Money Matters

Investment

Ayan Chaudhuri: I am a 25-year-old government employee with an annual gross income of `4.91 lakh. I have bought an apartment and the home loan EMI is Rs15,000 (total loan amount is Rs18 lakh). I also pay an annual home loan insurance premium of Rs5,256. Additionally, I hold a term plan worth Rs1 crore (annual premium Rs10,344), my NPS-PPF corpus amounts to Rs93,000 and I also invest Rs2,000 a month in SBI Mutual Fund via SIP. I don't have liquid cash right now, but I am planning to invest in stocks, get an adequate health cover and buy a car costing Rs6-7 lakh in a few years. My parents are not dependant on me and I don't plan to marry in the next four years. Do let me know how I should invest.

Rahul Jain, Head of Edelweiss Personal Wealth Advisory, replies:

It is good to know that you are planning your investments at the age of 25. Your term plan is adequate for now, but the same should be reviewed and revised periodically as your income and responsibilities grow. It will be a good idea to take a health insurance cover for yourself and your parents. If you want to build a corpus of Rs7 lakh for your car in the next four years, you need to invest Rs12,000 a month in a mix of equity and debt funds, and the ratio should be 75:25.

Taxation

Gaurav Kedia: I am planning to sell my Gurgaon apartment which I had purchased in 2009 for Rs32 lakh. Going by the current market value, I can sell it for Rs95 lakh or so post which I want to buy a piece of land and build a house. In case it takes more than three years to complete the project, what should I do to avoid the capital gains tax?

Archit Gupta, Founder and CEO of ClearTax, replies:

The IT law mandates investment of gains in another property either a year before or two years after the sale or construction of another property within three years from the date of sale if you want to claim an exemption from long-term capital gains tax. If you are unable to invest the gains in purchase/construction or get the paperwork done before filing the tax return for the year when the sale took place, you can deposit your profit in a Capital Gains Accounts Scheme. But in case the gains are not utilised within the specified time limit of two years or three years for purchase or construction, respectively, you will have to pay tax. You can also invest the money in a five-year capital gains bond if you need more time than the stipulated three years. However, the corpus can be used only at the end of the five-year term.

Mutual Fund

Abhishek Bhola: I want to invest in debt funds for the long term via SIP. Where should I invest?

Vidya Bala, Head of MF Research, FundsIndia.com, replies:

You can consider short-term and medium-term accrual categories. HDFC Short Term Debt Fund, Aditya Birla Sun Life Medium Term Plan and UTI Medium Term Fund are good options. You should be willing to face short-term volatility, though, as debt funds, too, take nasty knocks on a day-to-day basis.

Health Insurance

Bir Singh: I am 58 years old and my wife is 56. Seven years ago, I purchased an individual health insurance policy of Rs2.5 lakh for myself and a cover of Rs2 lakh for my wife. I am currently paying an annual premium of Rs12,720 for my policy and Rs9,500 for my wife's insurance. I also have a top-up plan of Rs5 lakh for which I pay a premium of Rs7,800. As my cover is insufficient, I want to increase it to Rs5 lakh. Should I port this policy to another insurer and convert it to a family floater plan?

Anurag Rastogi, Member of Executive Management, HDFC ERGO General Insurance, replies:

As one grows older, the need for a higher sum insured increases as well. Since you have held an individual policy for the past seven years, it is advisable to continue with the same rather than converting it to a family floater plan at this point. You can increase the sum insured at the time of policy renewal as per the product guidelines or get a suitable Super Top-up plan to raise the amount. You also have the option to port your insurance policy to another insurer, subject to portability guidelines.

Life Insurance

Kunal Bishnoi: I want to buy a term plan of Rs50 lakh. Can I buy it online and get a discount on the same?

Anilkumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance, replies:

Yes, you can purchase a term plan online with Rs50 lakh sum assured. However, it will depend on your current income and the underwriting guidelines of the insurance company. Also, availability of discounts differs from product to product and company to company. So, select a suitable term plan first after taking into consideration your income, health, lifestyle, liabilities, dreams and goals. Post that you can compare the rates offline and online, and opt for a policy.