Will Shifting Investments in Retirement Reduce My Taxes?

Ans: We suggest consulting a CA regarding the same.

Ans: To help you optimize his long-term tax savings, a well-rounded approach leveraging mutual funds (ELSS), PPF, and NPS will provide both tax efficiency and growth potential, balancing risk and security. Here’s a comprehensive strategy:

Key Investment Options:

1. Public Provident Fund (PPF):

• Tax Deduction: Up to Rs 1.5 lakh under Section 80C.
• Lock-in: 15 years, providing low-risk, government-backed returns (around 7.1%).
• Strategy: Maximize PPF contributions to Rs 1.5 lakh annually for stable, long-term, and tax-free growth.

2. National Pension System (NPS):

• Tax Deduction: Rs 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80CCD(1B).
• Equity Exposure: NPS offers flexibility in equity allocation, providing the potential for higher long-term returns.
• Strategy: Contribute Rs 50,000 for the additional tax benefit and build a retirement corpus, balancing equity and debt for moderate growth.

3. Equity-Linked Savings Scheme (ELSS):

• Tax Deduction: Up to Rs 1.5 lakh under Section 80C.
• Lock-in Period: 3 years (shortest under 80C).
• Growth Potential: Higher returns due to equity exposure.
• Strategy: Start a Systematic Investment Plan (SIP) in ELSS funds to benefit from tax savings and market-linked growth over the long term.

4. Comprehensive Plan for you:

a. Maximizing Tax Benefits:

• Contribute Rs 1.5 lakh to PPF for safe, consistent returns.
• Invest Rs 50,000 in NPS to take advantage of the additional tax deduction under Section 80CCD(1B) and build a retirement corpus.
• Allocate any remaining eligible tax-saving contributions to ELSS to optimize growth under Section 80C.

b. Diversified Investment Strategy:

• PPF: A risk-free option with guaranteed returns, perfect for long-term, low-risk growth.
• NPS: A moderate-risk option with the potential for higher returns through equity exposure, focusing on retirement planning.
• ELSS: A higher-risk, higher-reward option for long-term wealth creation and tax savings.

c. Additional Tax-Saving Measures:

• Health Insurance Premiums: Claim up to Rs 25,000 (or Rs 50,000 if covering senior citizen parents) under Section 80D.
• Home Loan Interest: Deduct up to Rs 2 lakh under Section 24(b) for home loan interest payments.

d. Tailored Recommendations:

• PPF: Max out the Rs 1.5 lakh limit to secure risk-free growth.
• NPS: Contribute Rs 50,000 annually to build a retirement corpus while enjoying additional tax benefits.
• ELSS: Invest the remainder of your Section 80C limit in ELSS to benefit from equity market growth.
• Regular Monitoring: Review and rebalance your portfolio as your financial goals evolve to ensure optimal growth and tax savings.

By following this balanced and diversified strategy, Kunal can optimize his tax savings while securing a solid financial future for his long-term goals.

Ans: Hello;

I would suggest you to not remove money from EPF for investments into mutual funds.

Any how EPF corpus has 15% exposure to equity market(through index funds) slated to be increased to 20%.

After fulfilling your household needs if you surplus income which you would like to invest then you may begin with a 5 K sip into HDFC balanced advantage fund (Growth) for 3 years to begin with.

Happy Investing;

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Hello;

If you want to have good corpus for your retirement then I recommend you invest this money(29 L) in NPS.

Apart from this also do regular investment of 10 K per month(NPS).

These lumpsum and regular investment may provide you a corpus of around 1.4 Cr at the age of 60.

NPS is much better, in fact the best in my view, for retirement planning.

NPS allows limited withdrawal after 5 years.

Happy Investing;
X: @mars_invest