Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 04, 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
GOUTAM Question by GOUTAM on May 31, 2024Hindi
Money

I will be retiring in nov ,24. I have pf of rs 22000000, leave encashment rs 3100000, gratuity rs2500000,fd 2200000,nps rs 5000000, ppf rs 1500000. I have no liability except daughter's marriage 5-6 years from now, have own house. Need a monthly income of rs 175000. G Ganguly.

Ans: Mr. Ganguly, congratulations on your approaching retirement in November 2024. You have built a substantial corpus with provident fund (PF) of Rs 2.2 crores, leave encashment of Rs 31 lakhs, gratuity of Rs 25 lakhs, fixed deposits (FD) worth Rs 22 lakhs, National Pension System (NPS) of Rs 50 lakhs, and Public Provident Fund (PPF) of Rs 15 lakhs. You are debt-free and own a house, which is a significant advantage.

Assessing Your Financial Situation
Monthly Income Requirement
Your monthly income requirement is Rs 1,75,000. This translates to an annual requirement of Rs 21,00,000. Considering your accumulated wealth, we will aim to generate this income while preserving and growing your corpus.

Daughter's Marriage
Your daughter’s marriage is anticipated in 5-6 years. We will allocate funds to ensure this goal is met without affecting your monthly income.

Evaluating Current Assets
Provident Fund (PF)
Your PF corpus of Rs 2.2 crores is substantial. PF is typically a low-risk investment providing stable returns, suitable for meeting regular expenses.

Leave Encashment
The leave encashment amount of Rs 31 lakhs provides additional liquidity, which can be utilized for immediate financial needs or invested for future growth.

Gratuity
Gratuity of Rs 25 lakhs is another lump sum that can be strategically invested to generate returns.

Fixed Deposits (FD)
Your FD corpus of Rs 22 lakhs offers security and guaranteed returns. However, the returns might not be sufficient to meet inflation-adjusted expenses.

National Pension System (NPS)
NPS corpus of Rs 50 lakhs is a good long-term investment with tax benefits. It can be partially withdrawn and the rest converted into an annuity.

Public Provident Fund (PPF)
PPF amounting to Rs 15 lakhs is tax-free and offers decent returns. It can be used as a safe investment for long-term growth.

Generating Monthly Income
To generate a monthly income of Rs 1,75,000, a diversified investment strategy is essential. This strategy will balance between security and growth, ensuring a steady income stream and preservation of capital.

Systematic Withdrawal Plan (SWP)
A Systematic Withdrawal Plan (SWP) in mutual funds can be an effective way to generate regular income. By investing a portion of your corpus in a balanced or debt-oriented mutual fund, you can set up monthly withdrawals. SWPs offer flexibility and potential for capital appreciation.

Mutual Funds
Investing in mutual funds will provide diversification and professional management. Actively managed mutual funds can yield better returns than index funds. A certified financial planner (CFP) can help select the right mix of equity and debt funds to balance risk and return.

Actively Managed Funds vs. Index Funds

Actively managed funds have professional managers aiming to outperform the market. Despite higher fees, they often yield better long-term returns. Index funds, on the other hand, replicate market indices and offer average returns. For your goals, actively managed funds are more suitable.

Regular Funds vs. Direct Funds

Investing through regular funds involves a commission for mutual fund distributors (MFDs). The expertise of a CFP ensures better fund selection and management. Direct funds save on commission but lack professional oversight. Regular funds offer better-managed investments, making them a wise choice.

Debt Mutual Funds
Debt mutual funds provide stability and regular income with lower risk. These funds are suitable for medium-term goals and act as a buffer against market volatility. A portion of your corpus can be allocated to debt funds for stability.

Ensuring Adequate Insurance
Life Insurance
Ensure you have adequate life insurance coverage to protect your family’s financial future. Avoid investment-cum-insurance policies like ULIPs, LIC endowment plans, as they offer lower returns and inadequate insurance cover. Consider surrendering such policies and reinvesting the proceeds in mutual funds.

Health Insurance
Adequate health insurance is crucial in retirement. Review your existing health coverage and consider increasing it if necessary. Medical expenses can be substantial, and comprehensive health insurance will protect your savings.

Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of expenses. This fund should be easily accessible and kept in a high-interest savings account or liquid mutual fund. An emergency fund provides financial security against unforeseen expenses.

Allocating Funds for Daughter's Marriage
Your daughter’s marriage is a significant financial goal. Estimate the expenses and allocate a portion of your corpus to safe and secure investments. Fixed deposits, debt funds, or balanced funds can be suitable for this purpose. Ensure these investments align with the 5-6 year time frame.

Portfolio Diversification
Diversifying your portfolio is crucial to manage risk and enhance returns. A balanced mix of equity, debt, and other asset classes will provide stability and growth. Regular reviews and rebalancing ensure the portfolio remains aligned with your goals.

Equity Investments
Equity investments offer high growth potential. A portion of your corpus should be allocated to equity mutual funds. These funds can generate inflation-beating returns over the long term, ensuring your corpus grows.

Gold
Gold is a traditional and reliable investment, acting as a hedge against inflation and economic uncertainty. Consider investing in gold through sovereign gold bonds or gold ETFs. These options offer better returns and safety compared to physical gold.

Tax Planning
Efficient tax planning maximizes your disposable income. Utilize available deductions under Section 80C, 80D, and others. Your contributions to NPS, PPF, and mutual funds (ELSS) help in tax savings while building your corpus.

Regular Review and Adjustment
Regularly review your portfolio’s performance. Market conditions and personal goals change over time. Rebalance your investments to maintain the desired asset allocation. A CFP can provide valuable insights and adjustments.

Financial Discipline and Continuous Learning
Maintaining financial discipline is key to achieving your goals. Automate your investments to ensure consistency. Stay informed about financial markets and new investment opportunities. Financial literacy empowers better decision-making.

Professional Guidance
A CFP provides personalized advice aligned with your goals. Their expertise in financial planning ensures optimal investment strategies, tax efficiency, and risk management. Regular consultations help in adapting to changing circumstances and market conditions.

Conclusion
Your substantial corpus is a result of disciplined savings and prudent investments. To ensure a secure retirement and meet your financial goals, a diversified investment strategy is essential. Focus on generating regular income, maintaining adequate insurance, and planning for significant expenses like your daughter’s marriage.

Invest wisely, stay disciplined, and enjoy a secure financial future.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 2024

Asked by Anonymous - Jun 11, 2024Hindi
Listen
Money
I have post office deposit of Rs 50 lacs, FD : Rs 25 lacs, PPF : 40 lacs, MF : 40 lacs, NPS : 7 lacs & an extra flat current valuation : 40 lacs... I am 54..& want to retire. I need a monthly income of 1 lac... Pl suggest
Ans: Evaluating Your Current Financial Position
Assets Overview
Post Office Deposit: Rs. 50 lakhs
Fixed Deposit (FD): Rs. 25 lakhs
Public Provident Fund (PPF): Rs. 40 lakhs
Mutual Funds (MF): Rs. 40 lakhs
National Pension System (NPS): Rs. 7 lakhs
Extra Flat: Rs. 40 lakhs
Total Assets
Total Value: Rs. 202 lakhs (excluding flat)
Monthly Income Requirement
Required: Rs. 1 lakh per month
Income Generation Strategies
Fixed Income from Deposits
Post Office Deposit: Generate regular interest income.
Fixed Deposit (FD): Provides stable interest income.
Utilising PPF
PPF can provide tax-free returns but has withdrawal restrictions.
Consider partial withdrawals after maturity for supplementary income.
Systematic Withdrawal from Mutual Funds
Set up a Systematic Withdrawal Plan (SWP) for a regular income stream.
Choose funds with a stable return history.
Utilizing NPS
Annuity purchase with 40% of NPS at retirement.
The remaining 60% can be withdrawn lump-sum.
Evaluating Additional Sources
Rental Income from Extra Flat
Consider renting out the flat for additional income.
Expected rental income could be Rs. 15,000 - Rs. 20,000 per month.
Diversification and Rebalancing
Diversify investments to mitigate risks.
Rebalance portfolio regularly for optimal returns.
Suggested Financial Plan
Fixed Income Sources
Post Office Deposit: Approx. Rs. 25,000 - Rs. 30,000 monthly.
FD: Approx. Rs. 10,000 - Rs. 15,000 monthly.
Income from PPF
Withdrawals to be used as supplementary income.
Plan for withdrawals to align with monthly needs.
Mutual Funds SWP
Generate Rs. 30,000 - Rs. 35,000 monthly through SWP.
Select funds with consistent performance.
Rental Income
Expected Rs. 15,000 - Rs. 20,000 monthly.
Use this for regular expenses.
Annuity from NPS
Approx. Rs. 10,000 monthly post-retirement.
Lump-sum withdrawal to cover unexpected expenses.
Monitoring and Adjusting
Review financial plan annually with a certified financial planner.
Adjust withdrawals and investments based on market conditions and needs.
Final Insights
Ensure all income sources cover your monthly needs.
Keep a contingency fund for emergencies.
Regularly consult with a certified financial planner to stay on track.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 18, 2024

Asked by Anonymous - Jul 07, 2024Hindi
Listen
Money
I am 45 years age. Current investment balance in PF and VPF-45,00,000 mutual funds-27,00,000, Shares-700,000, NPS-6,00,000,LIC-10,00,000 Monthly investment PF and VPF-43,000, Mutual funds -32,000,NPS-6000, LIC-4500 Shares-10,0000. Yearly step up in PF vpf, mutual fund is 10% Current leaving in pune and home loan is 50,00,000. One home is in Nashik current market price is 75,00,000. I have daughter in 10th std and son in 6th std. Expecting Rs 50,00,000 on both education expenses after their 10th std. I want to retire at the age of 52. Expecting monthly income of Rs 1,00,000 after retirement.
Ans: You are 45 years old with a comprehensive investment portfolio. Here's a summary:

Provident Fund (PF) and Voluntary Provident Fund (VPF): Rs. 45,00,000
Mutual Funds: Rs. 27,00,000
Shares: Rs. 7,00,000
National Pension System (NPS): Rs. 6,00,000
Life Insurance Corporation (LIC): Rs. 10,00,000
Your monthly investments are:

PF and VPF: Rs. 43,000
Mutual Funds: Rs. 32,000
NPS: Rs. 6,000
LIC: Rs. 4,500
Shares: Rs. 10,000
You own a home in Pune with a home loan of Rs. 50,00,000 and another home in Nashik with a market value of Rs. 75,00,000. Your daughter is in 10th std, and your son is in 6th std, with expected education expenses of Rs. 50,00,000 each.

You plan to retire at 52 and desire a monthly income of Rs. 1,00,000 post-retirement.

Financial Goals
Children's Education: Rs. 50,00,000 each after 10th std.
Retirement Planning: Achieve a monthly income of Rs. 1,00,000 post-retirement.
Loan Management: Efficiently manage the home loan of Rs. 50,00,000.
Recommendations for Financial Stability
1. Children's Education Fund
Dedicated Savings: Start a dedicated investment for your children's education.
Systematic Investments: Consider mutual funds tailored for education expenses with a horizon of 2-5 years.
2. Retirement Planning
Current Investments: Continue your current investments in PF, VPF, mutual funds, and NPS.
Retirement Corpus: Calculate the required retirement corpus to achieve Rs. 1,00,000 monthly income.
3. Home Loan Management
Prepayments: Make prepayments on your home loan whenever possible. This reduces interest and tenure.
Budget Allocation: Allocate a portion of any surplus towards prepaying the loan.
4. Portfolio Review and Diversification
Diversification: Ensure your portfolio is well-diversified across equity, debt, and other assets.
Regular Review: Review your portfolio annually and rebalance based on market conditions.
Analytical Insights
Children's Education Fund
Investment Strategy: Invest in a mix of equity and debt funds for a balanced approach.
Education Plans: Consider child education plans that offer a mix of growth and safety.
Retirement Planning
Corpus Calculation: To achieve Rs. 1,00,000 per month, you need a significant retirement corpus. Assuming a 4% withdrawal rate, you will need approximately Rs. 3 crores.
Current Contributions: Your current contributions are substantial. Continue with yearly step-ups to keep pace with inflation.
Risk Management
Insurance Coverage: Ensure adequate life and health insurance coverage.
Emergency Fund: Maintain an emergency fund of 6-12 months of living expenses.
Key Considerations
Risk Tolerance: Align your investments with your risk tolerance and financial goals.
Financial Goals: Prioritize your children's education and retirement planning.
Regular Review: Annual reviews and adjustments are crucial for staying on track.
Final Insights
To achieve financial stability and meet your goals, continue your disciplined investment approach. Start a dedicated fund for your children's education and make strategic prepayments on your home loan. Ensure your investment portfolio is diversified and regularly reviewed. Adequate insurance coverage and an emergency fund are essential for risk management. By following these recommendations, you can secure a comfortable retirement and provide for your children's education.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Janak

Janak Patel  |43 Answers  |Ask -

MF, PF Expert - Answered on Jan 29, 2025

Asked by Anonymous - Jan 26, 2025Hindi
Listen
Money
My age is 40 and i want to retire in nxt 10 years my corpus in mf = 5 crores - ppf = 1 crore - term insurance 3.75 crore - lic = 2 crore - mediclaim = 50 lakh - owned house - land = 50 lakjs - other recurring income monthly = 16 lakhs a month
Ans: Hi,

There are many things to consider for an early retirement (around age 50 as you mentioned), first is to start thinking about it in a more realistic manner. An early retirement has different meaning to each individual - opportunities to relax and pursue your passion and interests and live life on your own terms. So do think about how to keep yourself occupied once you retire.

At 50 years of age, it a still a long life ahead. Considering the investments and assets mentioned in your query, it may seem more than adequate, but some critical information are missing in it for a full assessment. What are your expenses, liabilities and plans/goals in life and also who are your dependents and what are your financial responsibilities. These need to be considered before concluding if you are well placed for the long retirement ahead.

There are many aspects that will need planning and expert guidance -
• Expense management - Regular income to cover your monthly expenses and ad-hoc/annual expenses
• Investment management - Optimize investment portfolio and plan on reinvesting maturing benefits of LIC that are aligned to your requirements
• Tax optimization of investments and reimbursements - Tax is applicable on gains from most sources of income except a few and in your case LIC (depending on the policy type) and PPF balance are tax exempt
• Risk management - besides health insurance (increase it to 1 Cr), do you need any other type of insurance, that needs to be assessed/calculated
• Succession and inheritance planning - passing of your assets and investments to family, friends or anyone you wish

I recommend you to connect with a good advisor / Certified Financial Planner who will study all aspects of your life and provide guidance and feedback and help you plan the retirement.

Thanks & Regards
Janak Patel
Certified Financial Planner.

..Read more

Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 04, 2025

Asked by Anonymous - Jan 26, 2025Hindi
Listen
Money
My age is 40 and i want to retire in nxt 10 years my corpus in mf = 5 crores - ppf = 1 crore - term insurance 3.75 crore - lic = 2 crore - mediclaim = 50 lakh - owned house - land = 50 lakjs - other recurring income monthly = 16 lakhs a month
Ans: You have built a strong financial foundation. Retiring in 10 years is possible with proper planning.

Understanding Your Current Financial Position
Mutual funds corpus: Rs 5 crores

PPF balance: Rs 1 crore

Term insurance cover: Rs 3.75 crores

LIC policy: Rs 2 crores

Mediclaim: Rs 50 lakhs

Owned house: No housing cost after retirement

Land: Rs 50 lakhs, but not a liquid asset

Recurring monthly income: Rs 16 lakhs

Evaluating Your Retirement Readiness
Your assets are strong and well-diversified.

Your medical and life insurance coverage is adequate.

Recurring income of Rs 16 lakhs monthly provides high financial security.

A structured withdrawal plan is needed for your corpus.

Strengthening Your Retirement Plan
Mutual funds should be balanced with equity and debt.

PPF maturity should be used for safe returns.

LIC policies should be reviewed for efficiency.

Recurring income should be managed wisely to ensure sustainability.

Investment Strategy for the Next 10 Years
Continue investing in mutual funds for long-term growth.

Increase debt exposure closer to retirement for stability.

Keep emergency funds for at least 2 years of expenses.

Avoid real estate as it locks funds and reduces liquidity.

Managing Expenses After Retirement
Define annual expense needs post-retirement.

Plan systematic withdrawals from investments.

Keep a portion of funds in low-risk instruments for liquidity.

Review your plan regularly with a Certified Financial Planner.

Final Insights
Your financial position is strong for early retirement.

Focus on asset allocation and risk management.

Keep reviewing and adjusting your plan as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 04, 2025

Asked by Anonymous - Jan 27, 2025Hindi
Listen
Money
I am 47. I wanted to retire this year. I have around 5 crore commercial property and 35 residential plots worth 3.5 crore. no house, 2 daughter of 6th std and 2nd std. Monthly expense 50k and monthly income 1 lk.
Ans: You have done well in accumulating assets. However, your retirement plan must focus on liquidity, stability, and growth. Real estate is illiquid and needs careful management. Let's assess your situation and build a structured financial plan.

Key Challenges in Your Retirement Plan
Your wealth is in real estate, which lacks immediate liquidity.

You have two young daughters, requiring future education and marriage funds.

Your monthly income is Rs 1 lakh, but real estate income is often inconsistent.

You have no house, meaning you might need to buy or rent one.

Healthcare costs will increase, and medical emergencies can arise.

Real Estate – A Major Concern
You have 35 residential plots and commercial property worth Rs 8.5 crore in total.

Real estate is illiquid and cannot generate stable cash flow.

Managing multiple properties requires time, effort, and ongoing expenses.

Selling during an emergency can lead to financial losses.

It is crucial to convert a portion of real estate into liquid investments.

Immediate Steps for a Secure Retirement
1. Secure a Stable Monthly Income
Relying on real estate income is risky as tenants may vacate, or rental income may fluctuate.

Sell some residential plots and reinvest in mutual funds for steady cash flow.

Avoid annuities as they lock money and limit flexibility.

Choose actively managed funds for growth and income generation.

2. Buying a House – Essential for Stability
Consider buying a house within your budget to secure your stay.

Renting may seem affordable now, but long-term rental costs can become a burden.

3. Children's Education and Marriage Fund
Your daughters are still in school, so their higher education expenses will rise.

Set up a dedicated education fund using actively managed mutual funds.

Avoid direct mutual funds, as they require constant monitoring.

Invest through a Certified Financial Planner to build a structured portfolio.

4. Emergency and Medical Fund
Healthcare costs will increase significantly after retirement.

Keep at least 3 years' worth of expenses in liquid assets.

Ensure you have adequate health insurance for yourself and your family.

Investment Strategy for Financial Freedom
Selling at least 10-15 plots can generate a diversified investment portfolio.

Invest in a mix of equity and fixed-income instruments.

Keep a portion in actively managed mutual funds for long-term growth.

Invest in regular mutual funds through a Certified Financial Planner for guidance.

Avoid index funds, as they do not offer risk protection in market downturns.

Final Insights
Convert illiquid assets into liquid investments to ensure financial stability.

Build a structured portfolio with active fund management.

Plan for children’s education, medical expenses, and monthly cash flow.

Ensure you have a house to live in without financial strain.

Avoid index funds, direct funds, and annuities for a flexible and growth-focused retirement.

Retirement is not just about assets but also income stability and liquidity. A structured approach will ensure you enjoy financial independence without stress.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 27, 2025

Listen
Money
Sir Krishnan Mahadevan from blore Want to retire by 51 iam 48yrs old . Financials MF 75lacs Site 45 lacs FD 20lacs House bought at 80lacs current value is 1.2crs were we stay Current monthly expenses is around 60k Home loan of 20lacs left with a emi of 20k permonth . Pls suggest
Ans: You are 48 years old with a goal to retire at 51.

Your current assets include mutual funds worth Rs. 75 lakhs, a site valued at Rs. 45 lakhs, and FDs worth Rs. 20 lakhs.

Your primary residence, bought at Rs. 80 lakhs, is now valued at Rs. 1.2 crore.

You have an outstanding home loan of Rs. 20 lakhs with a monthly EMI of Rs. 20,000.

Your monthly expenses are Rs. 60,000, which may increase post-retirement due to inflation.

Key Goals to Address
Clearing the Home Loan: Eliminate this liability before retirement.

Building a Retirement Corpus: Ensure sufficient funds to cover post-retirement expenses.

Providing for Inflation: Account for rising expenses over the next few decades.

Emergency Preparedness: Maintain a separate emergency fund for unforeseen needs.

Recommendations for Your Retirement Plan
1. Clear the Home Loan Before Retirement
Prioritise paying off your Rs. 20-lakh loan in the next 3 years.

Use part of your fixed deposit (FD) corpus to prepay the loan.

Clearing the EMI frees Rs. 20,000 monthly for your retirement corpus.

2. Optimise Mutual Fund Investments
Your mutual funds (Rs. 75 lakhs) are a strong foundation for retirement.

Avoid direct funds due to limited professional management and higher tracking needs.

Switch to regular funds via a Certified Financial Planner for personalised advice.

Diversify across large-cap, flexi-cap, and hybrid funds for balanced growth.

Invest systematically to maximise compounding and manage risk.

3. Increase Retirement Corpus
Use the surplus from EMI savings to invest in mutual funds.

Set aside Rs. 10 lakhs from FDs into debt mutual funds for stability.

This offers better returns than fixed deposits over time.

4. Emergency Fund Allocation
Maintain an emergency fund equivalent to 12 months’ expenses (Rs. 7–8 lakhs).

Invest this in liquid funds or sweep-in FDs for liquidity.

5. Inflation-Proofing Your Expenses
Your current expenses of Rs. 60,000 per month will rise post-retirement.

Assume expenses will double in 20 years due to inflation.

Your retirement corpus should generate a consistent monthly income.

Ensure investments in equity mutual funds for long-term inflation-adjusted growth.

6. Estate Planning
Create a will to clearly outline the distribution of assets.

Ensure the site and house are included in your estate plan.

Review the legal status of your site to ensure ease of transfer in the future.

7. Avoid New Real Estate Investments
Real estate is illiquid and may not offer steady returns.

Focus on financial instruments like mutual funds for flexibility and growth.

8. Tax-Efficient Planning
Long-term capital gains (LTCG) on mutual funds above Rs. 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

Use this knowledge to optimise redemptions during retirement.

For debt investments, remember that gains are taxed as per your income tax slab.

9. Post-Retirement Income Planning
Invest your mutual funds to create a Systematic Withdrawal Plan (SWP).

SWPs provide regular income and help manage taxation.

Use a mix of debt and equity funds for balanced withdrawals.

Adjust withdrawals annually for inflation and expenses.

Final Insights
Your financial foundation is strong, with a mix of assets and minimal liabilities.

Clearing your home loan before retirement is critical to reduce financial pressure.

Focus on growing your mutual fund investments for consistent post-retirement income.

Maintain an emergency fund to manage unexpected expenses.

Avoid new real estate investments and instead prioritise professionally managed mutual funds.

Regularly review your portfolio with a Certified Financial Planner to ensure alignment with your goals.

Plan your estate to ensure a smooth transfer of assets to your heirs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8611 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 30, 2025

Money
Dear experts, Is CGAS account mandatory to open even if the entire amount realized during selling of a land is reinvested into buying a new residential home before the ITR filing date of the financial year in which the land was sold? Can a normal fixed deposit be done, given that the home will be purchsed before the ITR due date, or the amount kept in the savings account only in which it was originally received? When CGAS account is really needed? And if the land is inherited, is fair market value (FMV) certificate mandatory during tax filing? Warm Regards.
Ans: Capital Gains and CGAS can confuse many. You’ve clearly understood key parts already. That’s a good start. Let’s look into the entire situation, part by part.

We will explore the rules, your options, and how to avoid mistakes. This will give you a complete 360-degree clarity from tax, legal and compliance angles.

 
 
1. When Capital Gains Account Scheme (CGAS) Becomes Mandatory

CGAS is not needed in all cases.
 
 

You must deposit in CGAS only if home purchase is delayed.
 
 

If you reinvest before ITR due date, CGAS is not compulsory.
 
 

You can reinvest directly in the new house.
 
 

Keep proofs of payments, builder receipts and registry.
 
 

This is allowed even if amount is not kept in CGAS.
 
 

Fixed Deposit or savings account is fine in such case.
 
 

But all reinvestment should happen before the ITR due date.
 
 

If even part of it remains, then CGAS is mandatory for balance.
 
 

So, CGAS is only a backup rule, not the first step.
 
 
2. Can Fixed Deposit or Savings Account Be Used Instead?

Yes, if you use the full sale amount in time.
 
 

There is no restriction to keep the sale money in a bank FD.
 
 

Even savings account can be used till reinvestment.
 
 

But do not mix that account with other funds.
 
 

It should be clearly seen that the money was from land sale.
 
 

Keep trail of cheque/RTGS and amount received in bank.
 
 

Use the same account for property payment preferably.
 
 

Attach documents to your tax file as proof of usage.
 
 

So, a separate CGAS account is not required if home is bought on time.
 
 
3. Real Timing for CGAS Requirement

Let’s say land is sold in FY 2024–25.
 
 

ITR filing due date is 31st July 2025 (for most individuals).
 
 

If you do not reinvest before 31st July 2025, then CGAS is needed.
 
 

You must deposit remaining capital gains before that date.
 
 

Otherwise, the capital gain becomes taxable.
 
 

After that, you can buy the home within two years.
 
 

Or construct the home within three years.
 
 

But tax exemption applies only if CGAS rules are followed.
 
 

So, CGAS gives you extra time, but with some process to follow.
 
 
4. What Happens If You Don’t Open CGAS?

If no reinvestment is done and no CGAS is opened,
 
 

Then you lose the exemption under the capital gains rules.
 
 

The gain will be treated as long-term capital gain.
 
 

You will need to pay tax on it.
 
 

Keeping money in FD or savings account won’t save tax after deadline.
 
 

Tax will be calculated as per rules and payable with interest.
 
 

So, if you're not ready to reinvest, then open CGAS on time.
 
 
5. For Inherited Land – Is Fair Market Value (FMV) Mandatory?

Yes, FMV is required for inherited property.
 
 

FMV as on 1st April 2001 must be calculated.
 
 

This becomes your cost of acquisition.
 
 

Without FMV, your gain will look artificially high.
 
 

That will lead to more tax than needed.
 
 

FMV must be from a registered valuer.
 
 

Use this valuation during capital gain working.
 
 

Keep valuation certificate with your documents.
 
 

It is not submitted with return, but can be asked later.
 
 

So yes, FMV certificate is very important in your case.
 
 
6. Points to Remember for Reinvestment and Tax Filing

Always try to reinvest before the ITR filing due date.
 
 

Keep documents ready – sale deed, purchase deed, payment proof.
 
 

Mention exemption under the correct capital gains section in ITR.
 
 

File ITR with details of both sale and new purchase.
 
 

If any delay is there, deposit in CGAS before 31st July.
 
 

Open CGAS with a scheduled bank only.
 
 

Withdraw money from CGAS only for house purchase or construction.
 
 

Do not withdraw for other purposes. That makes it taxable.
 
 

Proper filing avoids notices and problems later.
 
 
7. Should You Do CGAS Deposit Early Just in Case?

If you're unsure about home purchase date, CGAS is a safe backup.
 
 

You can withdraw later for the purchase purpose.
 
 

But if you're confident about timing, no need to open CGAS.
 
 

Avoid unnecessary paperwork if not required.
 
 

So, CGAS is useful, but not needed if timing is right.
 
 
8. Role of a Certified Financial Planner in Such Cases

Tax planning around property needs correct steps.
 
 

A Certified Financial Planner helps track timelines and rules.
 
 

You get full support for investment, taxation, compliance and reinvestment.
 
 

A CFP can also coordinate with CA or legal expert.
 
 

They also help with ITR and property documentation.
 
 

It removes the guesswork and avoids last-minute issues.
 
 

Guided help gives better peace of mind.
 
 
Finally

You are handling a serious matter with clarity and awareness. That’s a strong foundation. You do not need to open a CGAS account if the home is fully bought before the ITR due date. You can keep money in your savings account or fixed deposit during this time. Just make sure the home is purchased and payment is completed before the filing date.

If not, deposit balance gains in CGAS to save tax. FMV is also required for inherited land. Get a certified valuer’s report. Use this in capital gain computation. This avoids tax mistakes.

Stick to timelines. Keep clear records. Plan your reinvestment wisely. Work with a Certified Financial Planner if needed for execution and follow-through.

 
 

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

...Read more

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x