My flat plan: Should I sell equity (54F) or get a home loan?

Ans: You have a strong foundation. Your combined income of Rs. 2.4 lakh per month and assets like EPF, PPF, and LIC policies show disciplined savings. However, your significant loan obligations and future plans require a careful strategy to ensure financial stability and growth.

Evaluating the LIC Policies
Current Status: You have 25 LIC policies with a total sum assured of Rs. 25 lakh, maturing from 2036 onwards. These were started in 2011 with a 25-year term.

Decision on Surrendering: LIC policies typically offer lower returns compared to other investment options. You could consider surrendering them if the surrender value is close to your paid premiums. The money saved can be better utilized in higher-yielding investments.

Alternative Strategy: If you surrender these policies, redirect the funds into diversified mutual funds. This will provide better long-term returns and flexibility. Ensure you invest through a trusted MFD with CFP credentials to get the benefits of regular funds.

Managing the Home Loan
Loan Overview: You have a joint home loan of Rs. 1.5 crore with an EMI of Rs. 1.32 lakh. This is a significant portion of your income, which limits your cash flow.

Paying Off the Loan: You mentioned considering selling your flat for Rs. 1.2 crore. If you choose to sell, the proceeds can be used to reduce your loan burden. This would lower your EMI or even clear a significant part of the loan, freeing up monthly income.

Long-Term Capital Gains (LTCG) on Selling the Flat
LTCG Tax: If you sell your flat for Rs. 1.2 crore, LTCG tax will apply. The tax rate is 20% after indexation benefits. This tax can be significant, so consider reinvesting the gains under Section 54 to avoid or reduce the tax burden. Reinvesting in another property or certain bonds within specified timelines can help.
Investment Strategy for SIPs and PPF
SIP Investment: You have started an SIP of Rs. 18,000 per month. This is a good start. Continue increasing the SIP amount as your income grows. Diversify across large-cap, mid-cap, and small-cap funds to balance risk and return. Avoid index funds and ETFs as actively managed funds offer better returns with professional management.

PPF Contributions: You deposit Rs. 5,000 monthly in PPF. This is a safe and tax-efficient investment. Continue this as part of your retirement corpus. The PPF’s long-term benefits will provide security during retirement.

Handling the Educational Expenses
Planning for Your Son’s Education: You need Rs. 3 lakh annually for your son’s education. Start a dedicated education fund using a mix of equity and debt mutual funds. This will provide the required amount with minimal strain on your monthly budget.
Retirement Planning
Retirement Corpus Requirement: You need to focus on building a substantial retirement corpus, given the existing liabilities and your son’s education needs.

EPF and PPF: Your EPF (Rs. 10 lakh) and PPF (Rs. 5 lakh) form the core of your retirement savings. Continue these contributions.

Diversified Portfolio: Allocate a portion of your savings into diversified mutual funds with a mix of equity and debt. This will help in wealth accumulation over the long term.

Tax Planning
Income Tax Management: With your income and investments, effective tax planning is crucial. Utilize Section 80C (up to Rs. 1.5 lakh) for EPF, PPF, and LIC premiums. Explore other tax-saving avenues like NPS under Section 80CCD(1B).

LTCG and Deductions: Plan your investments to optimize tax liabilities, especially with the potential sale of your flat. Consult a tax expert to explore all possible deductions and exemptions.

Final Insights
Reassess Your Insurance: Consider term insurance with adequate coverage for your family. This is crucial for their financial security in case of any unforeseen events.

Investment Discipline: Maintain discipline in your SIPs and other investments. Regular reviews with a Certified Financial Planner will help in realigning your strategy as needed.

Career Shift: While exploring a career shift, ensure you have a robust financial plan. A stable passive income stream and an emergency fund can provide peace of mind during this transition.

Retirement Planning Focus: Prioritize building a retirement corpus. It’s crucial to have sufficient funds for a comfortable post-retirement life.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: At 39, you’re at a critical juncture in life where strategic financial planning is essential for securing your family's future. Your current income of Rs 2.4 lakhs per month, SIP investments, and commitment to savings through PPF reflect a disciplined approach. However, balancing your financial commitments, such as the joint home loan and your son’s education, with future goals like retirement requires careful planning.

Assessing Your Insurance Policies
Your 25 LIC policies, maturing from 2036 onwards, with a total sum assured of Rs 25 lakhs, have served as a significant portion of your insurance portfolio. However, with your current financial obligations and future goals in mind, it’s essential to reassess whether these policies align with your long-term objectives.

Considerations for Continuing LIC Policies:

Insurance Cover: Evaluate whether the Rs 25 lakhs sum assured is sufficient. Generally, life insurance should cover 10-15 times your annual income. In your case, this would be significantly higher than Rs 25 lakhs.

Policy Maturity: The policies mature over a long period, which may not provide liquidity when you need it most, such as during your son’s education or major life events.

Returns on Investment: LIC policies often offer lower returns compared to other investment options like mutual funds. The premiums could potentially yield better returns if redirected.

Option to Surrender:

Reallocation: If you choose to surrender, the funds could be redirected to more growth-oriented investments, providing higher returns and better alignment with your financial goals.

Impact: Understand the surrender value and any associated penalties. Weigh this against the potential returns from reallocating those funds.

Managing Your Home Loan and Property Sale
Your joint home loan with an EMI of Rs 1.32 lakhs is a significant financial burden, especially with your monthly expenses at Rs 40,000. Considering selling your flat for Rs 1.2 crores to pay off the home loan is a viable option but requires careful tax planning.

Long-Term Capital Gains (LTCG) Tax:

Tax Implication: If you sell the flat, LTCG tax will apply on the sale proceeds minus the indexed cost of acquisition. The current LTCG tax rate is 20% with indexation benefits.

Exemptions: To save on LTCG tax, you can invest the gains in another residential property under Section 54 or in specified bonds under Section 54EC.

Loan Repayment: Use the sale proceeds to clear the joint home loan. This reduces your financial burden, freeing up your income for other essential investments.

Evaluating the Sale:

Loan Repayment: Clearing the home loan reduces your EMI obligation, which currently consumes more than half of your monthly income.

Alternative Investments: Consider reallocating the remaining proceeds to a mix of liquid and growth-oriented investments. This could enhance your financial stability and ensure funds are available for future needs.

Strategic Investment Planning
Your current investment of Rs 18,000 per month in SIPs and Rs 5,000 per month in PPF is a good start. However, with the home loan and your son’s education expenses, it’s essential to optimize your investments for better returns.

Re-evaluating SIPs:

Diversification: Ensure that your SIP investments are diversified across different asset classes such as equity, debt, and hybrid funds to balance risk and reward.

Regular Funds: Investing through regular funds with the guidance of a Certified Financial Planner (CFP) ensures that your portfolio is well-managed, aligning with your goals.

Reallocation from LIC: If you decide to surrender your LIC policies, consider directing those funds into your SIPs. This could significantly enhance the growth potential of your investments.

PPF Contributions:

Tax Efficiency: PPF offers tax benefits under Section 80C and is a safe, long-term investment. However, the lock-in period and lower returns compared to equities might not align with your need for higher growth.

Balancing Contributions: You may want to balance contributions between PPF and equity-oriented SIPs to achieve a mix of safety and growth.

Planning for Your Son’s Education
With a 5-year-old son, you anticipate education costs of around Rs 3 lakhs per year. Education expenses will likely rise, so planning for them is crucial.

Education Fund:

Dedicated SIP: Consider setting up a dedicated SIP for your son’s education, targeting growth-oriented funds that can outpace inflation.

Child Plan: Explore child-specific investment plans that provide a mix of insurance and investment benefits, ensuring that education expenses are covered even in your absence.

Systematic Withdrawal Plan (SWP): As your son approaches college age, an SWP could provide a steady stream of income, covering his education expenses.

Retirement Planning
Retirement planning should be a priority, especially given your current financial commitments. You’ll need a substantial corpus to maintain your lifestyle post-retirement.

Corpus Estimation:

Target Corpus: Estimate your retirement corpus based on your desired retirement age, current lifestyle, and inflation. Given your current income and expenses, a target of Rs 5-7 crores might be realistic.

Investment Strategy: Allocate a portion of your income to retirement-focused investments, such as diversified equity funds. The power of compounding will help you accumulate the necessary corpus over the next 15-20 years.

EPF and PPF: Continue contributing to EPF and PPF as they provide a stable and tax-efficient foundation for your retirement corpus.

Reviewing Insurance Needs:

Term Insurance: Ensure that you have adequate term insurance coverage, which is more cost-effective than traditional policies like LIC.

Health Insurance: With age, medical expenses tend to increase. Consider enhancing your health insurance coverage to protect against unforeseen medical costs in retirement.

Tax Planning and Optimization
Efficient tax planning can help you retain more of your earnings and grow your wealth faster.

Maximizing Deductions:

Section 80C: You’re already maximizing this with PPF, LIC premiums, and home loan principal repayment. Consider other avenues like ELSS for additional tax benefits.

Section 80D: Ensure you claim deductions for health insurance premiums. This not only reduces tax liability but also secures your family’s health needs.

Capital Gains and Tax Efficiency:

Property Sale: As discussed, reinvest LTCG from the property sale into specified instruments to reduce tax liability.

Tax Harvesting: If you hold equities or equity mutual funds, consider tax harvesting strategies to minimize LTCG taxes.

Emergency Fund and Contingency Planning
An emergency fund is essential, especially with your current financial commitments.

Building a Safety Net:

Liquid Fund: Set aside at least 6 months’ worth of expenses in a liquid fund. This ensures you’re covered in case of job loss or other emergencies.

Flexibility: Ensure that this fund is easily accessible and not locked into long-term investments.

Debt Management:

Prioritizing Debt: Consider prioritizing high-interest debt, such as any personal loans or credit card balances, before focusing on long-term investments.
Final Insights
Your financial situation is complex, but with strategic planning, you can manage your current obligations while building a secure future. Focus on reassessing your LIC policies, optimizing your investment strategy, and planning for major life goals like your son’s education and retirement.

Reducing your home loan burden through the sale of your flat and efficient tax planning can further enhance your financial stability. Ensuring that you have adequate insurance coverage and a robust emergency fund will protect you against unforeseen events.

Finally, with disciplined investing and strategic reallocation of funds, you can achieve your long-term financial goals and secure a comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hi Karunakar,

You have an House property (independent house) valued at 1.6Cr which you intend to sell and use the amount to purchase another House property (flat) with value of 1.4Cr.
You have raise multiple queries and before responding to them, I will try to explain the capital gains on house property.
Capital Gains = Sale value - cost of acquisition - cost of improvement - expenses incurred for sale (e.g. brokerage).
So first calculate the Capital gains on selling the property, as you mentioned you are selling it for 1.6Cr, so reduce it by the acquisition cost, etc.
Once you have the Capital gains amount, that is the amount you need to re-invest in another property to save tax on it, in your case the Flat (value more than the CG) can be purchase within the next 2 years and no tax will be payable.
So lets assume out of 1.6 Cr, you have CG of 1Cr, then 1Cr reinvested in another property i.e. for your flat cost of 1.4Cr, you will have no tax payable.
So its not the full value of sale, its only on the Capital gains that you need to worry for paying taxes.
The remaining amount of 60lakhs in above example can be utilized as per your requirement.
Responses
1. & 2. You can use any amount above the capital gains for any purpose you see fit - like parking, registration, loan or any other form of investment.
3. If the sale will conclude in April 2025, and your payment of the capital gains towards new flat will be April 2026, then you need to invest the capital gains amount as per below -
- if you are sure of purchase of flat, then within 6 months of sale date invest the amount in "Capital Gains Account Scheme CGAS)" in authorized banks. Amount will be kept in a special FD for 2 years and you can withdraw anytime to pay for your new property.

Within 6 months from sale of property or before tax filing for FY of sale date, i.e. FY25-26 filing date 31 July 2026, whichever is earlier, you need to make a decision.
If you are not planning to purchase another house property, then reinvest in specific long term capital gain bonds from NHAI, REC, some others, these bonds have lock-in of 5 years
If you decide to purchase another property, deposit CG in CGAS as mentioned above.

Interest earned on these deposits in taxable (under head of Other income).

Thanks & Regards
Janak Patel
Certified Financial Planner.

Ans: You are 38 years old.
You own a house plus two flats worth Rs. 2 crores.
You have Rs. 15 lakhs in stocks and mutual funds.
You have Rs. 40 lakhs as self-savings.
You are paying EMI for a Rs. 35 lakh home loan.
You are getting rental income of Rs. 60,000 to Rs. 70,000 monthly.
You are planning to buy a bigger flat worth Rs. 1 crore.
You are confused between taking a new home loan or selling one flat.
Let us now guide you in a detailed 360-degree manner.

First, Understand Your Current Asset Position
You already own 3 properties including your current home.

Their combined value is around Rs. 2 crores.

You have Rs. 15 lakhs in financial investments.

You have Rs. 40 lakhs in self-savings.

You have an ongoing Rs. 35 lakh home loan.

Your monthly rental income is strong.

Your age is just 38, you have time ahead.

This is a solid financial base.
But more real estate may not be a wise decision now.

Do Not Keep Increasing Real Estate Exposure
You already have 3 properties.

Buying one more adds to concentration risk.

Real estate is not a liquid asset.

It gives no monthly income unless rented.

Maintenance cost, tax, and legal issues can also increase.

Selling it in emergencies is difficult and slow.

Better to reduce real estate, and build financial assets.

Why You Want a Bigger Flat – Emotional or Financial?
Bigger house is good if family is growing.

But it should not hurt your future goals.

More house means more expenses.

You need more furniture, interiors, maintenance.

These hidden costs may hurt long-term savings.

You must balance comfort and financial health.

Option 1: Buy Bigger Flat Using Rs. 60L Loan
Pros:

You keep all 3 flats.

Your rental income continues.

You move to a more spacious home.

Cons:

One more loan increases your EMI burden.

Total loan becomes Rs. 95 lakhs (35 + 60).

You already have Rs. 70,000 EMI likely.

Additional Rs. 55,000–60,000 EMI will hurt liquidity.

Two loans will reduce your monthly surplus.

You already have Rs. 40 lakhs with you.

You will have to use it all to fund new flat.

Your emergency savings and financial investments will be zero.

That is not safe in the long term.

No financial cushion will remain for future.

Option 2: Sell One Flat and Upgrade
Pros:

You unlock money from an illiquid asset.

You reduce overall real estate exposure.

You reduce EMI stress by taking a smaller loan.

You may only need Rs. 20–25 lakh loan.

This EMI will be just Rs. 15,000–20,000.

You can keep your Rs. 40 lakhs savings.

You can reinvest Rs. 40 lakhs wisely in mutual funds.

This can build your child’s education and retirement corpus.

You also avoid high EMI stress.

Cons:

You lose one rental income source.

Property appreciation may stop on that unit.

Some emotional attachment to property may exist.

Ideal Recommendation – Sell One Flat, Shift to Bigger Flat
Don’t hold 3 flats just for feeling rich.

Selling one flat reduces EMI and risk.

It also improves cash flow for future investing.

Use your Rs. 40 lakhs partly for new flat.

Take small loan of Rs. 20–25 lakhs only.

This keeps EMI light.

You keep financial freedom and comfort.

Avoid Overexposing Yourself to Home Loans
You are already repaying one loan.

Don't take one more large loan.

It may be okay now, but future is uncertain.

You may face income drop, job change, or medical emergency.

EMI pressure can impact your peace of mind.

Also reduces your ability to invest monthly.

Big loans steal your ability to grow wealth.

Use Surplus to Build Mutual Fund Portfolio
Rs. 40 lakhs is a powerful amount.

Don’t exhaust it in property.

Keep Rs. 10 lakhs as emergency fund.

Invest Rs. 30 lakhs in mutual funds through STP.

Use mix of equity, hybrid, and debt funds.

SIP monthly from STP over 18–24 months.

Use different fund categories for different goals.

Suggested Mutual Fund Strategy
For Retirement Goal:

Invest in Flexi Cap and Aggressive Hybrid Funds.

These give steady compounding over long term.

For Child Education (if applicable):

Use Flexi Cap and Large & Mid Cap Funds.

Also use Balanced Advantage for safer allocation.

For General Wealth Creation:

Use Aggressive Hybrid and Mid Cap Funds.

Keep STP in place from arbitrage or ultra-short funds.

Why Not to Use Direct Mutual Funds
Direct plans look cheaper.

But no one guides you when market falls.

You may stop SIP or withdraw at wrong time.

Regular plans via MFD with CFP offer safety.

They do review, rebalancing, and hand-holding.

Their service helps avoid costly mistakes.

Pay little more, but gain much more over years.

Why Not to Choose Index Funds
Index funds just follow index blindly.

No human decision-making.

No protection during crashes.

No smart exit or stock-level analysis.

Index funds are not meant for goal-based investing.

Active funds with good manager do better in India.

If You Hold LIC, ULIP or Endowment Plans
Check if any of your Rs. 15 lakhs is in such products.

Most of these give only 4%–5% returns.

They lock your money for years.

If no lock-in, surrender them.

Shift to mutual funds with proper guidance.

Take pure term insurance separately if needed.

Medical Cover is Not Enough
You have Rs. 10 lakhs health insurance.

Add top-up plan of Rs. 25–30 lakhs more.

Medical inflation is rising fast.

Hospital costs can cross Rs. 10 lakhs easily.

Better to be prepared now itself.

Keep Long-Term Investing Discipline
Do not stop SIPs during market correction.

Use goal-wise mutual fund tracking.

Increase SIP every year by 10% minimum.

Review your portfolio yearly.

Do not chase latest fund or trend.

Use CFP and MFD for regular help.

Finally
You already have large exposure in real estate.

Don’t increase it more.

Selling one flat and buying bigger one is wise.

Keep loan low and liquidity high.

Use remaining savings for wealth creation.

Don’t invest randomly in stock market.

Mutual funds are better with right guidance.

Don’t go for direct or index mutual funds.

Use regular plans through MFD with CFP support.

Stay on track with financial goals.

Don’t build more property, build more financial freedom.

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