The Budget announcements have been made.
The finance minister changed the tax slabs giving more money in the hands of the people.
What effect will the Budget have on investments?
How can you invest smartly and save more?
Has the FM given with one hand and taken away from the other?
In an hour-long chat on financial planning expert Sailesh Multani offered answers to many such questions. Here is the transcript:
Sailesh says, Hi, good evening and welcome to this chat session
Manoj asked, Sir how to go about tax planning after this budget for next FY
Sailesh answers, at 2011-02-28 15:58:50Hi, the budget has not any changes as far as tax planning goes. The limit of Rs 100,000 lakh under section 80C and Rs 20,000 under section 80CCF (investment in infrastructure bonds) remain. The tax planning process as well as the benefits remain the same for the next year too. Of course the tax liability for all individuals will reduce by upto Rs 2,000. You can continue to invest in PPF, ELSS, NSC or any such qualifying investments.
kamal asked, do you think people still go for ULIP...still the best option
Sailesh answers, Hi, ULIP is not among the most efficient investment or insurance product. ULIPs stand to lose on the expenses side which is very high for the initial 3 years. This results in most of the ULIPs underperforming for the first 7-8 years. Typically ULIPs grow only after 7-8 years. I would not recommend this product to any investor. Needless to say the charges are deducted from the premiums paid by the policyholder. Unfortunately, the insurance advisor doesn't discuss these finer points with his prospective client.
ASHWANI asked, This financial year FM has proposed Tax exempted up to income of Rs 1,80000/-,But nothing has been mentioned about womens who are already exempted up to Rs 1,90,000/ can you explain this please
Sailesh answers, hi, no change in basic exemption for women. it remains the same at 1.90 lakhs
akr asked, hi sir what about infrastructure sector future?
Sailesh answers, The problem with the infrastructure sector is mainly of land acquisition, spiralling interest rates, lack of transparency and long gestation period. Unless these issues are addressed in depth by the government and other related authorities, infrastructure sector will remain as risky proposition. I would not advise retail investors to buy stocks of infrastrcuture companies or units of infrastructure mutual funds.
jenks asked, What will be the impact on home loan lending rates? I've outstanding home loan of more than 20L with the DTC planned for 2011 should I plan for early closure of loans as there will be no tax break on HL
Sailesh answers, hi, interst rates are on the rise. According to me the consensus is that rates will peak only by June of this year. That is taking into consideration the geo political situation globally and inflation. you can expect home loan rates to mover up by atleast 1% in the coming months. It is never a bad idea to prepay the housing loan if you have the ability to do so. Dont wait for DTC.
Karthik asked, Hi I invested in TAta AiG ULIP for about 1.5 years with an annual investment of 90000/-. Should I continue paying the premium or stop nowitself. Please advise.
Sailesh answers, hi, since you have alreasdy bought the ULIP there is no option but to pay the premium till maturity. you may consider surrendering only if you have made profits. YOu may have to wait for 7-8 years. But dont buy any more ULIPs.
ranjeet asked, what about infrastructure bond of 20000 exempted fro tax.is it applicable next fiscal or not
Sailesh answers, hi, yes the benefit of Section 80CCF which provides additional deduction of Rs 20000 from your Gross Total Income has been extended by one year. You can invest in these bonds in the next financial year too
ravi23 asked, what is the qualifying age for senior citizen for tax saving
Sailesh answers, hi, for the current financial year it is 65 years of age. This has been reduced to 60 years from the next financial year.
firstname.lastname@example.org asked, Hi, I am planning invest. Which is best sector to invest considering budget changes?
Sailesh answers, hi, i would not encourage you to take sectoral calls on your own .I would advise you to leave the job of sector selection to professional fund managers. I would advise you invest in diversified equity funds which have the flexibility to invest across sectors.
MT asked, Sir, considering the new tax slab...anyone earning between say Rs.3.5L to Rs.5.0L should invest where to save IT deductions?
Sailesh answers, hi, your choice still remains the same. you should invest in investments that fall under section 80C like PPF, NSC and ELSS.
m asked, which is the best elss to invest for tax rebate & high return
Sailesh answers, hi, you can invest in Fidelity Tax Advantage and Franklin India Tax Shield
qrew asked, do u think ELSS is till a valuable investment?
Sailesh answers, hi, yes, according to me ELSS is a very good investment product. It encourages investors to invest in equity markets and stay invested for the long term as the mandatory lock-in period is 3 years. Equity has the potential to grow one's capital and build wealth over the long term. The idea is to select the well managed fund and invest for the long term. Unfortunately investors worry too much about the risk and ignore the rewards. ELSS to that extent because of the tax saving advantage in a way forces people to get exposed to equity as and asset class.
ashmore asked, Is tutuion fees paid for children exempt from IT, of so to what limit and under which section
Sailesh answers, hi, school tuition fee paid for 2 children during the financial year is allowed as a deduction under section 80C upto Rs 1 lakh.
Pranab asked, I had opened PPF account 2 years back and I had planned to invest 70K every year to build a decent sum for my daughter's education. I already have home loan principal payment which takes care of my 1 lakh investment. Should I continue to put 70K in PPF account as I dont take investment benefit from it? What will be impact of DTC on PPF?
Sailesh answers, hi, even if you take away the tax benefit that accrues from investing in PPF, dont forget the fact that PPF pays interest @ 8% p.a. which is compounded annaully. Plus the interest pais is exempt from tax. you just cannot afford not to invest in PPF.
Zaki asked, Dear Shailesh, what can be the perspective of investing at an early age if such kind of budgets are repeated in future?
Sailesh answers, hi, let me begin with by telling you that budgets should not be your guiding principle when it comes to your investment planning. It always pays to invest at an early age. I compare investment with cricket. the initial years of ones career are like the first 15 overs where the batsment should take the maximum advantage of scoring runs. One should take risk and go for high return yielding assets like equity and property. Unfortunately like cricket one cannot try and hit fours and sixes in the slog overs i.e. when one is nearing retirement. One needs to be careful about his investment by reducing risk as one approaches retirement. If you are young, just started your career, try and build a portfolio of equity funds. Invest via the SIP route
VVVVR asked, ANY CHANGE IN THE TAXABLE STATUS OF PPF
Sailesh answers, hi, no changes in PPF.
redd asked, Dear Sailesh..Can you please give the break up of the 1.8 lakh IT exemption ( i.e how much we need to save under 80 cc or 80 DD etc).Last year it was 1 lakh under 80 cc and 20000 worth Infrastructure bonds.Please clarify.Thanks.
Sailesh answers, hi, from your gross total income first minus your deductions under section 80C, 80D, 80CCF, etc to arrive at your net tazable income. On your net taxable income apply the income tax slabs.
anil asked, please suggest some mutual fund for long term of 10-15yrs for sip of 2500on monthly mode. regards anil
Sailesh answers, hi, my recommended funds among others include - HDFC Top 200 fund, DSP BR Equity Fund, Fidelity Equity Fund.
anitha asked, Hi Good evening. Is there any change IT slabs (1.8-5L, 5-8L, 8L & above) other than exemption limt increase to 1.8L?
Sailesh answers, hi, no changes in the income tax rates except for the change in basic exemption limits.
Shubho asked, Will the investement in Tax-Saving Mutual Fund remain as it is? Earlier, the talk was that this particular investement would get removed?
Sailesh answers, hi, for the next financial year i.e. FY 2011-12 you can invest in ELSS.
Chandramani asked, People say that this is the most insensitive burget. What is your take ?
Sailesh answers, hi, the opinions will differ from person to person. In my view the budget has atleast not taken aways anything from people if not given anything that most people hoped for.
neerajkuma asked, 80CCF limit extended to 40,000 ???
Sailesh answers, hi, no changes in 80CCF limit. It remains at Rs 20,000
abhi asked, can i invest in hdfc top 200 fund now?
Sailesh answers, hi, this is a diverisified equity fund with the flexibility to invest across sectors. the fund can invest in large cap and midcap stocks. The fund has an impeccable track record of over 10 years to show for. Anyone planning to build his MF portfolio should have this fund in his portfolio.
ratilal asked, pls advs todays date fd is better or fmp or mip
Sailesh answers, hi, FDs are assured return product. FMP and MIP on the other hand are market linked investment instruments. One cannot be sure if he will get the epxected return from FMPs and MIPs. The returns can be more or less than the expected. FDs are good for risk averse investors. FMPs and MIPs are suitable for low risk taking investors.
ranga asked, can i invest fixed deposits in four different banks and get the tax benefit i am 60 years old
Sailesh answers, hi, yes you can do so provided you invest in the tax saving fixed deposits.
Ghaneer asked, Hi Sailesh, is there any change in surcharge and education cess in this budget?
Sailesh answers, hi, the surcharge was abolished last year. The Cess of 3% continues.
sl asked, Any Pension scheme suggestions?
Sailesh answers, hi, i would not recommend any pension plan from any insurance company. The right approach to planning for one's retirement is to get a retirement plan made which will tell precisely the corpus one needs to accumulate till retirement and the amount of investment to be done in various asset classes per month to ensure that one is able to build the required corpus. A pension plan cannot ensure a financially comfortable and secured retired life.
skm asked, What are implications of FII now can invest in mutual funds
Sailesh answers, hi, the FII stands for Foreign Individual Investors. Foreign individuals can now invest in mutual funds in India. In my view this is a welcome move and a step in the right direction.
jrn asked, Is it something that housing loans would decrease by 1% for the floating rate of housing loans less than 15 lacs and house costing less than 25 lacs.
Sailesh answers, hi, i have to get some clarity on this subject. Request all particpants who have a similar query to email me at email@example.com. Once I get the clarification I will reply your emails.
BRK asked, Hello Sailesh. I am 34 years male drawing around 60K /Month (after Tax). I am planning to retire at the age of 55. In this connection, I am looking for a pension scheme where I could get around 15-20K /month. Could you help me with any scheme ?
Sailesh answers, hi, dont buy any pension plan. First get a retirement plan for yourself with the help of a financial planner and then invest in line with the plan.
stonehenge asked, What is your take on the New Pension Scheme with reference to this budget?
Sailesh answers, hi, I would advise investors to wait and watch the performance of NPS schemes for some more time before they start investing in the same.
pa1000 asked, Will the rate of interest change for the PPF Account ?
Sailesh answers, hi, the rate of interest on PPF is subject to changes as and when the government deems fit. But this is a very sensitive issue for the government as it affects the aam aadmi directly. Therefore, I do not forsee any changes in the near future.
priyanka asked, Hi Sir, is it better to invest in PPF, Mutual funds, or SIP? and how about property? what would you suggest?
Sailesh answers, hi, it is better to invest in both PPf and MF. SIP is one of the strategy one can follow to invest in mutual funds. In fact SIP is the most simple way of building wealth over the long term.
rkj asked, Mr. sailesh : FM seemsto have taken prudent deccisions for reducing the fiscal and current defecit. In view of this how do you perceive the direction of stock markets. Any sectrol preferences.
Sailesh answers, hi, if indeed the governement policies move in the direction of reducing the fiscal deficit, the stock markets will reflect the same. Any reduction in fiscal deficit is a good news for the stock markets. I dont have any sectoral preferences. I believe in having a diversified portfolio.
pvn asked, Hi Shailesh, Recently i left my last company and got EPF money(~3.5L) Now I am wondering where should i invest it, PPF for me and my wife(70K*2 for FY 2010-11 + 70K*2 for FY 2011-12) or should i repay my housing loan which is on floating intrest(which always worrying me) Please advice
Sailesh answers, hi, I would advise you to repay your housing loan. Get the liabilities off your balanced sheet. Build more assets as it will help improve your cash flows. Liabilities always result in cash outflows.
narendra asked, is it worth for a salary person of 6.5 lakhs to purchase infrastructure bond or otherwise invest in fixed deposite giving 12 percent return which is better
Sailesh answers, hi, first of all i am yet to come across any fixed deposit that is paying 12% p.a. I would rather advise you to vet the credentials of such an FD to ensure that your money is not subject to undue risk. I would rather buy a infrastructure bond from a repute company and enjoy the tax benefits.
kunder asked, Dear Shailesh, I worked for a pvt ltd company for 3 years and now want to withdraw my PF amount. The PF account is less than 5 yrs old. Will my PF amount which i will get be taxable??
Sailesh answers, hi, yes, your PF amount will be taxable since you have not completed five years of your service.
Balkrishan asked, is NSC Interest also exempt from Income tax
Sailesh answers, hi, NSC interest is taxable. But the same qualifies for deduction under section 80C.
Vaibhav asked, Which the best MF that would give you high returns and plus help me in saving my huge tax
Sailesh answers, hi, you should consider investing in Equity Linked Savings Scheme or ELSS as it is popularly known.
shantanu asked, which is the best investment ULPI or Mutal fund or FD.
Sailesh answers, hi, except for ULIP both FD and mutual fund are good investment options.
Sailesh says, We have run completely out of time. I thank you all for participating in this chat session. If you have any questions which were not answered during the chat, you can mail them to me at: firstname.lastname@example.org.