Me and my father look after a food and beverage shop( sweets and snacks). The property is our own it's around 2200 sqft on a prime location . Now after already running it for more than 30 years we are planning to wind up the business and sell out the land which will earn a sum of rs 6 cr+ to us. And after that we plan to invest that money into different sectors( like land, real estate, equity and FDs). Other option is to mortgage the property and renovate it and put it on rental income which can yield us around 1.2 lacs per month.
Now we are little confused as which option to choose. Renovation cost is around 50 lacs and winding up business is due to manpower issues.
Also please explain as we sell the property and get 6 cr in hand how do we plan out investment so as to save tax mostly.
Ans: Evaluating Current Situation
You and your father run a food and beverage shop.
You own the property, which is 2200 sqft in a prime location.
You plan to sell the property for Rs. 6 crores or renovate it for rental income.
Renovation cost is around Rs. 50 lakhs, and rental income can be Rs. 1.2 lakhs per month.
Manpower issues are prompting you to consider winding up the business.
Your goal is to invest the proceeds wisely and save on taxes.
Option 1: Selling the Property
Selling the property can provide a lump sum of Rs. 6 crores.
This option can simplify your financial management.
You can invest the proceeds in diversified sectors.
Option 2: Renovating for Rental Income
Renovating can cost Rs. 50 lakhs.
It can generate Rs. 1.2 lakhs per month in rental income.
This provides a steady income stream but requires management.
Tax Considerations
Selling the property will attract capital gains tax.
Investing in specified bonds can save on capital gains tax.
You can also reinvest in another property to save on taxes.
Diversified Investment Plan
Mutual Funds
Invest in mutual funds for growth and income.
Consider equity mutual funds for long-term growth.
Hybrid funds can provide a balance of growth and stability.
Systematic Withdrawal Plan (SWP)
Use SWPs for regular income from mutual funds.
SWPs offer tax-efficient regular withdrawals.
Fixed Deposits
Invest in FDs for secure returns.
FDs provide stability and guaranteed returns.
Avoiding Index Funds
Index funds track the market but lack active management.
Actively managed funds can outperform index funds.
A Certified Financial Planner can provide tailored advice.
Avoiding Direct Funds
Direct funds seem cheaper but need professional guidance.
Regular funds, through a Certified Financial Planner, offer expert management.
Final Insights
Selling the property can provide a large corpus for diversified investments.
Renovating for rental income provides a steady cash flow but involves management.
Diversify your investments for growth, stability, and tax efficiency.
Consult a Certified Financial Planner for a detailed, personalized plan.
Appreciate your long-term planning and proactive approach to managing your assets.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
