MON E Y MAT T E R S
Managing your money can be tricky. Send your queries, and personal finance experts will help you resolve any issue.
Investment
Sujit Ghosh: I have a six-year-old son whom I want to send abroad for higher education. I want to save ` 1.5 crore for this purpose. I already have an equity SIP running and it has grown to ` 25 lakh. Given the current market condition, I am planning to withdraw the sum and invest it in fixed deposits (FDs). I would also like to start a SIP for another 12 years so that the money is ready when my son is 18. How much should I invest and which scheme should I choose?
Arun Kumar, Head of Research at FundsIndia.com, replies: Assuming that your FD returns will be 6-7 per cent, the current corpus of ` 25 lakh will grow to ` 50-56 lakh after 12 years as against ` 87-97 lakh in equities at 11-12 per cent CAGR (expected returns). If you want to shift to FDs now, you have to amass another ` 1 crore in the next 12 years. This will require a monthly SIP of ` 31,000-34,000, assuming 11-12 per cent returns from equity. For this SIP, you can choose two or three multicap equity schemes with long-term track record and consistent performance.
Taxation
Bharat Negi: I live in a 3 BHK rented house in Delhi but also purchased a 1 BHK property here. But I do not live there. Can I claim house rent allowance (and a tax deduction on the same) as well as a tax deduction on home loan interest? Will I be eligible for tax deduction if my property is on rent?
Archit Gupta, Founder and CEO of ClearTax, replies:
If you are repaying a home loan, living on rent and also getting HRA as part of your salary, you might be able to claim tax benefits on both HRA and home loan interest. For instance, you may have rented a house to be closer to your workplace or you may need a bigger house for your family. Besides, you are paying interest on the home loan for another property. In such genuine cases, you will be eligible for both. One can claim up to ` 1.5 lakh under Section 80C for the principal repayment made and ` 2 lakh under Section 24 for the interest paid for a self-occupied property. If the property is let out, you can claim the entire interest paid over a year. However, the overall loss from house property that can be claimed is limited to ` 2 lakh in a financial year. The department may monitor this situation if the deductions claimed seem unusual and may also ask for an explanation. To avoid these issues, you should ensure that all relevant documents such as lease deed, rent agreement and homeownership papers are in place.
Auto Insurance
Ganesh Murmu: When I purchased my car insurance, I took a zerodepreciation cover. After my vehicle met with an accident, I made a claim but had to pay for several things. My insurance company said that the auto parts had to be replaced due to wear and tear and were not covered by the zero-depreciation policy. What should I do?
P. Ramesh Venugopal, Executive Vice President (Claims) at IFFCO Tokio General Insurance, replies:
An auto insurance policy covers loss or damage to the vehicle caused by external accidents. But any damage to any part of the vehicle due to normal wear and tear is not covered under the policy. Zero depreciation is an add-on cover. It only covers the depreciation applicable to the cost of parts replaced due to the proximate cause of an accident, as per the surveyor’s assessment.