Factor in long-term capital gains while selling your property

I am 45 years old and my salary is Rs 90,000. I will retire at 60. My dependents are my wife, daughters and my parents.

I own a flat worth Rs 40 lakh and it is let out for Rs 10,000 a month. I have recently purchased another flat for Rs 90 lakh with a home loan of Rs 30 lakh. After this purchase I am left with Rs 3 lakh in direct equity and mutual funds.

My monthly expenditure is Rs 40, 000. Besides, I pay an EMI of Rs 33,000 . I investRs 15, 000 in an RD . I save Rs 12,000 through SIPs in mutual funds.

I need Rs 10 lakh and Rs 15 lakh for my daughters’ wedding expenses in 2017 and 2022 respectively. I have accumulated sufficient gold for both of them. For my retirement I wish to accumulate Rs 50 lakh. My retirement benefits will be Rs 50 lakh. Is it advisable to sell the first flat and invest the proceeds in equity and mutual funds?

— Sridhar

Often people lose confidence in equity markets because they invest without proper research. Because your earlier direct investments let you down, for a long-term goal you need not become too cautious and save through RDs, especially when you are in the 30 per cent tax bracket. Allocate at least 60 per cent of your investment into through mutual funds. If the markets correct close to your daughters’ weddings, withdraw from PF for the expenses.

Since you bought the flat 12 years back, your current lon- term capital gains will work out to Rs 20 lakh.

If you are keen, sell your flat rather than investing the proceeds in equity. Close your new loan partially and invest the monthly surplus through systematic investment plan. By adopting this method, you need not pay long-term capital gains.

Marriage

Your monthly savings will be determined by the interest rate. If you opt for RD you may need to save Rs 14,200. Whereas if you opt for mutual funds and if it earns a return of 12 per cent, you need to save a sum of Rs 12,250 for the next 60 months.

For your younger daughter, you will need to save a sum of Rs 6,520 for next 120 months.

Retirement

Your current monthly expenses are higher due to your family size. Currently if you and your spouse need Rs 2.4 lakh annually as living cost, at retirement it will be Rs 6.19 lakh, if the inflation continues to be 7 per cent. To receive such an amount at retirement you need to have a corpus of Rs 1.12 crore. After deducting your retirement benefits you need to accumulate a sum of Rs 62 lakh. To reach the target you need to save a sum of Rs 14,350 for the next 168 months.

Although you have taken a term insurance for Rs 20 lakh, it is not adequate. Increase your cover by another Rs 30 lakh.

Take a health policy four years prior to retirement.

(The author is CEO, >myassetsconsolidation.com )

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