Ask us: on investments
Mutual funds are not meant to provide regular dividend options.
Q. I am a 28-year-old working in a PSU for the last 4 years. All my monthly income goes towards repaying a home loan that I took 2 years ago, supporting a brother and a sister in their education and monthly expenses of parents (purchased house) and wife (rent) who live separately.
I can save about ₹2 lakh in a year. I am planning to have a baby after a year. How should I plan to support a child and home loan repayment? I am the only earning member in my family.
Ayush Kumar Shrivastava
Vidya Bala answers:
A. How much you can save is not clear. We assume you that you are suggesting you can save about ₹2 lakh a year. Whatever be the sum, starting investments early on for your child gives you distinct advantages. You can start off whatever you can spare by investing in PPF. If you have a girl child, then consider Sukanya Samriddhi Yojana. These two will provide tax deductions as well. Outside of these, invest in simple equity index funds.
Q. I am a 62-year-old ex-employee of a PSU. I have invested my retirement benefits in equity and debt mutual funds expecting monthly dividend. Unfortunately, due to market conditions, the dividends are not coming and the capital has shrunk to 70%. Being retired and having no considerable pension, I am dependent on monthly dividends only. What is your advice? Should I take out the MF investment and invest in Jeevan Shanti or keep it for some more time and encash? Do you have other suggestions?
A. Mutual funds are not meant to provide regular dividend options. We do not know the nature of your funds (equity or debt) and their quality. But considering your situation, it is best you opt for: pension option of Vaya Vandana Yojana from LIC, small savings option of Senior Citizens’ Savings Scheme (in post office or SBI) and Floating Rate Savings Bond from RBI (available in major banks). This will ensure you get regular income. If you are in the high-tax bracket, then consider about 20% in ultra-short term debt funds and do a systematic withdrawal plan. This will be more tax efficient. But choose the options mentioned first before considering mutual funds.
Q. I am 26 years old and earning ₹6 lakh per annum. I have started investing in PPF recently. How much should I invest each month?
A. Check with your employer on your tax liability and invest to that extent in PPF. When your pay goes up, you can also consider tax-saving options such as tax-saving mutual funds. But outside of tax savings, consider small SIPs every month (₹5,000, at least) in Nifty-based equity mutual funds for superior returns.
Q. I had taken a home loan from the government office where I am serving, for which I am paying EMI every month. The property is registered in my name. I am receiving rent. My question is can I get the house re-registered in my and my wife’s names? By doing so, will I get any income tax relief?
Reply by N. Sree Kanth
A. As per Section 27 of the Income Tax Act read with Section 64 of the Income Tax Act, you would still be the owner even after transferring house property to your wife as the same will be carried out without adequate consideration, due to which any income accruing from such asset will be taxed in your hands and thus will result in no tax relief. This will apply even if only a part of the property is transferred as queried by you.
(Vidya Bala is Co-founder, PrimeInvestor.in. N. Sree Kanth is Partner, GSS Associates, Chartered Accountants, Chennai)
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