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Rediff.com  » Business » How to invest smartly and save tax

How to invest smartly and save tax

March 03, 2011 16:55 IST

InvestmentAre you always at a loss while planning your finances?

Are you aware of the investment options available in the market?

How best can you plan your finances?

What are the crieria for evaluating an investment option?

Are mutual funds profitable investment options? When and how should one buy mutual funds?

In an hour-long chat with rediff.com, financial planning expert Sailesh Multani offered some valuable tips. Here is the transcript:

Sailesh says, Hi, good evening and welcome to this chat session


alfa asked, if I buy house of 65 lacs on loan. Can I still get tax benefit of 1 lac on principal and 1.5 lac on interest paid.
Sailesh answers,  at 2011-03-03 16:00:59Hi, yes you will be entitled to the deduction in respect of principal amount repaid upto Rs 1 lakh and interest on loan paid during the financial year upto Rs 1.50 lakhs.


asheesh asked, Iam 36yrs old with two daughters aged 4&8yrs old and wife aged 32.Where should i invest to get superb return with tenure of 12years.I can invest 3lacks now and 2lacks yearly for 5years.
Sailesh answers, Hi, since you have 2 long term goals for your daughters – education and marriage, you need to start building their education and marriage corpus from today. Since these are long term goals, your investments should pre-dominantly be in equity funds. I would advise you start SIPs in diversified equity funds. You may consider investing in the funds I have recommended at the start of this chat.


asw asked, how the performance of stock market indices going to be, post budget? Can I invest in Index funds?
Sailesh answers, hi, you should expand your investment horizon beyond budget. If you are a long term investor with a 5 year view, then only you should consider investing in equity funds and stocks. Otherwise you are bound to get disappointed. From five years perspective India as an investment destination certainly looks promising.


Sudhanshu asked, Is Employee PF contribution taxable? If not, under which section tax rebate is given?
Sailesh answers, hi, employee's contribution to PF is allowed as deduction under section 80C.


Nayan asked, an individual family of 3,how many PPF a/c can we open. I have two but planning to open another two?
Sailesh answers, hi, there is no restriction on opening the PPF accounts. Every individual is entitled to open a PPF account. In your case all the 3 members of the family can open a PPF account. The tax benefit will be restricted only to Rs 70,000


Nayan asked, an individual family of 3,how many PPF a/c can we open. I have two but planning to open another two?
Sailesh answers, hi, all individuals are entitled to open a PPF account. You can open a PPF account for your entire family but claim tax benefit only upto Rs 70,000


Uday asked, Which is best Infra Bond and how to apply for one.
Sailesh answers, hi, as of now there have been two institutions issing these bonds - L&T and IDFC. Both are good. You can invest in the bonds of either of the instituitions.


SLC asked, EACH ONE OF WANTS TO SAVE TAXES BUT HOW MANY OF US THINK OF SAVING TAXES IN THE RIGHT WAY? WHAT I MEAN TO SAY IS WE SHOULD SAVE TAXES HONESTLY.YOUR COMMENT PLEASE.
Sailesh answers, hi, I agree with your point of view. To save tax there are many deductions available under the income tax. Saving tax is different from evading tax. One should save the tax the right way.


hkram asked, is post office as safe as ppf
Sailesh answers, hi, yes post office investments are as safe as PPF.


amar asked, How is DSP Black rock top 100 equity fund. Last 9 months rs.5000/-per month SIP shos 3% negative return. Kindly adivice to continue SIP or switch to other fund.
Sailesh answers, hi, this is a very good fund from DSP Blackrock. You should continue with your SIPs. The market has been on a downward trend for the past 4 months and theerefore that is reflected in the fund's performance.


Shal asked, Hi, I am looking for medical insurance for myself(32yrs) and my family ( wife and 3 yr daughter) please suggest the best plan
Sailesh answers, hi, you can buy the insurance from any of the reputed insurance companies. The premiums will more or less be the same. Go for the one that has cashless facility. also please do read the fine print to see the list of diseases covered.


rajesh asked, Dear Salesh please let me know if I have given the donation to the trust under the receipt of 80G.Can we claim the same other than 80C whose limit is 1 lac.
Sailesh answers, hi, you can claim donation under section 80G itself.


kng asked, I have taken housing loan from Bank for a property under construction. would I get deduction u/s 80C towards principal repayment of housing loan.
Sailesh answers, hi, yes you will be eligible for benfit of section 80C towards the repayment of the loan.


Mohan asked, hi Shailesh , i have one daughter of age 2.3yr i want to invest monthly for her. which will Useful for Higher education. Can you provide the idea for this?
Sailesh answers, hi, you should start SIPs in the funds I have recommended at the start of the chat. Please dont buy any children's plan from any insurance company.


Dharmesh asked, Hi Sailesh, I want to start SIPs Is it advisable to invest in both HDFC Top 200 and HDFC Equity at same time. I heard from one of the analysts that one should invest in only either of two as it will create overalaps in investment.Pls suggest
Sailesh answers, hi, yes it is possible that both the portfolios may have the same stocks. Therefore, to begin with you should avoid investing in both. Maybe at a later stage you could add the other fund to your portfolio.


sandaskadam asked, I me myself marathi Kadam , Sandash working in Air India. I being Dalit want to know if there are any special schemes for dalits in saving Income tax . Jai Ambedkar , jai Bhim,Jai Maharashtra
Sailesh answers, hi, I dont think there is any special scheme for tax saving for Dalits.


pukesh asked, Is it the right time to invest in Equity markets right now or better invest in Gold ?
Sailesh answers, hi, if you want to grow your moeny, willing to take high risk and invest for the long term (five years atleast) then only invest in equity markets. you should have both equity and gold in your portfolio. The allocation to gold should not exceed 15% of your total portfolio.


rrrrr asked, Hi I am currently investing in HDFC top 200,HDFC TAX saver-Growth,HDFC growth-Growh,HDFC mid cap opprtunity & Reliance Equiy Opportunity funds by SIP route costing me 12,500 PM is my portfolio will give me Maximum returns after 10 years?
Sailesh answers, hi, why so much bias towards HDFC mutual fund? Even if you are investing in good funds, you do carry the risk of getting exposed only to one fund house. To reduce your risk diversify your portfolio by investing in funds from other fund houses. I would advise you to redeem HDFC Growth and HDFC midcap Fund. Consider invsting in Fidelity Equity and DSP BR Equity Fund.


suresh asked, what r the advantages /disadvantages of ulips as tax savers
Sailesh answers, hi, I can only think of disadvantages when it comes to ULIPs. I would not advise any investor having an objective to grow his money to invest in ULIPs. ULIPs are extremely expensive producsts and typically take 7-8 years to break even on account of high adminstrative cost in the initial 3 years. Dont simply buy ULIPs because it gives you tax benefit under section 80C.


Parimal asked, I am 24, what insurance plan should i go for ?
Sailesh answers, hi, the best plan is Term plan. This is the golden rule of insurance. forget anyother form of insurance. If you want to protect your life take a term plan as it offers higher sum assured for lowwer premiums. You should avoid buying anyother insurance plan like endowmen, moneyback and ULIPs.


Nayan asked, is it worht to invest in GOLD when market prie is 21000+. I wan2 do S.I.P of 1000 monthly. already i have taken gold 200gm
Sailesh answers, hi, it is a good strategy to invest in Gold via the SIP route. I would discourage you to buy physical gold as purity and storage will be of concern. you should consider buying gold exchange traded funds (ETFs). Gold will continue to remain the most sought after precious metal till the western world comes out of its financial crisis. This may take several years. till then you should expect the gold price to move up. Please bear in mind that this will be a slow process.


Jitendra asked, Hi Sir, I took an SIP of SBI Tax Magnum in 2007. How long should I stick to this ? Pl. advise
Sailesh answers, hi, i would recommend you to redeem this fund immediately. What you can do is to invest this money again into an ELSS fund in the month of April and claim deduction under section 80C for the next financial year.


sunil asked, i have 1 lack rs of lic primium will aditional investment infrastructure bonds will also help for tax exsumtion
Sailesh answers, hi, yes you can claim deduction under section 80CCF towards the investment in infrastructure bonds.


amit@123 asked, I am 40 yrs old and can save upto Rs.50000 per month. What is the best way of investing this money.
Sailesh answers, hi, that is a lot of money to save every month. I would advise you to draw up a list of your financial goals and calculate how much you need to invest in order to achieve each such goal. Accordingly break up the amount of Rs 50,000 and invest in a mix of equity, debt and gold. If you find it too teachnical then I would adivse you to take assistance from a professional financial planner who will help you with the same.


Ram1 asked, Can you help me with some tax free (on interest) investments other than PPF?
Sailesh answers, hi, unfortunately there is no fixed income instrument except for PPF that offeres tax free interst. If you are willing to take some risk then you could consider investing in debt funds and take the divident payout option. But pleae bear in mind that returns from debt funds are neither regular not assured.


timke asked, I have two Endowment insurance plans.I am paying 40,000 per year for cover of 10,00,000. Should i discontinue, reedeem and look for good term plan available at low premium for long term.
Sailesh answers, hi, surrender only if you are making some money, dont surrender at a loss.


ashu asked, Please reply...now i have ULIP too....can i break those now?
Sailesh answers, hi, since you have already taken the ULIP you should continue paying your premiums. there is no point surrendering them at a loss.


Santosh asked, Hi Sailesh, Santosh here from bangalore..Last financial year till Dec 2010 I was getting my Income Tax deducted at source, from January i've jumped to a start-up company where the Income tax deduction has not happened till Feb 2011. Can you please let me what is the last day to invest to get tax exemptions??and where exactly to invest, my investment bracket is upto 30k for this financial year
Sailesh answers, hi, the last day is 31st march. You could invest either in PPF or ELSS.


vijay asked, shialesh sir, I have a 6 month daughter and my salary is 35ooo per month. for my daughter future (education and marriage) what plans should i get for investment and insurance
Sailesh answers, hi, first and foremost dont buy any insurance plan for your child. It will not serve any purpose. To buidl your daughter's education and marriage fund. you need to start investing in a mix of equity and gold with equity forming a larger portion of your portfolio. Start SIPs in the funds recommended by me at the start of this chat.


Aju asked, hi Sailesh, what aperson can do if he doesnot receive the refund of It till now?
Sailesh answers, hi, you need to write a letter to your assessing officer and send it by registered post. Dont worry you will get your refund as the IT department is also bound to pay you interest as penalty for the delay in refunds. But please do write to your IT officer.


has1 asked, Is it a good idea to invest or buy a LIC Policy befor 31 march 2011. is there some benefit involved. what are the benefits and what are the losses if i dont invest this year. ?
Sailesh answers, hi, if you want to save the tax on your income for the current financial year then you should buy your insurance plan before the 31st March. It is not necessary that you should buy an insurance plan. you could invest in PPF or ELSS also. If you have contributed to the Provident fund from your salary that will also qualify for deduction from your gorss total income. If you dont invest or take benefit of section 80C you will end up paying more tax


taxtension asked, IS SIP exempted from tax?
Sailesh answers, hi, SIP is not an investment product. It is one of the various methods of investing. there is not special tax benefit if you invet in mutual funds via the SIP route.


a2 asked, hw abt the selection of HDFC TAx Saver, JM Tax Gain, Sundaream Tax plan, Pricipcal Tax Saving, Fedieliity Tax advtge, Religare Tax paln, ICICI pru tax paln for tax saving purpose, I had invested to all MF's form last three yeras. Pl hepl?
Sailesh answers, hi, out of the funds listed by you, I only recommend HDFC Tax Saver and Fidelity Tax Advantage. You should redeem the other funds if possible.


vns asked, is it possible claim housing loan tax benefit by both husband and wife.if yes how
Sailesh answers, hi, yes, both husband and wife can claim the tax benefit if the house property is co-owned by them. Also both of them should have take a home loan. the agreement must specify the ratio in which the property is co-owned by the couple.


dk asked, Hi, shailesh, I fall in 30 % tax bracket & saved the maximimu possible taxes throgh various option available.Please suggest the best & effective investment for the purpose of avoiding tax from the profit earned from these investment.
Sailesh answers, hi, if you have avialaled of all the possible deductions under the income tax act then there is not much scope for you to save tax.


jay asked, What do you think of the New Pension Scheme (NPS) as pension for my wife who is not employed
Sailesh answers, Hi, I am not in favour of NPS at the moment. I would like to wait and watch the performance of funds under the NPS before I start recommending them to investors.


Raja asked, If one makes an earning of 10lks and pays 30k towards house EMI, is it better to do pre-closure with, lets say 5lks per year or make use of 1.5 lks tax exemption on interest (hoping it stays)
Sailesh answers, hi, if you have surplus funds to pre-pay your home loan then why not do it. In my opinion it is not prudent at all to continue with a liablity in one's balance sheet simply because of a tax benefit. Imagine you will be paying interest to your bank for 15 years! That means every month a bulk of your salary is taken away by your bank. Go ahead and pre-pay your loan. Whatever you save on EMI should be channelised into equity funds via the SIP to build wealth over the long term.


SSS asked, Hi My sal is 25L per anum and Pls advice how much tax I can save in a year through all the options like VPF, House loan, Section 88, HRA and company lease car and any other options Pls which you can suggest
Sailesh answers, hi, please write to me with more details at : sailesh.multani@gmail.com


Saurabh asked, Sir, I am investing Axis Incomer saver fund since one year but not getting return even 5%. Pls suggest should I withdraw?
Sailesh answers, hi, you should hold onto your investments for the next 6 months. If the interest rates continue to rise as it is widely expected, then you should be able to get more returns from this fund. Please be in touch with your advisor to ensure that you exit this fund in time.


ajayb007 asked, what is professional tax and how it is exempted from tax
Sailesh answers, hi, professional tax is deducted by your employer. This tax is exmept from tax and has the effect of reducing your taxable salary.


M.D,Chawhan asked, Is investment in house or flat better investment it will save income tax. But how much loan should i take if i am earning 60000/- per month.I have to look to my family expences as well.
Sailesh answers, hi, dont buy a property simply bcause you get tax benefits. That is not the right way to plan your finances. your EMIs should not make your life difficult.



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: sailesh.multani@gmail.com.