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Top News Express Investigation: Muzaffarnagar whitewash — Like in murder, accused got away in rape, rioting cases too Blacklist fear forces Pakistan to shut 20 terror camps in PoK After Kargil, Pak CO urged Indian Brigadier for bodies ‘for paltan’s izzat’ I own a residential apartment in Indore which is presently unoccupied and also is […]

I own a residential apartment in Indore which is presently unoccupied and also is free from any loan liability. I have bought and registered another residential apartment in Indore in March 2013. This has been bought under home loan scheme. Total value of the flat,including other development charges,registration and stamping charges is about Rs 55 lakh. Am I entitled to avail benefit of deduction of 100 per cent interest amount on the loan under Section 24 or is it limited to Rs 1.50 lakh? Am I liable to pay any wealth tax and TDS? How are these calculated ? At present,I stay in Haryana as per job requirement.

— SK Singhal 

Dear investor,buying a second home is a good way to save taxes. On the first home which is self occupied,you can use deduction of Rs 1 lakh towards your principal under Section 80C. At the same time,you can claim deduction of Rs 1.5 lakh on the interest payment. However,the tax structure in second home is different. You cannot claim anything on the principal part but you are entitled to avail the benefit of deduction of 100 per cent interest amount under Section 24. Yes you can claim 100 per cent of the interest paid on the second home. As far as wealth tax is concerned,since this is your second home,you have to pay wealth tax on it. The wealth tax is 1 per cent of the value of wealth exceeding Rs 30 lakh as calculated on March 31 of every year. This means,you don’t have to pay taxes as long as the value of your assets is less than Rs 30 lakh. Once it goes beyond Rs 30 lakh,your tax liability will be 1 per cent of the amount that exceeds Rs 30 lakh. So on the wealth of Rs 50 lakh,you will pay tax of Rs 20,000 (1 per cent of Rs 50 lakh minus Rs 30 lakh). You can avoid paying wealth tax by renting your second home or using it for commercial purpose. You can file tax using a challan ITNS 282. However,it is best to connect with a CA for filing wealth tax.

For my daugther’s education and my retirement,I have added two LIC policies,one for each. Is it safe to assume that they would fetch me at a minimum 5-6 per cent return over a period of 15-20 years? Is that a good option to keep? 

— Vishal 

LIC will certainly give you a return of 4 per cent to 6 per cent. However,you have better options than LIC policies. If you have 15-20 years investment horizon,I would suggest you can invest a part of money in a balanced fund and a part in equity fund. Equity funds are those that invest in equity market. They are high risk investment but also provide high returns. Over a time horizon of 15-20 years,equity funds perform extremely well giving you a return of 12 per cent to 18 per cent CAGR. In the short term,you will experience lot of fluctuations though. The other fund is debt fund that invest in bank savings,government securities,corporate bonds,etc. There will be lower risk than the equity mutual funds but the prospect of returns is also low. Debt funds provide a return of 7 per cent to 10 per cent. By dividing your money in both funds,you can achieve a return of 9 per cent to 12 per cent over your investment horizon. If you can invest Rs 10,000 per month,split it into two parts,Rs 3,000 and Rs 7,000. Invest Rs 3,000 per month in any equity fund,and Rs 7,000 in debt funds.

— Expert advice by Adhil Shetty,CEO,

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