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Vivek

Vivek Lala  |251 Answers  |Ask -

Tax, MF Expert - Answered on Jul 03, 2023

Vivek Lala has been working as a tax planner since 2018. His expertise lies in making personalised tax budgets and tax forecasts for individuals. As a tax advisor, he takes pride in simplifying tax complications for his clients using simple, easy-to-understand language.
Lala cleared his chartered accountancy exam in 2018 and completed his articleship with Chaturvedi and Shah. ... more
Asked by Anonymous - Jun 30, 2023Hindi
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Hi, I wanted a income tax saving investment for my mother. She is 58 yrs old and have FD-Interest income and House Property Rental income. Please suggest better options.

Ans: The tax saving options are :
ELSS u/s 80C - max - 1.5L
A good medical cover u/s 80D - max - 50000
NPS - max 50,000

In order to save more taxes and have a stable income, she can shift her FD's slowly to mutual funds and have a SWP for her day to day expenses.
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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Tejas

Tejas Chokshi  |126 Answers  |Ask -

Tax Expert - Answered on Jul 15, 2023

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Hi Sir. What would be best investment for Senior Citizen less than 75 years age, with good tax savings option. Please suggest.
Ans: When considering investment options for senior citizens under the age of 75 with good tax savings options, there are a few options worth considering:

Senior Citizen Savings Scheme (SCSS): This government-backed scheme is specifically designed for senior citizens and offers attractive interest rates. Investments in SCSS are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh per financial year.

Pradhan Mantri Vaya Vandana Yojana (PMVVY): This scheme is offered by Life Insurance Corporation of India (LIC) and provides regular pension income to senior citizens. It offers a higher interest rate than other fixed-income instruments. PMVVY offers tax benefits on the pension received, and the investment amount is eligible for tax deductions under Section 80C.

Tax-saving Fixed Deposits (FDs): Many banks offer tax-saving FDs with a lock-in period of five years. The interest earned is taxable, but the investment amount is eligible for tax deductions under Section 80C.

National Savings Certificates (NSC): NSCs are issued by the Indian government and offer a fixed interest rate. The interest accrued is eligible for tax deductions under Section 80C. However, the interest earned is taxable.

Tax-saving Mutual Funds (ELSS): Equity Linked Saving Schemes (ELSS) are diversified mutual funds that invest primarily in equities. They offer the potential for higher returns over the long term. ELSS investments are eligible for tax deductions under Section 80C, up to a maximum limit of Rs. 1.5 lakh per financial year. However, please note that ELSS investments are subject to market risks.

It is important to consider your risk appetite, financial goals, and investment horizon before making any investment decisions. I would recommend consulting with a financial advisor who can assess your specific circumstances and provide personalized investment advice based on your needs.

..Read more

Ramalingam

Ramalingam Kalirajan  |4647 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

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my mother is 78 and she has all her money in FD . please suggest some good mf and good returns.
Ans: It's great to see your proactive approach to financial planning. Given your situation, I will provide some tailored advice to help you secure your financial future while addressing your mother's needs.

Understanding Your Financial Landscape
You are approaching retirement in May 2024, after an extensive 42-year career in accounts. With a B. Com degree and a substantial professional background, you have a solid foundation. You've recently opted for the 'Pension on higher wages' scheme with EPFO, necessitating an arrears payment of Rs. 11 lakhs, and ensuring a monthly pension of Rs. 32,000.

Your current financial obligations include an LIC policy with an annual premium of Rs. 44,000 and a monthly salary of Rs. 1.1 lakh. Additionally, you have little to no savings, aside from your pension funds and FDs. With a moderate risk appetite and willingness to explore higher-risk options, your goal is to maintain financial stability and create long-term wealth.

Financial Stability Post-Retirement
Given your circumstances, maintaining financial stability is paramount. You have a homemaker wife, a young son, and dependent parents, all relying on your financial support. Here are some steps to consider:

Emergency Fund
Establish an emergency fund equivalent to at least six months of expenses. This fund will provide a safety net for unforeseen expenses or financial setbacks. Keep this fund in a liquid, low-risk investment like a high-interest savings account or a short-term debt fund.

Pension Planning
Your monthly pension of Rs. 32,000 will cover some of your post-retirement expenses. However, you should also consider other sources of income to supplement this amount. Given your current salary and expected pension, ensure your monthly expenses align with your retirement income.

Investment Strategy for Wealth Creation
With your moderate risk appetite, a well-diversified investment portfolio can help achieve long-term wealth creation. Here are some recommendations:

Systematic Investment Plan (SIP)
Starting a SIP of Rs. 60,000 per month for 8-10 years is a great step. Investing through SIPs allows you to benefit from rupee cost averaging and compound interest. Focus on a mix of equity and hybrid mutual funds, which provide growth potential and moderate risk.

Actively Managed Mutual Funds vs. Index Funds
While index funds track market indices, actively managed funds are handled by professional fund managers aiming to outperform the market. Here's why actively managed funds may be more beneficial:

Professional Expertise: Fund managers actively make investment decisions to maximize returns.
Potential for Higher Returns: Actively managed funds can outperform the market, especially in volatile times.
Risk Management: Fund managers adjust the portfolio to mitigate risks, which can be advantageous in fluctuating markets.
Regular Funds through Certified Financial Planners
Investing in regular funds through a certified financial planner (CFP) has its advantages over direct funds:

Professional Guidance: A CFP provides tailored advice and helps in selecting the best funds based on your financial goals.
Comprehensive Planning: CFPs offer holistic financial planning, considering various aspects of your financial health.
Periodic Reviews: Regular funds through a CFP include periodic portfolio reviews and rebalancing, ensuring alignment with your goals.
Addressing Your Mother’s Investments
Your 78-year-old mother currently has all her money in fixed deposits (FDs). While FDs offer safety, they may not provide sufficient returns to combat inflation. Here are some alternatives:

Conservative Hybrid Funds
These funds invest in a mix of debt and equity, offering better returns than FDs while maintaining lower risk. They provide capital appreciation and regular income, suitable for conservative investors like your mother.

Senior Citizen Savings Scheme (SCSS)
SCSS offers a secure investment option with regular income for senior citizens. It provides higher interest rates than FDs and comes with tax benefits under Section 80C of the Income Tax Act.

Monthly Income Plans (MIPs)
MIPs primarily invest in debt instruments and a small portion in equity, offering regular income with moderate risk. They are ideal for senior citizens seeking a balance between income and capital preservation.

Conclusion
Your commitment to securing a stable financial future is commendable. By creating an emergency fund, diversifying your investments, and planning for your retirement, you are on the right track. For your mother, shifting a portion of her investments to conservative hybrid funds, SCSS, or MIPs can enhance her returns while ensuring safety.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4647 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 09, 2024

Asked by Anonymous - Jun 09, 2024Hindi
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Hi I sir I a m 52 PSU bank employee. Planning to retire at 55 .Savings of 1 CR in FD .pension expected 60000.Retirement benefits arround 1 CR. Other savings in PLI 15 lacs NSC 10 lacs,LIC 5 lacs Planning to sell 1 property worth 1.5 CR.Daughter pursuing 2nd year . Aged mother and handicapped brother dependant on me. Housing loan 9 lacs outstanding.planning to avail 50 lacs for renovation of another property.Need monthly income if 2 lacs .Please advise investment avenues
Ans: Planning for a Comfortable Retirement: Steps to Achieve Your Goals
You are 52 years old, working in a PSU bank, planning to retire at 55. Your savings include Rs 1 crore in FDs, Rs 15 lakhs in PLI, Rs 10 lakhs in NSC, and Rs 5 lakhs in LIC. You expect a pension of Rs 60,000 and retirement benefits of around Rs 1 crore. You also plan to sell a property worth Rs 1.5 crore. Your dependents include your daughter in her second year of studies, an aged mother, and a handicapped brother. You have an outstanding housing loan of Rs 9 lakhs and plan to borrow Rs 50 lakhs for property renovation. You need a monthly income of Rs 2 lakhs. Here's how to plan your investments to achieve your goals.

Understanding Your Current Financial Position
You have significant assets and income streams, including:

Savings in FD: Rs 1 crore
Expected Pension: Rs 60,000 per month
Retirement Benefits: Rs 1 crore
Property Sale Proceeds: Rs 1.5 crore
Savings in PLI: Rs 15 lakhs
Savings in NSC: Rs 10 lakhs
Savings in LIC: Rs 5 lakhs
Evaluating Your Financial Goals
You aim to secure a monthly income of Rs 2 lakhs post-retirement. This requires careful planning and strategic investments.

Creating a Retirement Corpus
To achieve a monthly income of Rs 2 lakhs, you need to build a substantial corpus. Here’s how to calculate it:

Monthly Income Required: Rs 2,00,000
Annual Income Required: Rs 2,00,000 x 12 = Rs 24,00,000
Assumed Safe Withdrawal Rate: 4%
Required Retirement Corpus: Rs 24,00,000 / 4% = Rs 6 crores
Steps to Achieve the Retirement Corpus
Achieving Rs 6 crores by retirement requires a strategic approach. Here’s a step-by-step plan:

Systematic Investment Plans (SIPs)
SIPs in mutual funds can help build wealth over time. Here’s why:

Regular Investments: Investing monthly promotes disciplined saving.
Rupee Cost Averaging: It averages out the cost of investments, reducing market volatility impact.
Professional Management: Actively managed funds aim to outperform the market.
Building a Diversified Portfolio
Diversification reduces risk and maximizes returns. Here's how to create a balanced portfolio:

Equity Mutual Funds: Allocate a significant portion to equity funds for growth.
Debt Mutual Funds: Invest in debt funds for stability and predictable returns.
Balanced Funds: These funds offer a mix of equity and debt, balancing growth and stability.
Reviewing Existing Investments
You have investments in PLI, NSC, and LIC. These plans typically offer lower returns. Here’s what you can do:

Evaluate Returns: Check the returns on these plans.
Consider Surrendering: If returns are low, consider surrendering and reinvesting in mutual funds.
Utilizing the Proceeds from Property Sale
The sale of your property worth Rs 1.5 crore provides substantial capital. Here’s how to use it:

Pay Off Loans: Clear the Rs 9 lakhs housing loan to reduce liabilities.
Invest the Remaining Amount: Invest the remaining Rs 1.41 crore in a diversified portfolio for growth.
Setting Up a Systematic Investment Plan (SIP)
Determine Monthly Savings: Calculate how much you can invest monthly after expenses.
Select Actively Managed Funds: Choose funds with a strong performance history.
Start Early: The earlier you start, the more time your money has to grow.
Emergency Fund and Insurance
An emergency fund and proper insurance are crucial for financial security. Here’s what you need:

Emergency Fund: Keep 6-12 months' expenses in a liquid fund.
Health Insurance: Ensure you have adequate health coverage for yourself and your dependents.
Life Insurance: Review your life insurance to ensure sufficient coverage.
Benefits of Actively Managed Funds
Actively managed funds are managed by professionals aiming to outperform the market. Here’s why they are beneficial:

Expert Management: Fund managers make informed decisions based on market analysis.
Flexibility: They can adjust the portfolio to mitigate risks.
Potential for Higher Returns: Aiming to outperform the market, these funds often yield higher returns.
Disadvantages of Index Funds
While index funds offer low-cost diversification, they have drawbacks:

Lack of Flexibility: They strictly follow the index, missing opportunities to outperform.
Average Returns: Aim to match market performance, leading to average returns.
Full Market Exposure: They are fully exposed to market downturns without active management.
Disadvantages of Direct Funds
Direct funds have no commission costs but require more involvement. Here’s why regular funds with a CFP are better:

Professional Guidance: Regular funds come with expert advice and management.
Convenience: CFPs handle administrative tasks and provide tailored advice.
Performance Monitoring: Regular reviews by professionals ensure optimal performance.
Planning for Dependents
You have significant responsibilities, including your daughter’s education, and supporting your mother and brother. Here’s how to plan:

Education Fund: Allocate part of your savings for your daughter’s education.
Healthcare Fund: Ensure sufficient funds for your mother’s and brother’s healthcare needs.
Living Expenses: Plan for your brother’s living expenses, ensuring a stable future for him.
Renovation Loan and Its Impact
You plan to borrow Rs 50 lakhs for property renovation. Here’s how to manage it:

Evaluate Necessity: Ensure the renovation is essential and will add value.
Loan Repayment Plan: Create a clear repayment plan to manage the additional debt.
Impact on Savings: Assess how the loan will impact your overall savings and investments.
Creating a Withdrawal Strategy
Having a withdrawal strategy ensures you don’t outlive your savings. Here’s how to create one:

Systematic Withdrawal Plan (SWP): Set up SWPs in mutual funds to provide regular income.
Safe Withdrawal Rate: Withdraw at a safe rate (4%) to ensure the corpus lasts.
Adjust for Inflation: Increase withdrawals periodically to keep up with inflation.
Final Insights
Achieving a monthly income of Rs 2 lakhs post-retirement is challenging but possible. Start with SIPs in actively managed funds, diversify your portfolio, and regularly review and rebalance your investments. Utilize the proceeds from your property sale wisely and plan for dependents' future needs. Ensure you have adequate insurance and an emergency fund. With careful planning and disciplined investing, you can achieve your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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.

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