Financial FAQs for Armed Forces Officers

The tax implications of transferring retirement benefits to a spouse in India Gift tax: Gifts between spouses are exempt from gift tax, so you will not have to pay any gift tax when you transfer your retirement benefits to your spouse. Clubbing provisions: The income arising from the assets gifted to your spouse will be clubbed with your income and taxed in your hands. This means that you will be taxed on the interest income, capital gains, etc., arising from the investments made with the gifted amount

There is no exemption or deduction available for treatment or ongoing medicines of diabeties, however the health insurance will be granted only if the problem with client is not serious like regular intake of insulin’s etc. However central government employees have certain waive off or discounted treatment in CGHS empanelled entity/hospitals.

The ITR-2 form need to be filled. Also, you can claim deductions for your salary and rental income as well. You need to follow the below mentioned steps:-

• Under the “Income from Salary” Head, you will need to enter your salary income.

• Under the “Income from Other Sources” Head, you will need to enter your car rental income.

• Also, you can claim the standard deduction of Rs 50,000 for your salary income.

• You need to calculate the taxation on basis of the above details and pay tax accordingly.

Please feel free to write to us in case of any further queries.

Based on your income and the fact that you are a PSU employee, you will need to file your income tax returns using ITR FORM 1. The conditions to file ITR 1 (SAHAJ):

• The individual must be a resident of India (other than not ordinarily resident). • The individual’s total income from all sources must be less than Rs.50 lakh.

• The individual’s income from salary/pension, one house property, and other sources must be less than Rs.50 lakh each.

• The individual’s agricultural income must be less than Rs.5,000.

The due date for filing your income tax returns for the financial year 2022-23 is 31st July 2023.

Sir,

Gammon India and Core Education both are unlisted shares, they are not traded on NSE or BSE however they can be traded in over the counter market.

Tax Treatment of unlisted shares are as follows.

1. If sold within 2 years will be considered as short term captal gain and taxed as per slab.

2. If sold after 2 years tax will be levied at 20% after indexation. If these shares are sold at a loss, they cannot be set off against any other sources of income like salary, house property, income from business and other sources.

These losses can be set off against capital gains only-Long-term capital loss from the sale of unlisted shares can only be set off long-term capital gains. Short-term capital loss can be set off against long-term and short-term gains

1.Check the pre-fill screen: If you have filed your return with the same platform and your PAN is already linked, you should see a pre-fill screen where some details are auto-fetched

2.Verify the tax-paid section: Scroll down to the ‘tax-paid’ section in the filing form. Here, you should find the details of TDS and advance tax that you have paid. If these details are not appearing, you can manually enter them or upload Form 26AS to add the information

3.Review the computation of total income: Ensure that you have filled in all the relevant schedules and sections accurately. In the Part B – Total Income (TI) section, you should be able to view the computation of total income auto-populated from the schedules you have filled

4.Seek professional assistance: If you are still facing difficulties in filing your return or resolving the issue with the tax payable and interest demand, it may be beneficial to consult a tax professional or seek assistance from the income tax department

LIC’s Jeevan Shanti plan is a single premium deferred annuity plan which offers a guaranteed annuity for the rest of the policyholder’s life, which can be a good option for people who are looking for a secure income stream in their retirement years.

However, the amount that you are looking at committing towards this is very high and the returns that will be earned by you will only be in the range of 3-4% post tax which is not very suitable for the tenure that you’re looking at. Additionally, it will only provide a fixed income which will also not take inflation into account.

Hence, we do not recommend this policy to you.

We think that the funds are well-positioned for future growth. Having exposure to mid-cap and small-cap funds is appropriate as per your age and horizon and we have assumed that you have a high risk profile.

We recommend you to stop the contribution in Axis Small Cap only because of over-diversification purpose and re-start it in Mirae Asset Large Cap Fund and to keep track the performance of your portfolio. Also, we recommend you to maintain emergency fund with you for uncertain events.

We advise you to speak with a financial expert for individualised advice.

Good luck with your financial endeavours!

Dear Sir,

The amount required in 2026 is Rs. 1.37 cr for which you need to invest Rs 1.3 cr as of today. We have assumed a ROI of 10% and inflation of 6%. Talking about the investment avenues, always consider a well-diversified investment portfolio that includes a mix of asset classes such as stocks, bonds, commodities etc.

Coming to your query, you need to invest the money in short-term fixed instruments like government, corporate bonds and corporate FD’s with relatively low risk and moderate returns.

You can also consider investing a part in conservative or equity savings funds where you get the exposure of equity markets along with safety of debt. Please consult with a financial advisor to get personalized advice based on your specific financial situation.

Dear Sir

As per your query regarding EPF latest guidelines for withdrawing the amount in 2023, please refer to the below-mentioned points.

1. You can withdraw up to 75% of the net balance in your EPF account, or three months of your basic salary plus dearness allowance, whichever is lower.
2. You can withdraw 100% of your EPF amount if you are unemployed for more than two months as per old rule.
3. You can withdraw up to 50% of your EPF amount for the marriage of your child or for their education after class 10.
4. You can withdraw up to 90% of your EPF amount if you are 54 years of age or above.

There is no maximum limit for the amount that can be withdrawn from your EPF account. However, you will need to pay income tax on the amount withdrawn if you have not contributed to your EPF account for at least five years.

The amount can be left in your EPF account after the contribution stops for an indefinite period of time. However, if you do not withdraw the amount after a certain period of time, it will be transferred to the Employees’ Pension Scheme (EPS).

Please connect with us in case of any queries.

Sir,

Every investor has their own risk appetite and financial goals. Hence, the investment strategy may vary person to person.

As your time horizon for the goal is of long-term, we would suggest investing more in mutual funds, and the FD investment option can be rethought.As Stocks are more risky and chances of losses are high which can lead to non-achievement of your financial goal. Direct investment in shares requires a thorough analysis of companies’ fundamentals periodically. You are already investing a large amount in Debt instruments. You may reconsider investing in equity through equity mutual funds.

We would recommend that as you already have major corpus in Debt you can increase some portion of your equity investment.

Dear Sir/Ma’am,

This fund has been designed to provide the amount for your child’s wedding, higher education etc. once the child has grown up for events. There are two components in the maturity amount. One is Principle and another one is Interest.

Interest earned here will be added to your income and will be taxable as per the slab rates.

Suppose you invest in a bond with a face value of Rs. 100 @ 10% ROI. At the maturity you will receive principal amount of Rs. 100 along with the interest of Rs 10 which will taxable as per your slab rate.

Here are some steps that will help-

1. Create a Budget: Make a detailed budget to track your income and expenses. Cut unnecessary expenses and prioritize debt payments.

2. Emergency Fund: Set aside a small portion of your income each month to build an emergency fund. This will prevent you from accumulating more debt in case of unexpected expenses.

3. Debt Snowball or Avalanche: Consider using either the debt snowball or avalanche method to tackle your debts. In the snowball method, pay off the smallest debt first and then move on to the next one. In the avalanche method, focus on the debt with the highest interest rate.

4. Reach out institute to negotiate the lending rate based on good payment history.

5. Debt Consolidation: If possible, explore the option of consolidating your debts into a single loan with a lower interest rate.

6. Avoid New Debt especially high-interest loans and credit cards.

Dear Sir,

Our investment decisions should be matched with our risk appetite and investment horizon. You can invest in the Mid or Small Cap Fund if you have a time period of 10 years. PGIM India Mid Cap Opportunities Fund/Nippon India Small Cap Fund would be the good options for you. In the initial 3 years, you might face negative returns as equity orinted funds are very volatile in the short term but you can expect the returns ranges between 12% to 15% in 10 years of investment horizon.

HDFC has recently launched this fund investing mainly into the defence and allied sector Companies. The future prospects of the fund depends on the performance of the sector companies that the fund invests in. Looking at your age, you have to understand the risk associated with the investment avenue being a sectoral fund, it contains high volatility. If your risk appetite is low and you are looking for safety over the period you should look for the alternatives. Although, If you plan to remain in the fund for 24-36 months, you should be prepared to face high volatility and uncertainty in the short to medium term. hence, please consider the above mentioned points before making any decision

Your portfolio is a mix of different category of mutual funds like – large-cap, mid-cap, small-cap, and thematic funds which indicates you have well diversified your portfolio. Diversification can help reduce risk and improve the potential for returns. Investment for long term in equity funds gives good return. We suggest you to stay invested for 5-10 years and you can expect 12-14% CAGR from your portfolio while in short term you may see volatility. However it is essential to keep reviewing your portfolio periodically and track the performance of particular mutual funds and make adjustments if required.

Dear Sir,

There are various types of pension plans available such as Immediate Annuity Plan, Guaranteed Period Annuity Plan, Life annuity plan etc. of insurance companies such as LIC, HDFC life Insurance & ICICI Prudential Life insurance. You can choose any one according to your requirements. However, we recommended you to invest available bulk amount in mutual funds and take SWP from it after your retirement. It will provide you regular income, liquidity, flexibility and tax efficiency. Before choosing any one option for your retirement, we suggest you to consult with your financial advisor for the best suitable advice.

Dear Sir/Ma’am,

Investments should have their foundation in asset allocation with equity, bonds (fixed income), gold and real estate being the primary asset classes. It may be a good idea to start with index funds and then as you learn more about mutual funds, diversify into ELSS, blue chip, hybrid, and debt funds depending on you risk appetite, investment horizon and financial goals. In addition, You must set aside some amount in a debt mutual fund or a recurring deposit to cater to near-term expenses and create a contingency fund for yourself.

Dear Sir, Investment in Mutual Funds need a time to generate good & stable returns. It would be a best practice in case you do not withraw the amount in the first 4-5 years and give the time to your investment to grow at a decent rate. After 4-5 years, you can start SWP for your requirements. In SWPs, your capital also withdrawn. Therefore, you should withdraw the amount through SWPs at a rate below than the CAGR.

HDFC Mutual Fund has recently launched the HDFC Defence Fund, which will invest in stocks of defence and allied sector companies. The fund will be benchmarked against the newly-launched Nifty India Defence Index. The investment objective of the fund is to provide long-term capital appreciation by investing predominantly in stock of Defence & allied sector companies like Hindustan Aeronautics, BEML, Bharat Dynamics. The fund is meant for investors who are willing to take high risk for high returns as defence sector is highly regulated and government being the main buyer, it also has concentration risk. Moreover, being a sectoral fund, it contains high volatility and investors should consult their financial advisors before making any investment decisions.

Dear Sir/Ma’am,

Your current SIPs are a good mix of equity funds. They provide you with exposure to a variety of asset classes and investment styles but we suggest you also maintain your asset allocation according to your age, risk profile, and goals.

Your current asset allocation is 100% in equity funds, if you don’t have any debt investment. So, we suggest you to change your asset allocation and add some hybrid/debt funds in your portfolio. For the additional Rs. 5,000 SIP, we suggest investing in the Aggressive Hybrid category or Balanced Advantage category for the purpose of diversification and asset allocation.

Here are a few suggestion for aggressive hybrid and balanced advantage category:

Aggressive Hybrid – Mirae Asset Hybrid Equity Fund

Balanced Advantage – Edelweiss Balanced Advantage Fund

Therefore, the best SIP for you will depend on your investment goal and risk tolerance.

Regards

Sir,

Congratulations on starting your investment journey! It’s great that you’re already investing in Parag Parikh Flexi Cap, which is a good fund for your age and risk profile.

Here are a few other mutual funds that you might want to consider only if you have a long-term investment horizon only 7-10 Years:

ICIC Prudential Nifty 50 Index Fund – This is an index fund that tracks the performance of the Nifty 50 Index, which is a benchmark index of the top 50 companies in India. Index funds are a good way to get broad exposure to the stock market at a low cost.

Kotak Equity Hybrid Fund – This fund is a good option for investors who want a well-diversified portfolio. It invests in a mix of equity and debt securities, across different market capitalizations.

These are just a few suggestions, and there are many other good mutual funds available. It’s important to do your own research and choose funds that are right for your individual needs and investment goals.

Your total monthly SIP is running Rs. 32,667 (including the prospective SIP considering that annual SIP of RS 50,000 in DSP tax Saver Fund). We’ve calculated the corpus that you’ll be able to accumulate after 20 years is Rs. 3.11 crore. (Assumed Rate of Return- 10% p.a.).

Following are our recommendation on your funds to start your additional SIP: (considering that you’ll required money after 20 years)

• ICICI Flexi Cap

•UTI Mid Cap

• Nippon India Growth Fund

Disclaimer -We advise you to speak with a financial expert for individualized advice. Good luck with your financial endeavors!

Hybrid funds, which invest money in both equity and debt funds. These funds are suitable for conservative investors who don’t wish to take higher risks but want to have exposure to equity funds as well. Amount can be invested in these funds with a time horizon of 3 to 5 years. Also, in hybrid funds, there are multiple funds with different strategies, and investors should invest according to their risk appetite and time horizon. Some of the Hybrid funds are mentioned below

1. Hybrid Aggressive

2. Balanced Advantage

3. Hybrid conservative:

Currently, the asset allocation of the portfolio is 100% and a decent portfolio should have diversified to provide support during uncertainties. Portfolio is also overly allocated towards a particular AMC (Quant), which increases the concentration risk of the portfolio and also avoid two or more fund of a category. All the funds are well but Nippon India growth fund is better over Quant Mid Cap and Parag Parikh Flexi Cap & Quant are also well performing funds.

Apart from deduction benefits, ELSS is better investment option from return perspective and in its peers Quant Tax Plan has delivered the decent returns. Navi Nifty Bank Index is sectoral fund, a this category fund majorly faces three drawbacks i) inconsistent returns, ii) limited exposure and iii) incomplete replication of index portfolio. Instead of this, Sensex and Nifty index are better option having exposure of overall market

It seems that your portfolio is over diversified. Every category should include the one or two funds but it in your case there are more than 2 funds which will affect the portfolio. We suggest you to choose the old or new tax regime as your SIPs in the ELSS funds which will provide the maximum deductions of 1.5 lakh in a year. Portfolio . Choose 1 fund of a category and realign amount to the portfolio via SIP’s, even ELSS functions typically as flexi cap, thus you have more than 5 similar funds. You can diversify SIP in various category and restrict one fund a category.