The Budget announcements have been made. The finance minister changed the tax slabs giving more money in the hands of the people. However, he also hiked duty on petroleum leading to a fuel price rise.
The entire Opposition walked out of the Lok Sabha in protest terming the Budget 'inflationary'.
What effect will the Budget have on investments? Is this the right time to rejig your portfolio?
In an hour-long chat on rediff.com on Thursday, financial planning expert Sailesh Multani replied to many such queries. Here is the transcript:
Sailesh says, Good afternoon everyone, I welcome you all to this chat session. Lets begin the chat
farhan asked, what are the new TAX slabs?
Sailesh answers, at 2010-03-04 12:55:49The new tax rates are: NIL for income upto Rs 160000 (Rs. 190000 for woman assessee), from Rs 160001 to Rs 500000 -10%, from Rs 500001 to Rs 800000 20%, Rs 800001 and above 30%.
VarunSingla1 asked, I have 5 lacs of cash.Where can i invest other than FDs for good returns ?
Sailesh answers, Hi, if you are looking at higher returns than FDs, then you can consider Monthly Income Plans (MIPs) offered by most of the mutual funds. MIPS invest 10%-25% of their corpus in equities and rest in safer fixed income generating securities. MIPs are structured to give you the benefit of debt and equity market. Since, the investment is done in equity markets, you will have to take some risk. MIPs are not risk free like FD. Also, the income in the form of dividend is not assured. Your investment horizon should be atleast 24 months to benefit from investing in MIPs
1234 asked, WHAT WILL THE NEW INREREST RATE FOR PPF AND MIS.
Sailesh answers, hi, there has been no change in the rate of interest for PPF and POMIS. It remains the same at 8% p.a.
lkj asked, Are there new tax saving investment opportunities created in this budget
Sailesh answers, hi, yes besides the deduction of Rs 1 lakhs available under section 80C, there will be additional deduction of Rs 20k for investing in specified infrastrucutre bonds. The details of these bonds will be notified shortly.
tes asked, i have a joint home loan, me and my wife working, the tax we can save is 1lakh each as principal and 1.5 each as interest right or it will be divided since joint home loan
Sailesh answers, You have taken a joint loan for the property. That by itself does not make you and your wife eligible to tax benefits under section 24 & 80C. To claim the tax benefits by each one of you, the property should be co-owned by you and your wife. The loan should be taken by the person in whose name the property is purchased to avail of the tax benefits.
TopGun asked, Hi Sailesh. I had bought NSC worth 10,000 in 2004 and they matured now. Do I have to include this amount in my income this year? I got 16000 on maturity. Secondly earlier dividends of MFs were taxfree. Whats the status now and for 2011-12?
Sailesh answers, hi, yes you will have to include the total interest earned on the NSC in your total income for the year in which your NSC matured. There is no change in the taxability of dividends in the budget. They remain taxfree for both equity and debt fund investors.
bk asked, How good is LIC Wealth plus when compared to all the guaranteed NAV Plans. Do u think its wise to invest in this plan than in KVP and NSC's . Thanks for your help!!!
Sailesh answers, hi, I am not sure the way these NAV guaranteed schemes work. Personally I have not been able to understand the mathematics behind these schemes. I would prefer a term plan when it comes to insurance. For regular income and safety, I would prefer NSC over LIC Wealth Plus.
qwqw asked, if someone has monthly surplus amount, then one should repay the housing loan or to have SIP in MF
Sailesh answers, hi, in my view you should repay your home loan instead of investing it in equity funds through SIP. Rather, the amount which you save on EMI should be channelised into equity funds through SIPs.
san asked, Hi i am santhosh here and i am 39 years old, How can i plan for retirement now so that i can get monthly income after i reach 55.
Sailesh answers, hi, you need to build a corpus of investments to take care of your day-to-day and lifestyle expenses post retirement. You will have to sit with an investment planner and get the retirement plan made for yourself. The plan will lay down the roadmap as to how much money you need to save on a monthly basis and invest the same into asset classes that in line with your risk appetite and investment horizon.
Deb asked, I want to invest in ELSS. I have savings of around 1 Lakh. Please advise what % of my savings should I put in ELSS scheme? Is there any other better options where I can invest?
Sailesh answers, hi, you can follow the thumb rule. 100 minus your age can be invested in ELSS. This means if you are 30 years in age, then Rs 70000 can be invested in ELSS and so on.
sibu asked, I wanted to invested 5000 via SIP , pl tel me which fund would be the best for SIP
Sailesh answers, hi, in the equity fund category,you can invest in funds like HDFC Equity, Franklin Indi Bluechip, DSP BlackRock Equity and Sundaram BNP Paribas Select Midcap. In the balance fund category you can consider funds like HDFC Prudence and DSP BlackRock Balanced Fund.
dannu asked, Which are the Infrastructur Bond which are best to invest in to save tax under 20000/-catagory?
Sailesh answers, hi, the details of these bonds are not out as yet.
Mani asked, I am going to sell my house and buy an another asset. The Money which i am going to get from my old house can I keep for 6 months and invest or I need to invest asap. Is this is taxable ?
Sailesh answers, hi, you will have to deposit this money into a separate bank account called Capital Gains Deposit Account. This money can them be utilised to buy a new house within 2 years from the sale of property.
Mani asked, I am going to sell my house and buy an another asset. The Money which i am going to get from my old house can I keep for 6 months and invest or I need to invest asap. Is this is taxable ?
Sailesh answers, hi, you will have to deposit this money into a separate bank account call the Capital Gains Deposit Account. This money can then be utilised to buy another house property within 2 years from the date of sale of an exisitng house property.
ujagirrai asked, hi sir i am planning to invest in Lic of india
Sailesh answers, hi, if you are taking a life insurance policy then go only for Pure Term Plan. This is the best type of insurance for any individual of any age. It offers you higher sum assured at relatively lower premiums. Please stay away from ULIPs. Ask your insurance advisor if the policy is a ULIP. IF yes, do not go for it.
asdfasdf asked, Hi i am planning to invest 60K p.A in metgold plus for 3 years with insurance cover for 10 years pl. suggest. i am 26 earning 25k p.m.
Sailesh answers, hi, i m not sure of the details of this policy. If its an ULIP, please stay away from it. Go for term plan. For investments, you should invest in mutual funds. ULIPs are very high on the cost side in the initial years and hence not advisable.
Ajay asked, Hi Sailesh, correction is possible in share market in coming months in 2010, Is it right time to invest in market ?
Sailesh answers, hi, corrections keep happening in the stock markets at regualr intervals. The long term outlook looks good for the India as a country and I would definitely recommend that you invest in equity markets. Please invest for the long term - 5 years and above. ensure that you invest in diversified equity funds. Avoid Sector or Thematic funds. Every fall in the market should be considred as an opportunity to invest in equity markets.
water asked, Sir, I intend to invest in ELSS - HDFC tax saver and ICICI tax saver, kindly suggest. Time horizon for the investment is 5 + years Rajesh
Sailesh answers, hi, both the funds are good for 5 years time horizon.
pratik asked, i want to invest gold...which is good for me..?
Sailesh answers, hi, if you are looking at investing in gold, then consider Gold EXchange Traded Fund (ETF). these are the best form of investing in gold. Its easy o buy and sell gold ETF. You need to have a demat account and a share trading account with any stock broker. Also, do not allocated more than 10% of your overall portfolio to gold. Invest in gold as an insurance and a hedge against inflation.
bharath asked, Hi sailesh, I want to know more about the capital gain tax and is it possible to avoid it by paying for loans
Sailesh answers, hi, you cannot avoid paying capital gains tax by repaying your loans. To save capital gains tax, you need to invest in capital gains tax saving bonds offered by REC and National Highway Authority of India (NHAI)
bharath2 asked, Sir, I want to invest 25lakh in share market how many years I have to wait to avoid any capital gains tax..
Sailesh answers, hi, as per the prevailing tax laws, if you want to claim exemption from long term capital gains on equity shares and equity funds, then your holding period should be atleast 365 days from the date of investment.
Google asked, Hi Shailesh, in the view of the tax benefits on the housing loans likely to be withdrawn next year, will it be worthwhile availing a new housing loan at this juncture ?
Sailesh answers, hi, if buying a house is a need then i dont see any reason why you should postponed the decision by one year. there may be an increase in the property price in he next one year. so go ahead and take the loan. I am not sure what will kind of similar benefits will be made available under the Direct Tax Code. Waiting for more clarifications and then taking action may not be a good idea.
raman asked, I am 28 years ,working in nautomobile company and completed 3 years in job.Till date i have taken lic policy of 5 lakhs for 15 years and given two premium of 35000 for last 2 years.I have invested 20000 in lic ulip,35000 in sbi mutual fund.is my strategy policy will work good in future and also suggest me for future planning for getting good corpus.my monthly take home salary is 37000
Sailesh answers, hi, you seem to investment savvy but you need to plan your investment before buying any ULIP or mutual fund. If you are investing to build your retirement corpus then I would recommend that you get a retirement plan made for yourself. Once the plan is ready and you know how much you need to invest and in which asset class (equity, debt, gold),then go ahead and buy the insurance plans and mutual fund schemes.
mc asked, WHY SHOULD ONE GO FOR ETF INSTEAD OF BUYING PHYSICAL GOLD. PLEASE EXPLAIN
Sailesh answers, hi, physical gold is better than ETF because it is easier to buy and sell an ETF compared to physical gold. You need to call your stock broker to buy and sell the ETF.Secondly, the units of ETF are held in demat form. So there is no worry of taking care like physical gold. also, the gold which the funds is the purest form of gold.
Vignesh asked, Hi... I am residing in a rented house in Bangalore & I am planning to take Home Loan to build a house in my native. Would I be able to get tax benefit on the prepayment of Home Loan as well as enjoy tax deduction through HRA?
Sailesh answers, hi, yes you can claim the home loan benefits under the income tax act for the house you are building in your native. You can also claim the benefit of HRA for the rent paid by you for the house in Bangalore.
veena asked, How should a 25 yr old plan/invest in mutual fund to gain maximum wealth. Investment capacity is 9k/mth for 2 years. Thanks
Sailesh answers, hi, your age is appropriate for investing in equity funds which has the potential to build wealth over the long term. But your investment horizon is too less. You should invest in equity funds with time horizon of atleast 5 years. Then only you can capitalise on the wealth creation potential of equities
grg asked, My PPF acoount matures on 1st April 2010. Keeping in mind the new DTC with EET coming, should I close my PPF account without 5 years extension?
Sailesh answers, hi, the provisions of DTC will be applicable only to deposits made on or after 1st April 2011. You can go ahead and renew your PPF account for another 5 years.
seshan asked, which one is better...1) 5000 per month as SIP in one pure equity fund...2) 1000 per month as SIP in 5 pure equity funds....both with long term (15-20 years) in mind
Sailesh answers, hi, it is always better to have a equity fund portfolio of 4-5 funds. It helps you diversifiy the risk. your portfolio does not depend on one/two scheme to perform. Hence, divide the amount between 4- funds.
Sailesh says, We seem to have run out of time. I thank you all for participating in the chat. If you have any questions to ask, you can post them to me at sailesh.multani@rediffmail.com
