Financial Health Check

I have just sold my house in Delhi and don’t know what to do with the large capital I have got. I have some needs that are current, some amount I want as a regular flow over the next few years as I am a retired person and I have some needs of lump sums in future years – I want to give my grandson some money in seven years time when he is 18. I also want to know the tax saving options I have. I had bought this in 1988 for Rs 12 lakh and have sold for Rs 43 lakh.
Brig. A Raghavana

The sale amount from a property looks very large for a non-commercial property seller and the feeling of intimidation is not unusual. The trick is to break the amount down into smaller bits and then allocate it. Since you have made a profit on your property investment, you need to pay tax on it. Tax laws allow you to index the cost at which you bought your property and then take the difference between sale price and buying price to calculate profit. After indexation, your purchase price is Rs 34.51 lakh and your profit comes down from Rs 23 lakh to Rs 8.49 lakh.

It seems that you want to deploy this money in financial assets and not more property. The option for you is to buy special tax savings bonds of NABARD, NHAI, Rural Electrification Corporation, National Housing Bank and SIDBI with a three year lock in. You get semi-annual interest during the term of the bonds and get your principal back after three years.

The rest of the money (Rs 34.51 lakh) can be put in a mixture of small saving instruments, bonds, debt and equity funds. Break up your future needs to see when you would need the cash lump sums. Your grandson’s gift can be put in a Post Office MIS and Recurring Deposit combination or a balanced fund. For your regular income needs you can invest in institutional bonds or a good debt fund.

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