Can you do complete analysis of my present investments

Thanks for writing to us. Please note the following –

1. Your salary is Rs. 864,000 per annum but you are saving only 86,560 (LIC Rs. 80,560 + PPF Rs. 500 x 12 months) for savings taxes under section 80C of the Income Tax Act 1961. What is the amount that your employer is deducting against EPF? If the total amount - EPF along with the above amount of Rs. 86,560 exceeds Rs. 150,000, then you are done with saving taxes under the above section.

2. The other way to save tax is to invest in National Pension Scheme (NPS). Please note that finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. This is over and above the limit of Rs. 150,000 provided under Section 80C of the Income Tax Act, 1961. NPS can give you much better return than that of recurring deposits. Therefore, out of this Rs. 8,000 that you are saving in RD per month you should allocate a portion to NPS. Not only that this will get you tax rebate, the return from NPS would also be superior. For example – if you invest Rs. 5,000 per month in NPS and the return is 10% then after 20 years you can expect to get a corpus of Rs. 38.00 Lakhs against your investment of Rs. 12.00 Lakhs. Whereas, Bank Recurring Deposit will get you maximum 7% and with that you can expect to create a corpus of Rs. 26.00 Lakhs only. Please note that we have not accounted the tax benefit that you will also get in NPS.

3. The remaining Rs. 3,000 from Bank recurring deposit and the Rs. 2,000 of Post Office RD can be invested in diversified equity mutual funds through monthly SIPs. This can build a corpus of 76.00 Lakhs after 20 years presuming returns @15% against the expected RD corpus of only Rs. 12.00 Lakhs. Please try this SIP calculator https://www.advisorkhoj.com/tools-and-calculators/systematic-investment-plan-calculator. Please also check the returns of Diversified Equity Fund SIPs over 10 years. As you can see the top performing funds have given 15-21% annualised returns.

4. It seems you are in your late twenties or early thirties. Therefore, this is also the time for planning for your kid’s higher studies and your retirement planning. As you have no mutual fund investments as of now beating the inflation in terms of returns from your current investment would be difficult. Therefore, you need to allocate some portion of your monthly savings in mutual funds and set financial goals against that.

5. We recommend you to read these article ELSS is one of the best retirement planning investments for young investors, ELSS investments can help you in both: Tax saving and retirement planning and 6 reasons why your retirement planning may fail to have a better understanding about retirement planning.

6. You should also try to clear off your personal loan. Our suggestion would be to close the monthly recurring deposits and pay off the personal loan first and then start the fresh investments. Overall, your current investments may only be able to beat the inflation rate. But real returns (Rate of return – inflation) could still be negligible.