[vijaykr]

Originally Posted by JediKnight

Many people are not aware but you do not have to pay capital gains tax if you invest the money to buy home even for mutual funds.

I am one of those who is not aware of this So how does this work exactly in terms of not paying CG? Unless the amount used for buying a home is coming from another property sale in which case it is straightforward, how do you show that the proceeds from investment used for a home purchase are exempt from capital gains? Thanks

[thanixravindran]

Originally Posted by vijaykr

I am one of those who is not aware of this So how does this work exactly in terms of not paying CG? Unless the amount used for buying a home is coming from another property sale in which case it is straightforward, how do you show that the proceeds from investment used for a home purchase are exempt from capital gains? Thanks

I believe he is referring to Section 54F which gives option of exemption of LTCG from non residential capital assets like land, equity and mutual funds if reinvested in residential property.

Section 54 is for exemption of LTCG from residential property reinvestment to another residential property.

[Dry Ice]

Originally Posted by V.Narayan

Dear @Dry Ice, always pleased to share what little I have experienced. I did not quite understand what is meant by decumulation. If you could clarify I could write on it. Also share a rough idea of your age range (20s, 30s or 40's) to make my response more relevant.

My bad, should have probably expressed it better. DailyDriver has covered the essence of what I meant pretty well. Essentially, planning the draw down phase.

I am in late 30s, so probably 20 odd years to go.

Originally Posted by V.Narayan

And finally my advice to readers would be to donate, lumpsum or in bits, something to a good well run charity. How much is not as important as how willingly we do it with grace and humility. We need to not only lessen the burden of our worldly assets but also the baggage of desires in our hearts and souls.

True

Originally Posted by V.Narayan

The impediments to decumulation are FOMO, a fear that enough is never enough, that we need to prepare for financial armageddon, that the RoI is never good enough and a better RoI is just around the corner. The grip of moh and maya can be very strong and not quite visible to us.

Certainly, that fear is all too prevalent. It’s more of a feeling than fact. The mind always frets about the worst case scenarios.

Originally Posted by V.Narayan

Don't chase perfection of corpus amount or RoI. Chase the minima you need and ensure that is locked in. Rest is a bonus. Long long ago I determined roughly how much I will need as a retiree to live on, added an inflation of 5% per annum, and invested in a series of pension plan annuities with HDFC Life. As my earnings grew I added additional annuities to invest in. Today all but one of those annuities have matured and yield a annual income which will go on for life of both my spouse and me. The return wasn't the best but it was a substantial forced saving each year, non-withdrawable {so no tinkering by me} and now I don't have to bother or manage the corpus. After that all other investments in equity, real estate, mutuals were for the top up corpus.

That’s true, and probably the way to go, instead of trying to maximise returns while excessively hedging against every possible risk. As they say, keep it simple, stupid!

Thanks for sharing!

[JediKnight]

Originally Posted by thanixravindran

I believe he is referring to Section 54F which gives option of exemption of LTCG from non residential capital assets like land, equity and mutual funds if reinvested in residential property.

Section 54 is for exemption of LTCG from residential property reinvestment to another residential property.

Yes that is correct. I was referring to Section 54F. Many people are not aware of this section. So parking funds for a future real estate purchase in a mutual fund is a prudent option and it hedges you against price increase.

[whitewing]

Originally Posted by JediKnight

Yes that is correct. I was referring to Section 54F. Many people are not aware of this section. So parking funds for a future real estate purchase in a mutual fund is a prudent option and it hedges you against price increase.

Could you please eloborate how a LTCG from sale of MF/equity can be transferred into a land/house purchase? If indeed this is possible, it would be an option I would like to explore.
At the time of my last reading of the (sometime last year) Section 54F limits the capital assets to those whose incomes could be classified under "Income from house property".

[tasty911]

Originally Posted by whitewing

Could you please eloborate how a LTCG from sale of MF/equity can be transferred into a land/house purchase? If indeed this is possible, it would be an option I would like to explore.
At the time of my last reading of the (sometime last year) Section 54F limits the capital assets to those whose incomes could be classified under "Income from house property".

Have a look at these:
https://cleartax.in/s/ltcg-tax-savings

https://economictimes.indiatimes.com...8.cms?from=mdr

[tasty911]

Originally Posted by JediKnight

Yes that is correct. I was referring to Section 54F. Many people are not aware of this section. So parking funds for a future real estate purchase in a mutual fund is a prudent option and it hedges you against price increase.

I believe it has to be an equity mutual fund.

[JediKnight]

Originally Posted by tasty911

I believe it has to be an equity mutual fund.

Disclaimer I am not a tax professional/expert so there can be errors in what I am saying.

The law says it can be for any long term capital gain other than a residential property ( for section 54 F). So it can be things like direct equity of hybrid funds etc as long as there is a LTCG. I guess for debt funds purchased before 1st April 2023 you can still use if you have LTCG. But not after that because government got rid off LTCG on debt funds after that.

[tasty911]

Originally Posted by JediKnight

Disclaimer I am not a tax professional/expert so there can be errors in what I am saying.

The law says it can be for any long term capital gain other than a residential property ( for section 54 F). So it can be things like direct equity of hybrid funds etc as long as there is a LTCG. I guess for debt funds purchased before 1st April 2023 you can still use if you have LTCG. But not after that because government got rid off LTCG on debt funds after that.

You are correct. For a short period between April 1, 2023 and March 31, 2025 it was not applicable to non-equity funds. Before and after than, the LTCG from these can be offset on purchase of property.

[neeravnaik]

One advice for financial planning is to have a bias for action. Too much time is spent looking for the “best plan” than actually saving and investing. I have seen it with a lot of people. Any time you start is a good time. Don’t read too much into views of experts and in global news and general doom and gloom. Go and look at 20-30-40 years charts of any market index especially for India and it has gone up over long term so you just start anytime. It takes little time to open an account on something like Coin on zerodha and start SIP in some index funds. Regular investing does not need any timing.

[Sober_Motorhead]

Originally Posted by V.Narayan

There is a lot more I could write on regarding health insurance, buying a home, where to settle, writing a will etc but on this post I wanted to stay focussed on building your basket of savings.

Dear Narayan Sir, Your views and thoughts on all of the above will be very helpful. In particular - where to settle, as that could majorly influence the other decisions. Look forward.

[desidino]

Originally Posted by V.Narayan

Second thing I did around age 60 is to sell off all real estate assets and put the money into financial assets. The hassle of managing real estate is IMHO a pain and the returns other than capital appreciation almost a pittance.

This is something I am nudging my parents into doing. With real estate assets spread across multiple cities, it has become impossible to manage them properly. Even renting out doesn't yield any benefit after accounting for maintenance & repair cost needed on independent house that is in a different city. Agriculture land is prone to threat of encroachment from adjacent fields and even wholesale redrawing of boundary due to chakbandi / consolidation by the government.

However, I do understand the attachment that my parents' generation have for real estate as that was the main big ticket asset class that they had access to. I am privileged that my parents were able to accumulate a good real estate portfolio, especially given that they came up from basically nothing. It is a tight rope to walk with parents wherein one doesn't want to hurt their feelings and yet do what is prudent while running the risk of appearing ungrateful and possibly souring family relationships.

So, instead of selling all their real estate assets, I am in the process of consolidating their real estate portfolio by selling assets in other cities and buying a larger asset in the city where we are living. The newly purchased assets will remain in the parents' name.

The next big discussion I will have to have with them someday is to prepare a will. That would be another tight rope walk.

[V.Narayan]

Originally Posted by Sober_Motorhead

Your views and thoughts on all of the above will be very helpful. In particular - where to settle, as that could majorly influence the other decisions. Look forward.

After having spent all by adult life after around 28 in the big cities of Mumbai & Delhi-NCR I know that my wife and I cannot scale down to our home town even though it is a Tier II capital of a State. I know my parents in their time were unable to live cheerfully in that hometown either. Noe everyone is different and we need to look into ourselves objectively on this. Also often after a career of 40 years outside you realize you know very few in your hometown and in social tastes and sophistication you may have grown beyond your old friends and relatives. Settle in a landscape of familiarity. When we retire at 60 or 65 we are already flooded with a ton of change hitting us from all side - monetary, social status, self respect, loss of employment etc that a big change of house and city is an unwanted burden.

Originally Posted by desidino

This is something I am nudging my parents into doing. With real estate assets spread across multiple cities, it has become impossible to manage them properly.
The next big discussion I will have to have with them someday is to prepare a will. That would be another tight rope walk.

The lure of landed property is very strong. Focusing on the will is the right and the essential thing to do. Very essential if s much of their networth is in property. You may wish to consult a lawyer to help understand for yourself, your siblings and your parents how difficult the inheritance & the division gets if your parents do not leave behind a registered will.

[srsrini]

Originally Posted by JediKnight

Disclaimer I am not a tax professional/expert so there can be errors in what I am saying.

The law says it can be for any long term capital gain other than a residential property ( for section 54 F). So it can be things like direct equity of hybrid funds etc as long as there is a LTCG. I guess for debt funds purchased before 1st April 2023 you can still use if you have LTCG. But not after that because government got rid off LTCG on debt funds after that.

To add, Section 54F covers all long term assets. So even gold would be covered - physical or ETFs!

One critical difference between 54 and 54F. There is a complex looking formula used to figure out how much capital gains is exempted. It simplifies to this - you should use all the sales proceeds (not just capital gains) to buy the house, and you would get the exemption for all capital gains. Else it would be proportional. (In Section 54, only the capital gains needs to be used for the new home.)

[sukhbirST]

Great thread with valuable tips from Narayan sir. One can never predict future investment growth, but one can listen to others who have seen it in their past.

About settling down, connectivity to every small thing you need in least possible time is the rule I followed. After retirement, more than money is the longevity in earning more important, if at all you want to work and earn. If you can't manage your assets, then no one can after you. Consolidate and organise everything to keep it simple. Thanks everyone with nice comments.