital appreciation based on the price of gold. Interest income is taxable, but any capital gains on maturity are tax-free.

Rental Yield Real Estate Investment Trusts (REITs): Though you're cautious about real estate, REITs allow you to invest in a basket of real estate assets. They provide regular dividend income, which is rental yield. You won’t need to worry about maintenance or managing properties. REITs offer steady income and tax-efficient capital appreciation.

Tax Efficiency Strategies
Tax planning is a crucial part of any financial strategy. Given your asset base, current income, and goal to retire in five years, reducing your tax liability is essential. Here are a few steps that can help you achieve that:

Reduce Tax Burden on Real Estate Income

Ownership Structure: If any of your properties are solely in your name, consider transferring them to family members in lower tax brackets (e.g., your wife or mother). This reduces your tax burden as rental income gets distributed.

Invest Through HUF: If you don’t already have one, forming a Hindu Undivided Family (HUF) can help. Income earned through HUF gets taxed separately from personal income, reducing your overall tax burden.

Depreciation Deductions: Claiming depreciation on your factories and offices can significantly reduce taxable income. This applies even though they’re leased out. Have your accountant review your depreciation claims to ensure you’re taking full advantage.

Focus on Tax-Free Investments

Tax-Free Bonds: You can invest in tax-free bonds issued by government-backed entities. The interest earned on these bonds is entirely exempt from tax. Though they offer lower returns (5-6%), they are a good addition to your portfolio for stable, tax-efficient returns.

PPF and VPF: If you haven't maxed out your Public Provident Fund (PPF), it offers tax-free returns, and the interest earned is exempt from income tax. Additionally, consider contributing to a Voluntary Provident Fund (VPF) if available, as it also enjoys tax benefits.

Optimize Your Insurance Policies

You’re currently paying Rs 11.58 lakh annually in LIC premiums. Since these are investment-linked insurance policies, they tend to offer lower returns than other investment options. You may want to reconsider whether you need such a high premium commitment for another eight years.

Steps to Consider with LIC Policies

Review the projected returns upon policy maturity. Compare them with other safe investment options.

Surrender Partially: If the policies are not yielding a high return, you may consider surrendering part of them and reinvesting the surrendered value into better-performing instruments like debt mutual funds or tax-efficient bonds.

Retain Policies Near Maturity: Policies maturing within 3-5 years can be retained, as surrendering close to maturity may not be financially viable.

Build Your Retirement Corpus
Your goal of retiring at 50 is feasible, but your retirement corpus needs careful planning. At retirement, you would want a mix of stable income and wealth preservation to last for the next 30-40 years.

Steps to Build Your Retirement Corpus

Systematic Withdrawal Plans (SWPs): Once you retire, you can shift a part of your fixed deposits and FDs to debt mutual funds. Through an SWP, you can withdraw a fixed sum every month. SWPs in debt funds are tax-efficient since the withdrawals are treated as capital gains, and only a small portion of the withdrawal is taxed.

Avoid Direct Stock Exposure: Since you are risk-averse towards stocks and market-linked investments, avoid direct exposure to equity markets. However, you can consider hybrid funds that invest a portion in equity and debt. This way, you get a balanced return without the full exposure of equity risk.

Annuity as an Option: Once you reach the age of 50, explore annuities that provide a fixed monthly income. These are a secure, low-risk way of ensuring a steady income for your retirement.

Managing Business and Reducing Taxes
You’ve recently started a new business with an annual income of Rs 20 lakh. You should take full advantage of the available tax deductions for business expenses.

Tax-Reduction Strategies for Your Business

Claim All Deductions: Ensure that you claim deductions on all legitimate business expenses, including salaries, rent, utilities, and other operational costs. This reduces your taxable profit.

Depreciation on Assets: If your business involves equipment or machinery, ensure that you are claiming depreciation on these assets to reduce your tax liability.

Opt for Presumptive Taxation: If your business income is below Rs 2 crore, you may qualify for the presumptive taxation scheme. This scheme allows you to declare profits at a fixed percentage of your turnover, which simplifies tax filing and reduces scrutiny.

Estate Planning and Legacy for Daughters
Since you have two daughters and significant assets, estate planning should be a priority. You want to ensure a smooth transfer of wealth, reduce inheritance taxes, and avoid any disputes.

Steps for Efficient Estate Planning

Create a Will: Ensure that you have a clear, legally-binding will in place. This prevents any legal disputes and ensures that your assets are distributed according to your wishes.

Set up Trusts: Consider setting up a family trust. Trusts can help reduce estate taxes and ensure that your daughters inherit your wealth in a structured manner. They also protect the inheritance from creditors.

Plan for Property Transfer: Real estate can be tricky when it comes to inheritance due to capital gains tax. Discuss with a legal expert on how best to structure the transfer of property to your daughters to minimize tax implications.

Finally
You are in an excellent position, with a strong asset base and stable income streams. With some careful tax planning, reallocation of insurance premiums, and a focus on diversification, you can achieve financial freedom by the age of 50.

While your reservations about market-linked investments are valid, not all investment opportunities carry high risk. You can balance your portfolio with safer instruments like debt funds, government bonds, and REITs.

By following a diversified approach, you will be able to reduce tax liability, increase passive income, and secure your family’s future. Consider working with a Certified Financial Planner to ensure all elements of your plan are optimized and aligned with your goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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Radheshyam

Radheshyam Zanwar  |895 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Sep 19, 2024

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Career
Hello sir, What are the career options for students having PCM in 12th standard other than engineering degrees. My daughter is good at Maths and average in chemistry and physics also we as parents not able to decide what could be the appropriate graduation choice for her. Just to add she is also not inclined towards programming and AI.
Ans: Hello Ankit.
It is glad to hear that your daughter is good at Mathematics. She is average in Physics and chemistry. Considering these parameters, there are many choices for graduation in different fields. But you have to explore the right field as per her choice/interest. some of them are as follows:
(1) Bachelor of Science (B.Sc.) i.e. B.Sc. in Mathematics / Physics / Chemistry / Economics
(2) B. Arch.
(3) B. Des.
(4) BBA
(5) Actuarial Science (Best for Math enthusiasts who enjoy solving real-world problems involving finance and risk.)
(6) Data Science / Data Analytics
(7) Chartered Accountancy (CA)
(8) Aviation
(9) Hotel Management / Culinary Arts
(10) Law (Integrated 5-year LLB)
(11) Bachelor of Fine Arts (BFA)
(12) Defence (NDA)
From the above options, It would be great to go with UG in LLB and then PG in LLM. There are chances to become Jujdge at an early stage as there are special reservations for female candidates in judiciary posts. When a candidate joins LLB, he gets a lot of extra time to learn extracurricular activities and some relevant courses. This is a very cool and prestigious field. Generally, students ignore it at an early stage.

If you are dissatisfied with the reply, please ask again without hesitation.
If satisfied, please like and follow me.
Thanks.

Radheshyam

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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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