I am a Resident Indian pensioner, Sr citizen, 78 yrs old owning 2 flats (1 in Goa for self-use and the 2nd one in Mumbai given on rental)

Income for FY 2019-20 as follows: -

• Gross sal (pension) 474042
• Income from rental 204000
• Interest on FD 7904
• Interest on savings a/c 2075
• Dividend on listed shares 90
• Total 688111 (A)

Deductions/exemption

• Standard deduction 50000
• PPF contribution 150000
• Health insurance premium 36582
• 30 % Annual rental 61200
• Total 297782 (B)
• Taxable income A-B 390329 LESS 300000 = 90329
• TAX PAYABLE 4488
• Rebate u/s 87A 4488
• NET TAX Payable NIL

PLS ADVISE ITR FORM APPLICABLE.

Ans: Investing wisely is crucial to ensuring a secure financial future. I understand you have several financial commitments and are looking for ways to optimize your investments and reduce your income tax. Let's address your concerns comprehensively.

Reducing Income Tax
Firstly, you mentioned that you are already maximizing your 80C investments and claiming housing loan interest. Here are some additional strategies to reduce your taxable income:

Utilize Section 80D: Under Section 80D, you can claim deductions for medical insurance premiums for yourself, your family, and your parents. The deduction is Rs 25,000 for yourself and your family and an additional Rs 25,000 (Rs 50,000 if parents are senior citizens) for your parents' insurance.

Claim House Rent Allowance (HRA): If you are paying rent and do not live in your own house, you can claim HRA exemptions under Section 10(13A). The exemption amount depends on your salary, rent paid, and city of residence.

Invest in National Pension System (NPS): Contributions to NPS under Section 80CCD(1B) provide an additional deduction of Rs 50,000 over and above the 80C limit of Rs 1.5 lakhs. This can help you save tax and build a retirement corpus.

Interest on Education Loan (Section 80E): If you have taken an education loan for yourself, your spouse, children, or a student for whom you are a legal guardian, you can claim a deduction on the interest paid on such loans.

Donations (Section 80G): Donations to specified charitable institutions qualify for deductions under Section 80G. Ensure the charity is eligible for deductions.

Section 24(b) - Interest on Housing Loan: Beyond your primary residence, if you have a loan on a second house, you can claim deductions for the interest paid without a cap under certain conditions.

Investment Options
Now, let’s discuss where to invest your money for good returns without a lock-in period:

Systematic Investment Plans (SIPs) in Mutual Funds: SIPs are ideal for disciplined investing. They allow you to invest a fixed amount monthly in mutual funds. Opt for equity mutual funds for potentially higher returns over five years. Diversify your portfolio by including large-cap, mid-cap, and balanced funds.

Debt Mutual Funds: For conservative investments, consider debt mutual funds. These invest in fixed-income securities and offer relatively stable returns. They are less volatile than equity funds and provide liquidity.

Liquid Funds: These are a type of debt mutual fund that invests in short-term instruments. Liquid funds provide high liquidity and better returns compared to savings accounts. They are suitable for short-term investments and emergencies.

Ultra-Short Duration Funds: Similar to liquid funds, but with slightly longer investment horizons. They offer better returns and maintain liquidity.

Your Real Estate Decision
You have two main options regarding your properties in Raipur and Bhubaneswar:

Option 1: Demolish and Rebuild in Raipur: Building a new house on your existing land can modernize the property and potentially increase its value. However, consider the cost (Rs 80 lakhs) and whether it will yield a good return on investment, especially if you plan to sell or rent it out.

Option 2: Settle in Bhubaneswar: Bhubaneswar offers a good rental yield and is your wife's preferred location. Purchasing a 3 BHK for Rs 1.5 crores can be a good investment, especially if the property appreciates and offers a steady rental income.

Analysis and Recommendation: Assess the potential returns, convenience, and personal preferences. Bhubaneswar seems more lucrative if it offers good rental income and aligns with your lifestyle. However, rebuilding in Raipur could be worthwhile if the property's location is prime and the new construction significantly increases its value.

Managing Loans
You currently have a car loan of Rs 15 lakhs and a housing loan of Rs 36 lakhs. Here are some strategies to manage and reduce your loan burden:

Prepay High-Interest Loans: Focus on repaying high-interest loans like the car loan first. Use any surplus funds to reduce this debt faster.

Balance Transfer for Home Loan: Consider transferring your home loan to another bank offering lower interest rates. This can reduce your EMI burden and total interest outgo.

Part-Payment of Home Loan: Use bonuses or other windfalls to make part-payments on your home loan. Reducing the principal amount can significantly lower your interest burden over time.

Creating an Emergency Fund
Ensure you have an emergency fund that covers at least 6 months of your expenses. This fund should be easily accessible and kept in a high-liquidity account like a savings account or liquid fund. It provides financial security in case of unforeseen circumstances like medical emergencies or job loss.

Financial Planning for the Future
Retirement Planning: With your home loan payable till the age of 70, it's essential to have a solid retirement plan. Continue contributing to NPS for a pension corpus. Also, consider other retirement-focused mutual funds or pension plans that offer steady returns.

Children’s Education: If you have children, start planning for their education expenses early. Invest in child education plans or equity mutual funds with a horizon aligned with your child’s age.

Regular Monitoring and Rebalancing: Regularly review your investment portfolio to ensure it aligns with your goals and risk tolerance. Rebalance your portfolio as needed to maintain the desired asset allocation.

Enhancing Financial Literacy
Improving your financial knowledge can empower you to make better decisions. Consider reading books on personal finance, attending workshops, or following credible financial blogs and news sources. Understanding basic financial concepts will help you navigate investments and tax planning more effectively.

Final Insights
Balancing your income, expenses, and investments is key to achieving financial stability. By strategically investing Rs 36,000 monthly, utilizing tax-saving options, managing your loans efficiently, and planning for the future, you can secure a robust financial foundation. Regularly monitor and adjust your plans to stay on track with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello;

You may seek additional pure term plan, with regular premium payment, of 1.4 Cr covering both, yourself and your wife.

Best wishes;

Ans: Hello;

You may sell the second flat and land site owned by you.

It may fetch you around 1.1 Cr(~50 L flat value and 60 L land site value).

Therefore your total corpus adds upto around 2.5 Cr(1.4 Cr FD+ 1.1 Cr RE sale proceeds).

You may keep a sum of 50 L towards higher education corpus for your child.

For the balance 2 Cr, if you buy an immediate annuity, you may expect a monthly income of around 1 L.

This conveniently meets your regular monthly expenses and provides a surplus.

Part of the surplus may be invested in equity savings type mutual funds so as build a corpus over 10 years which may be used to boost retirement income.

Maturity proceeds of various endowment policies which have subscribed to, may be used to step up the annuity income to account for inflation.

Annuities may have lower rate then FD but it is offered for long tenures thereby avoiding the reinvestment risk.

Ultimately it is your preference.

Do buy adequate healthcare insurance for yourself and your family.

Also a word of caution on plan to undertake trading and investment in direct stocks. Define a certain minimum risk capital (say 10 L) which you may not mind even if lost completely and then venture out for stock trading. No MTF, No FNO.

Also take trades based on own self study or recommendation from a registered research analyst. Trading based on social media and TV tips is a sure way to disaster.

Happy Investing;
X: @mars_invest