Ask Financial Planning Questions

Financial Planning is the art of fulfilling one’s goals. It is a typical experience when one is doing it for himself or his loved one. If you are doing it and need an answer to a particular query you may search the Financial Planning question mentioned below. If you are still not able to get the solution do ask me through the below comments section.

Financial Planning Questions

What is the tax liability on selling a property?
Can you provide details regarding Education Loan?
How much pension I will get after retirement?
Which is the best-secured investment for retirement planning?
What do clients can expect from financial planning?

Income Tax on sale of House Property

Question: My father is retired from a Central Government job and is a senior citizen. He sold his house recently for Rs.40 lakh. What is the total tax liability on him? If he does not invest this amount for some time, can he deposit it in his savings bank account?

In real estate investment, you are liable to pay capital gains tax based on your period of holding. If your father sold the house after three years of purchase, he will have to pay long-term capital gain tax at a rate of 20% with indexation benefit. However, if the period of holding is below three years, the short-term capital gain tax will apply and the gain will be added to his income. Hence, based on the year your father purchased the house calculate the gains he has made which will give you the total tax liability on him.

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But tax liability on property investment can be saved by investing the amount under two schemes. If you buy another property (not land) within two years or construct within three years of selling the house, you will not be liable to pay any capital gain tax. Subsequently, you can also invest in capital gain bonds, with a maximum limit of Rs 50 lakh per person per year. However, if you intend to do any of these after few months, the amount realized should be deposited in a capital gain deposit scheme account in any nationalized bank for a stipulated time.

Must Read- Insurance Questions

Education Loan

Question: I want to take an education loan for my child’s higher education. Can you please advise what factors to look into before going for it?

Before going to the bank for checking the loan formalities, I would advise you to zero in on the course and Institution where you are seeking admission of your child. Check on the fee structure and placement record. Compare the fees vis a vis the expected salary following the course completion. All this information would be helpful to understand how easily the loan will be repaid and also if it is worth taking a loan for such kind of Institution for your child admission. Banks don’t ask for any security for loans up toRs 4 lakh but will do their due diligence. If the loan amount would be more than 4 lakh but less than 7.5 lakhs than bank will ask for a 3^rd party guarantor or co-loaner and if the loan is more than 7.5 lakhs than you have to submit collateral of the equal amount of loan. It is also advisable to serve the interest in the moratorium period as this will help in reduction of interest rate to be charged by bank.

EPF (Employee Provident Fund) & Pension

Question: I am a Central Govt. employee. I joined the service on 04/09/2010. From October 2010 from my salary a sum of Rs. 1475/- is deducted by my employer towards EPF. My date of birth is 31/08/1974. How much amount I will get after my retirement and also how much pension I can get per month after 60 years. Please clarify.

Employee Provident Fund is a defined contribution scheme and one of the best tools to accumulate a corpus for your retirement. With a disciplined investment, it compounds your money at a pre-defined interest rate. You have 24 years for your retirement. If I assume your income grows constantly at 8% p.a. (although it is 9% as on today, but may increase or decrease in future) till your retirement, you will be able to accumulate a surplus of Rs 57 lakh only from EPF contribution. Through this corpus, you can buy an annuity/pension from any life insurance company in India. The pension will be at the rate prevailing during your purchase of an annuity. If I assume a rate of 6%, which is the current rate of annuity, you will receive a pension of approximately Rs 28000 monthly. However, insurance companies have different options for annuity-like joint pension, pension for a defined period, pension for you with the return of purchase price to the nominee, and others. The amount of pension varies in all the options. You will have to choose any one option at the time of buying the annuity from the company.

Check- Mutual Fund Questions

Best investment for retirement

Question: My income per month is Rs. 25000/- approx. I want to invest Rs. 7000/- to Rs. 10000/- per month upto retirement age for my benefit. Please let me know the best secured investment idea for best return. Besides this I want to invest another Rs. 1000/- to Rs. 2000/- in every year due to getting DA / increment. Waiting for your comments.

There is nothing called “best secured or ideal investment”. Any investment decision you make should align with your goals to achieve. There are various investment options available to an investor but each one has its risk and return as per the time horizon for investment.

Retirement is a long-term commitment and probably the most neglected goal by individuals. Since there is a good amount of retired life to live, there is always a need for a higher corpus to be accumulated. The primary reason for this is the longevity of your life and the expenses you bear post-retirement. Hence the investment should be made in such instruments which can not only beat inflation but are capable of generating higher returns with maximum utilization of your resources.

Equity as an asset class has proved its sustainability of giving consistent returns with a probability of risk-reducing if invested for more than 10 years. Hence, it’s advisable to have maximum exposure in this asset class, gradually reducing when you are approaching near your goal. To allocate your investments in the right manner it is necessary that you quantify your retirement goal. This means that you should know how much expenses you will have to incur post-retirement which will give an estimate of the corpus required at age of retirement. Since you haven’t disclosed time for your retirement and current expense and liabilities; it will be difficult for me to give any estimation and allocation of your investments. However, assuming you have 15-20 years for your retirement, I will advise you to adopt Mutual Fund Mode and start SIP in well diversified equity funds like HDFC Top200, DSPBR Top 100 equity, Fidelity equity and IDFC Premier Equity Fund. This will generate you the required return and will help you in reaching your goal. You can also consider PPF and NPS which are good tools for generating wealth for your retirement. For more advise on allocation of your visit a Certified Financial Planner and work on your retirement goals.

Financial Planning

Question: What’s involved in financial planning? As a client what should I expect?

On its most fundamental level, Planning acts to eliminate your financial fear: what would happen if you become unemployed or became disabled, or passes away? Planning can’t prevent those things from happening, but it can, within certain tolerances, prevent them from turning into financial disaster. On the upside, I think planning gives you the best possible chance to grow and protect your earnings and assets so that you can live, as nearly as possible, financially worry-free. And so that you can do the things you want for the people you care about & achieve all your financial goals.

You can ask your financial planning & personal finance questions in the comment section.