Hi,
My salary is 22 lakhs with investment such as 35 lakh FDs, 20 lakh Stocks, monthly rent of 18,700, 50k nps, 1.5lakh ppf and no health insurance.
Kindly suggest what should I do to reduce income tax to large extent?
Is it better to buy a flat with loan around 50lakhs with 8.2% interest and down payment of around 40lakhs? But I will be losing yearly interest over FDs with 7%.
Ans: You can consider a home loan. I am assuming that this house will help you save Rs 18,700 in rent. (Rs 2.24Lpa). Vs this on the Rs 40L downpayment you will lose FD interest of Rs 3.2L pre tax (FD at 7% and Equity at 15% assumed) which works out to only Rs 2.29L post tax on the FD interest. Further you would now get tax deduction on your home loan of Rs 2L pa. You would lose HRA benefit. (You need to compute this based on various HRA conditions). You tax saving on home loan is definitely going to be higher.
Thus, the home loan is beneficial to you from a tax saving basis and based on your current circumstances. However, you need to consider other factors like your repayment capacity of your EMI on home loan and also its impact on your savings into stocks, MF, etc. for the future.