Save As Per The Corpus You Need

Devesh Bansal, Mumbai

I am 29. I started investing in mutual funds (MFs) two years ago. I invest Rs 2,000 each in three equity funds—multicap, focused equity and multi asset allocation—every month. I also have fixed deposits (FDs) worth Rs 10 lakh, besides Employees’ Provident Fund (EPF) and Public Provident Fund (PPF), but I aim to have around Rs 50 lakh in MFs. Is my contribution enough to create the portfolio I want over the next 25 years when I plan to retire, or should I increase it?

Yes, this contribution of Rs 2,000 each in three good equity funds will easily help you accumulate more than Rs 50 lakh after 25 years as it will accumulate around Rs 1.12 crore assuming an annualised rate of 12 per cent. However, it may or may not be sufficient for your post-retirement expenses as you also need to calculate the right amount of retirement corpus that will be required to maintain the same standard of living after factoring in inflation.

The FDs will give you stable but lower returns in the long run and are not tax-efficient. The EPF and PPF investments will give you decent returns in the range of 7-8 per cent but it will just about beat inflation.

Get in touch with a financial advisor who can give you a clear picture after doing retirement corpus creation activity and risk appetite exercise with you, and suggest you the right investment amount for post-retirement expenses.

Suhel Chander, CFP®, Handholding Financials

Pritam Singh, Delhi

I get my salary as a lump sum, and house rent allowance (HRA) is not mentioned in the salary slip. However, I want to claim HRA benefits in tax. How can I do that?

Though there is no HRA component in your salary, you can still claim an exemption for the rent you pay. Under Section 80GG, Chapter VI-A of the Income-tax Act, 1961, one can claim an exemption for rent of up to Rs 5,000 a month, provided one does not own a property in the same city. The conditions to claim this are:

• Section 80GG applies to salaried and self-employed professionals.
• HRA should not be part of the salary package to claim Section 80GG deduction. If you have claimed HRA at any time during the financial year, you will not be able to claim a deduction under this section. This means that if HRA was part of your salary package in your previous job but is not in your current one, you will not be able to claim an 80GG deduction for that financial year.
• You, your spouse, or your minor child should not own a property in the city, where you occupy a rented accommodation for which you want to claim 80GG deduction.
• In case you own a residential property at any place for which your income from house property is calculated under applicable sections (as a self-occupied property), no deduction under Section 80GG is allowed.
• Individuals residing in property owned by their parents are also eligible to claim Section 80GG benefits. However, such individuals should sign a rental agreement with their parents and pay rent to them. The rental amount paid to their parents will be taxable when they file their ITR.
• You will need to file Form 10BA with the details of rent payment.
• If your rent exceeds Rs 1 lakh per annum, you will have to submit PAN card of the property owner to claim the deduction.

The eligible amount of deduction will be the lowest of the following three:

• Rs 5,000 per month or Rs 60,000 per year.
• 25 per cent of the total income, excluding long- and short-term capital gains.
• Actual rent paid minus 10 per cent of income.

Uma S. Chander, CFP®, Handholding Financials