[Gansan]

Originally Posted by roadie_swift

This is absolutely correct, but does this mean that the said tax-savings can ONLY be achieved through PPF contributions?

No. But I will look at other options only after exhaustimg this one.

And the annual withdrawal and plough-back will lubricate our cash flow, at a small cost in loss of interest!!

[carboy]

Originally Posted by Abeer

I already have a PPF account in my name. Can I open a PPF account in my minor son's name also? Will the PPF contribution limit be 70K in each of the accounts or will it be 70K as the combined limit?

Yes, you can open a PPF account in your son's name. He will have a separate limit of 70K per year. However, his 70K cannot be shown for tax relief in your tax returns. It will be like a FD paying 8.5 but whose returns aren't taxed.

[roadie_swift]

Originally Posted by carboy

Yes, you can open a PPF account in your son's name. He will have a separate limit of 70K per year. However, his 70K cannot be shown for tax relief in your tax returns. It will be like a FD paying 8.5 but whose returns aren't taxed.

Carboy, what you have mentioned is incorrect.

If Abeer were to open a separate account in the name of his minor child, then we have to presume that it will be Abeer himself who will contribute to both the accounts - i.e. his own as well as his child's - and in that case, Abeer's contribution to both the accounts combined is capped at 70k.

All PPF accounts, to which only one individual is contributing - as self or as guardian - have to be capped at a combined total limit of 70k. Each account does not have a separate 70k limit if the same person is contributing to the accounts.

Hence, unless and until the child has a separate source of earning, on which the child is paying income tax / filing returns, and from which source of earning the child is contributing separately to his/her PPF account, s/he will not have a separate limit of 70k.

Cheers,
R_S

[carboy]

Originally Posted by roadie_swift

Carboy, what you have mentioned is incorrect.

If Abeer were to open a separate account in the name of his minor child, then we have to presume that it will be Abeer himself who will contribute to both the accounts - i.e. his own as well as his child's - and in that case, Abeer's contribution to both the accounts combined is capped at 70k.

All PPF accounts, to which only one individual is contributing - as self or as guardian - have to be capped at a combined total limit of 70k. Each account does not have a separate 70k limit if the same person is contributing to the accounts.

Hence, unless and until the child has a separate source of earning, on which the child is paying income tax / filing returns, and from which source of earning the child is contributing separately to his/her PPF account, s/he will not have a separate limit of 70k.

Cheers,
R_S

Looks like I was wrong. However, I think even if your spouse is non-earning, you can put 70K in her name separately.

[Devrishi]

It will be separate limit for father & son i.e. Rs.70,000/- each. There is a little twist to it. Abeer(father) should actually gift Rs.70,000/- to his son. That way his son will have Rs.70,000/- in his saving bank account. Gift in blood relation is tax free. Now transfer Rs.70,000/- from sons saving bank account to sons PPF account.

[Abeer]

Originally Posted by Devrishi

It will be separate limit for father & son i.e. Rs.70,000/- each. There is a little twist to it. Abeer(father) should actually gift Rs.70,000/- to his son. That way his son will have Rs.70,000/- in his saving bank account. Gift in blood relation is tax free. Now transfer Rs.70,000/- from sons saving bank account to sons PPF account.

Thanks for your replies but I am confused now. How does this gift thing work? If I open the account in my son's name and then deposit via cash every month, would that qualify as a gift?
My son has a savings account in HDFC and my PPF account is in SBI. If I open my son's PPF account, it will also be in SBI.
So, how does this gift thing work?

[meonbhp]

I am looking for some advice.

My father, who was only earning member of family died suddenly 4 weeks back. I am 24. I worked for a year after engineering but left the job as i was interested in doing MBA (which I cant afford now). So there is no income as of now other than his pension. I want to invest Rs.12 Lakhs for future of my younger siblings. I can't take risk to venture into equity. What are the safe options for me? Bank FDs, MF, POMIS..whats best combination for good returns. I can't lock all the money for more than 6-7 years.

[carboy]

Originally Posted by meonbhp

I am looking for some advice.

My father, who was only earning member of family died suddenly 4 weeks back. I am 24. I worked for a year after engineering but left the job as i was interested in doing MBA (which I cant afford now). So there is no income as of now other than his pension. I want to invest Rs.12 Lakhs for future of my younger siblings. I can't take risk to venture into equity. What are the safe options for me? Bank FDs, MF, POMIS..whats best combination for good returns. I can't lock all the money for more than 6-7 years.

You can go through this -
Low Risk Portfolio

Another thing to remember, a lot of Banks are giving very high FD rates currently - 9-10%. Don't worry about going only for high-profile banks. Most banks are DICGC insured. That means, even if a bank crashes, each individuals deposit (including interest) upto Rs. 1,00,000 is insured by DICGC. Just check the DICGC Website before putting money in the bank. I think 95% of all banks are covered by DICGC as long as your principal+interest in the bank doesn't exceed Rs 1,00,000.

[Technocrat]

Originally Posted by meonbhp

I am looking for some advice.

My father, who was only earning member of family died suddenly 4 weeks back. I am 24. I worked for a year after engineering but left the job as i was interested in doing MBA (which I cant afford now). So there is no income as of now other than his pension. I want to invest Rs.12 Lakhs for future of my younger siblings. I can't take risk to venture into equity. What are the safe options for me? Bank FDs, MF, POMIS..whats best combination for good returns. I can't lock all the money for more than 6-7 years.

Very sorry to hear that. My best wishes are with you & your family.

I would suggest following-

1) First of all get a term insurance of maximum possible value for yourself (I am assuming you are the eldest earning member now or will be) if not then get it for someone who is. The premium on Term policy is very low e.g. an insurance worth 25-30L for someone your age would be around 5-6k annually.

2) Invest major part in FDs given the great ROI currently, this is the best time for FDs. I would recommend doing it in batch of sum e.g. if you want to put 10L in FD, then create 3 FDs one for 6L & 2 for 2L each, this way even if you have need money you wont have to break the entire FD & continue to get higher ROI. Senior citizens (60+) get an extra % so if you have anyone in that category at home, make the FD on their name.

3) Start 1 or 2 or more SIPs for small amounts (any amount from Rs 500 to 10k or more)for Equity based MF schemes. This will allow you to invest small amounts in Stock market at relatively lower risk. You may want one of the SIPs to be in Tax Saving MFs.
The Best about these schemes is that they can be liquidated as & when needed, only downside is if you try to encash it when the NAV is down.

As for MBA, there are many reputable part time courses available in Mumbai which aren't too heavy on pocket. If not that then you can always get one via Correspondence through IGNOU.

I hope this helps.

[ghodlur]

Originally Posted by meonbhp

I am looking for some advice.

My father, who was only earning member of family died suddenly 4 weeks back. I am 24. I worked for a year after engineering but left the job as i was interested in doing MBA (which I cant afford now). So there is no income as of now other than his pension. I want to invest Rs.12 Lakhs for future of my younger siblings. I can't take risk to venture into equity. What are the safe options for me? Bank FDs, MF, POMIS..whats best combination for good returns. I can't lock all the money for more than 6-7 years.

@meonbhp

Very sorry to hear about your father.

I wholly support what Technocrat has mentione din his post. Apart from his recommendations I would suggest a few more but surely not to confuse you.

In addition to the FD, you can look to PPF which is a fantastic product for long term gains. Alternatively you can look at Bank RD's, Postal schemes which are also relatively safe. Also the Infrastrusture bonds may be looked at.

Now if you try to sit down and do a brief study about the various options suggested by BHPians you might want to divide them into two major sections - Insuramce and Investments. For Insurance a term plan is the most ideal and also give thought to a simple medical Insurance too. For investments you have the suggestions.

All the best to you and your family.

[carboy]

Originally Posted by ghodlur

In addition to the FD, you can look to PPF which is a fantastic product for long term gains.

What advantage does PPF give him over a regular FD?
The main advantage of PPF is that the interest of PPF is tax free unlike any other instrument. But that may not be really relevant to him. So I don't see any reason for him to prefer PPF over regular FDs.

Originally Posted by ghodlur

Also the Infrastrusture bonds may be looked at.

Again infrastructure bonds may make no sense for him. Infrastructure bonds are a tax saving instrument other than the returns themselves.

Originally Posted by ghodlur

For Insurance a term plan is the most ideal and also give thought to a simple medical Insurance too.

You need life insurance only if there is an earning member - so that can wait till he or some other member of the family starts earning & the rest of the family is majorly dependent on that person's income.

[rsjaurr]

I completely agree with carboy that PPF although best option for tax paying individual,will not make sense to meonbhp.Same is the case with bonds,MFs and insurance schemes.As carboy said,insurance schemes are best for earning individual and his dependents and some part of return money is lost as compared to e.g.PPF.All schemes based on sensex are too risky and this is not the right time for meonbhp to invest in these schemes especially if he is not earning yet and has siblings to look after as well.

So probably the best option would be to invest the whole amount in 3-4 different FD in siblings names.The longer the period more interest you get so you can invest here for about 7 yrs and expect the money to almost double the invested amount.

[ghodlur]

Reason for suggesting PPF was the interest rates remain fairly constant since being regulated by Govt of India where as in case of Bank FD's the ROI is subject to change depending on the whims of the bank. Even if @meonbhp starts earning which he needs to do ASAP, PPF would help in tax savings too. Also would locking an substantial amount in a FD for a long period of time be justified? He says that he cant lock the money.

He is better off on putting the amount in a debt fund or a balanced fund.

[meonbhp]

Thank you for reply guys. I knew this is right place to get some advice

As ghodlur said I will start earning soon as I m eldest in family. Mother doesn't work and is a heart patient. Sister and brother are studying engineering (last and 1st yr resp.).

FDs will be my main focus. Which banks give best interest rates?

Also, is putting some amount (say 4L) in postal scheme Welcome to the Indiapost Web Site a good idea? Or should I just concentrate on bank FDs? Only downside I see in POMIS is penalty on premature withdrawal. But I have to put aside some amount for my sister's wedding anyway. Can I link this to my bank account so monthly interest is credited to my account automatically?

I have heard good things about hybrid funds like HDFC prudence. What is your opinion about it?

I don't know much about PPF other than that it is an tax saving instrument with moderate returns, lock-in period is 15 yrs and maximum I can invest is 70000 per yr. So how much I will get after maturity? How often does the interest rates get revised? and can I withdraw whole amount in case of emergency?

We have a whole family medical insurance (I think premium will be less now) and I will get myself insured as soon as I start earning.

Sorry for too many questions.

[tsk1979]

If your mother is a senior citizen, then take FDs in her name. You get 0.5% more.