Mutual funds are not meant to provide regular dividend options.
Q I am 28 years old working in PSU for last 4 years. All my monthly income goes towards repaying the home loan, which I took 2 years ago, supports a brother and a sister for their education and the monthly expenses of parents (purchased houses) and wife (rented), Those who live differently.
I can save around ₹ 2 lakhs in a year. I plan to have a baby after one year. How should I plan to support a child and home loan repayment? I am the only earning member in my family.
Vidya Bala answers:
a. How much you can save is not clear. We believe that you are suggesting that you can save about ₹ 2 lakh in a year. Whatever it is, starting early investment for your child gives you different advantages. You can start whatever you have left by investing in PPF. If you have a girl child, consider Sukanya Samriddhi Yojana. These two will also provide tax deduction. Of these, invest in ordinary equity index funds.
Q I am a 62-year-old former employee of a PSU. I have invested my retirement benefits in equity and debt mutual funds with the expectation of monthly dividends. Unfortunately, due to market conditions, dividends are not coming in and capital has shrunk to 70%. Being retired and not quite pensioned, I only depend on the monthly dividend. what is your advice? Should I withdraw from mutual funds and invest in Jeevan Shanti or keep it for some more time? Do you have other suggestions?
a. Mutual funds are not meant to provide regular dividend options. We do not know the nature (equity or debt) and quality of your funds. But looking at your situation, this is the best option for you: Pension option of Via Vandana scheme from LIC, Small savings option of Senior Citizens Savings Scheme (in post office or SBI) and Floating Rate Saving Bond from RBI (major banks available in) . With this you will get regular income. If you are in the high-tax bracket, consider around 20% in an ultra-short-term debt fund and create a systematic withdrawal plan. It will be more tax efficient. But before considering a mutual fund, choose the options mentioned earlier.
Q I am 26 years old and earning 6 lakhs per year. I have recently started investing in PPF. How much should I invest every month?
a. Check with your employer on your tax liability and invest in PPF to that extent. When your salary increases, you can also consider tax-saving options such as tax-saving mutual funds. But outside of tax savings, consider smaller returns every month (at 5,000, at least) in Nifty-based equity mutual funds.
Q I took 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 getting rent. My question is, can I re-register the house in my and my wife’s names? Will I get any relief in income tax by doing this?
Answer by Mr. N. Kantha
a. As per Section 27 of the Income Tax Act, as per Section 64 of the Income Tax Act, you will be the owner even after transferring the property of the house to your wife, as will be done without adequate consideration, due to which any income will be earned from such assets. Tax will be levied in your hands and thus there will be no tax relief. This will apply even if only part of the property is quoted by you.
(Vidya Bala, Co-founder, PrimeInvestor.in. N. Sree Kanth is Partner, GSS Associates, Chartered Accountant, Chennai)
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