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Mihir Tanna  |851 Answers  |Ask -

Tax Expert - Answered on May 24, 2024

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more
Vinod Question by Vinod on Feb 21, 2024Hindi
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Hi , My In-laws sold their home for 1 cr inbangalore in 2024. they had bought land in 2002 for 1.5 lakhs and built home in 2008 for 25 lakhs. how much tax they need to pay for the captital gain or which bounds are good for investing to avoid the tax. they are 63 yrs old.

Ans: Capital gain amount is derived by deducting indexed cost from sale consideration.

Assuming land is acquired in FY 2002-03 in 1.5 lacs, indexed cost will be Rs.497143 and Assuming property is constructed in FY 2008-09 in 25 lacs, indexed cost will be Rs.6350365. Total will be 6847508

accordingly there will capital gain will be Rs.31,52,492 taxable @20%.

You can calculate the indexed cost from the income tax calculator https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

For bonds please check with bank
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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Mutual Funds, Financial Planning Expert - Answered on Jun 17, 2024

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I am 37 years old me&my wife salary is 55k pm each , rental income 30k , & we have a home loan of36 lacs emi32K @ 20yrs 8.4%we hve 2 kids of one boy12yr &8yr daughter. We totally have 2 L share ,mutual funds 1 L , ssy 3L, and I have 1 cr term insurance , wife giving regular lic premium 60k yrly abt to close in 4 yrs and we both have individual Nps account with total corpus 16L and ppf 3L each . My presently exp is 30k pm. I want to be financially free in next 15 years with monthly expense of 60k. Need money for kids studies marriage etc. also need 1 cr to purchase new house at earliest. Should I invest in shares or mutual funds. I have no knowledge of mkt but ready to learn. which one is safe for future
Ans: First, it's commendable that you are taking charge of your finances with a clear goal in mind. Your financial goals are ambitious yet achievable with the right planning and strategy. Understanding your current financial standing and future aspirations is the first step towards financial freedom. Here, I'll provide a comprehensive guide to help you navigate your financial journey over the next 15 years, ensuring that you can meet your expenses, children's education, and marriage costs, as well as purchase a new house worth Rs 1 crore.

Current Financial Situation
Let's break down your current financial situation. You and your wife have a combined salary of Rs 1,10,000 per month and a rental income of Rs 30,000, bringing your total monthly income to Rs 1,40,000. Your home loan EMI is Rs 32,000 per month at an interest rate of 8.4% for 20 years. Your monthly expenses are Rs 30,000, leaving you with a significant surplus.

Your current investments include:

Rs 2 lakh in shares
Rs 1 lakh in mutual funds
Rs 3 lakh in Sukanya Samriddhi Yojana (SSY)
Rs 1 crore term insurance
Rs 60,000 yearly LIC premium
Rs 16 lakh in NPS (both accounts)
Rs 3 lakh each in PPF for you and your wife
Financial Goals and Priorities
Your goals include:

Financial freedom in 15 years with monthly expenses of Rs 60,000
Funds for children's education and marriage
Purchase of a new house worth Rs 1 crore
Analyzing Your Investments
Insurance
You have a term insurance of Rs 1 crore, which is good. Term insurance provides financial security to your family in case of any unfortunate events. Your wife’s LIC policy is about to mature in four years. After maturity, consider investing this amount in more growth-oriented investment options. Since term insurance is already in place, you might not need additional LIC policies which often combine insurance and investment.

NPS and PPF
Your combined NPS corpus of Rs 16 lakh is a significant amount. NPS is beneficial for long-term retirement savings due to its tax benefits and potential for reasonable returns. Similarly, the PPF accounts are stable, tax-efficient, and provide safe returns.

Mutual Funds and Shares
You have Rs 2 lakh in shares and Rs 1 lakh in mutual funds. While shares offer potentially high returns, they come with higher risks and require market knowledge. Mutual funds, especially actively managed ones, provide a balanced approach with professional management and diversification.

Investment Strategy for Financial Freedom
Monthly Savings Allocation
With your monthly income surplus, you have ample room to allocate funds towards different investment avenues. Here’s a suggested allocation:

Emergency Fund: Maintain an emergency fund equivalent to 6 months of expenses (approximately Rs 1.8 lakh) in a liquid or savings account.

Home Loan Repayment: Continue with your existing EMI of Rs 32,000. As your income increases, consider making occasional lump sum payments towards the principal to reduce the tenure and interest burden.

Children’s Education and Marriage: Start a dedicated investment in mutual funds for your children’s education and marriage. Use child-specific plans or balanced funds to ensure steady growth with moderate risk. SIPs (Systematic Investment Plans) in equity mutual funds can be a good option here.

Retirement Planning: Increase your contributions to NPS and PPF. NPS offers good returns with moderate risk, while PPF provides assured returns with tax benefits. Aim to maximize your PPF contributions each year.

New House Purchase: For your goal of purchasing a new house worth Rs 1 crore, start a separate investment plan. Invest in a mix of debt and equity mutual funds to balance growth and stability. This will help you accumulate the required down payment.

Mutual Funds vs. Shares
Given your limited market knowledge, mutual funds are a safer and more practical option compared to direct shares. Here's why:

Benefits of Mutual Funds
Professional Management: Fund managers handle investments, leveraging their expertise to maximize returns.

Diversification: Mutual funds spread investments across various sectors and companies, reducing risk.

Systematic Investment Plan (SIP): SIPs allow you to invest a fixed amount regularly, benefiting from rupee cost averaging and disciplined savings.

Flexibility: Mutual funds offer various schemes tailored to different goals, risk appetites, and time horizons.

Transparency and Regulation: Mutual funds are regulated by SEBI, ensuring transparency and investor protection.

Actively Managed Funds vs. Index Funds
While index funds passively track market indices, actively managed funds aim to outperform the market through selective investment choices by fund managers.

Disadvantages of Index Funds
No Outperformance: Index funds match market returns but don't aim to beat them.

Market Risk: They are fully exposed to market volatility without the possibility of tactical adjustments.

Advantages of Actively Managed Funds
Potential for Higher Returns: Skilled managers can leverage market opportunities for better returns.

Risk Management: Fund managers can adjust portfolios to mitigate risks during market downturns.

Regular Funds vs. Direct Funds
Direct mutual funds have lower expense ratios since they bypass intermediaries, but they require more investor involvement and knowledge.

Disadvantages of Direct Funds
Self-Management: Investors must research and manage investments themselves, requiring market knowledge.

Time-Consuming: Continuous monitoring and adjustments are needed without professional assistance.

Benefits of Regular Funds
Advisor Support: Investing through a certified financial planner offers professional advice and tailored strategies.

Ease and Convenience: Financial planners handle the complex aspects of investment, allowing you to focus on your goals.

Steps to Implement Your Plan
Consult a Certified Financial Planner: A CFP can provide personalized advice and help tailor a strategy to your specific needs and goals.

Set Up SIPs in Mutual Funds: Allocate your surplus income towards SIPs in equity and balanced mutual funds for long-term goals.

Increase NPS Contributions: Boost your NPS contributions to benefit from long-term growth and tax advantages.

Review and Adjust Regularly: Regularly review your financial plan and adjust based on changing needs, market conditions, and goals.

Educate Yourself: While your financial planner will manage your investments, understanding the basics of mutual funds and market trends can help you make informed decisions.

Addressing Your Goals
Children’s Education and Marriage
Investing through SIPs in diversified equity mutual funds will help accumulate the necessary corpus for your children's education and marriage. Start early to benefit from compounding.

Retirement Planning
Your current NPS and PPF investments form a solid foundation. Increase contributions and consider additional retirement-focused mutual funds for a well-rounded retirement plan.

Purchasing a New House
For the new house, a combination of debt and equity mutual funds can help you accumulate the required down payment. Plan to divert a portion of your monthly surplus towards this goal.

Final Insights
Achieving financial freedom and meeting your long-term goals requires a disciplined approach and strategic investments. Your current financial standing is strong, and with careful planning and the right guidance, you can reach your aspirations.

By leveraging mutual funds for their professional management and diversification benefits, increasing your NPS and PPF contributions, and regularly reviewing your plan, you will be well on your way to financial independence.

Remember, a certified financial planner can offer invaluable support and ensure your investments are aligned with your goals. Stay focused, be disciplined, and regularly monitor your progress.

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Anu Krishna  |965 Answers  |Ask -

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Hi Anu, After reading a lot of your responses I started to believe that you probably have a solution to my complex problem I am 42 yr old and wife 40 and we live in AUS. We have 2 beautiful, smart kids 11 and 7. She is a nice person but not very smart to think what should we care and what not care and live a happy life. A few years ago my mom from India used to visit how used to complain about my in-laws about how rude they are how they not keep in touch at all and all that. This is absolutely true because I saw that myself. But my wife being a loving daughter thinks none of that is true and my mom is lying. 10 years ago my dad passed away after 2 months of lot of suffering from cancer, my wife was pregnant here at the same time in AUS. I had to go to India to spend with time with my dad during his last days.One unbelievable truth is when I was performing funeral rituals on on side my father in law was telling all my close visitors that I am not talking/calling much to my wife during these days to AUS. All those guests told me about it. But my father-in-law says that he never said those things to visitors and they are all lying. My wife firmly believes that they are all lying. When I talked to him in person he agreed that he said those things. He is never nice to our family. He never even offered help to my family when my dad was suffering. All that a side, realizing that me and my family is disturbed a lot, none of my family members are saying anything to her just so that we are happy and nothing bothers us. It's been 2 1/2 years like that. But she is not ready for forget what happened in the past and live a happy family life. Despite suffering I myself tell her to forget all that happened and I never talk about past things. But she still clings on to those thoughts. My kids are suffering now. To keep my family happy, I try to make fun , talk to her, go places and all that. But with those past thoughts she turned into a heartless person. Please help. Tell me where, what and how can I/we fix this.
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Thank you for the acknowledgement.
My suggestion to you: Start afresh!
Digging what happened only puts your wife in the spotlight...maybe she wasn't at her best and things went downhill, but it will not give her the chance to rework things and integrate back into the family.
So, press the RESET button and along with the kids, focus on your family...what her father said or not, what someone should have done or not; let it be done and dusted.
For relationships to work and move, both parties involved, must make that choice to leave the past behind, else the shadows keep growing and casting a cloud over something that is healthy and has a chance to grow beautifully.
Does this make sense here? If I tell you to go down the path and confront her about her father, she will get defensive and this thing will get ugly and perhaps backfire.
Are you willing to start afresh is the question here? If YES, what will this do for you? Now, you know what to do...

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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