What isn't your investment?
Your first house, family jewellery, contingency fund shouldn't be linked to any goal
Oct 25, 2013
Source : Business Standard

 

MUMBAI: Have you ever considered whether you have become a crorepati after the price of your house rose 50 per cent in two years? Or, whether you have Rs 10 lakh of family jewellery?

Well, both aren’t your investments, as you consume these — if you are living in the house whose value has risen, it isn’t an investment. This is because if you were to sell it, another house would have to be bought. Also, if the property was bought through a home loan and you are paying the equated monthly instalments (EMI), the actual value of the house, for you, would be much less. For instance, if the current property price is Rs 1 crore and the loan due for the property is Rs 50 lakh, you are a lakhpati, not a crorepati.

Similarly, gold jewellery would be used for marriages in the family, or it would be worn on special occasions. You would only sell these in times of distress; that, too, with a view to replace these someday.

In fact, even the income tax department recognises some of these aren’t investments; it doesn’t include these in the wealth tax ambit. For example, your first house doesn’t come under the wealth tax net; residential property other than one house, guesthouses, farmhouses, motor cars, precious metals, including jewellery, gold, aircraft, yachts, boats, urban land and cash of more than Rs 50,000 do. If these exceed Rs 30 lakh, there is a tax of one per cent. When the Direct Taxes Code is implemented, the threshold limit of wealth tax would be raised to Rs 1 crore. Also, additional assets are proposed to be covered.

When planning for the future, a number of items should be excluded. Financial planner Steven Fernandez, says, “While doing financial planning for a person, we do not link the house (the person is living in) or the jewellery or even the contingency fund to any future goal.”

The contingency fund — salary of at least six months in a liquid fund or simple bank deposit — is part of your liquidity ratio. But here, too, the amount cannot be linked to any future goal such as child’s education, travel or retirement planning.

Many other items should be kept out of the list — collectibles such as stamps and coins, as valuing these is difficult.

A second property, mutual funds, stocks, etc, would come under investment, and these are considered while planning for the future. That is why financial planners insist on separate plans for different goals. For instance, if you want to fund your child’s education 10-15 years later, create a different corpus, with equity mutual funds or large-cap stocks. A short-term goal such as travelling abroad in two years has to be adequately funded through investments, primarily in debt schemes, with a part in large-cap schemes.

 

Well, both aren’t your investments, as you consume these — if you are living in the house whose value has risen, it isn’t an investment. This is because if you were to sell it, another house would have to be bought. Also, if the property was bought through a home loan and you are paying the equated monthly instalments (EMI), the actual value of the house, for you, would be much less. For instance, if the current property price is Rs 1 crore and the loan due for the property is Rs 50 lakh, you are a lakhpati, not a crorepati.

Similarly, gold jewellery would be used for marriages in the family, or it would be worn on special occasions. You would only sell these in times of distress; that, too, with a view to replace these someday.

In fact, even the income tax department recognises some of these aren’t investments; it doesn’t include these in the wealth tax ambit. For example, your first house doesn’t come under the wealth tax net; residential property other than one house, guesthouses, farmhouses, motor cars, precious metals, including jewellery, gold, aircraft, yachts, boats, urban land and cash of more than Rs 50,000 do. If these exceed Rs 30 lakh, there is a tax of one per cent. When the Direct Taxes Code is implemented, the threshold limit of wealth tax would be raised to Rs 1 crore. Also, additional assets are proposed to be covered.

When planning for the future, a number of items should be excluded. Financial planner Steven Fernandez, says, “While doing financial planning for a person, we do not link the house (the person is living in) or the jewellery or even the contingency fund to any future goal.”

The contingency fund — salary of at least six months in a liquid fund or simple bank deposit — is part of your liquidity ratio. But here, too, the amount cannot be linked to any future goal such as child’s education, travel or retirement planning.

Many other items should be kept out of the list — collectibles such as stamps and coins, as valuing these is difficult.

A second property, mutual funds, stocks, etc, would come under investment, and these are considered while planning for the future. That is why financial planners insist on separate plans for different goals. For instance, if you want to fund your child’s education 10-15 years later, create a different corpus, with equity mutual funds or large-cap stocks. A short-term goal such as travelling abroad in two years has to be adequately funded through investments, primarily in debt schemes, with a part in large-cap schemes.

 

Latest Realty News

Grievances later, pay property tax first, says PMC
Oct 25, 2013
PUNE: The civic administration, struggling to achieve the annual budget revenue target of Rs 4,167.5 crore, is now focusing on property tax collection. The administration has asked property owners to pay their taxes before approaching the civic body with tax-related grievances.
Chembur: MMR’s best foot forward
Oct 25, 2013
MUMBAI: Located between South Mumbai on one side and Navi Mumbai on the other, Chembur enjoys seamless connectivity in the form of the Eastern Freeway and Monorail towards the southern parts of the city
Small cities, satellite towns defy realty slowdown
Oct 25, 2013
MUMBAI: Slowing house sales in major cities such as Mumbai and Delhi notwithstanding, growth in residential transactions in satellite towns such as Greater Noida and tier-II and tier-III cities show a different picture.
Rental Housing In Mumbai – Economics And Dynamics
Oct 24, 2013
MUMBAI:Over the decades, Mumbai has been and continues to be the destination of countless migrants from all parts of India. This steady influx of people has also been driving perhaps the highest demand for rental housing in Mumbai than in any other Indian city.
Businessman booked for selling land with forged documents
Oct 23, 2013
AURANGABAD: The Satara police have booked a city-based businessman for allegedly selling a piece of land admeasuring four gunthas located at a prime location in the outskirts of Satara to a Jalna businessman by forging documents of the land.
Opt for Tingre Nagar, for apartments priced Rs 20-40 lakhs
Oct 23, 2013
PUNE: If you have a budget of Rs 20-40 lakhs and you are looking to invest in the eastern suburbs of Pune, then Tingre Nagar could provide you with a number of options. Tingre Nagar, which has a large number of properties available within this budget, is ideal for home buyers who cannot afford nearby locations such as Viman Nagar, Koregaon Park and Kalyani Nagar, where the property prices are relatively higher.
Mira-Bhayander stretch on a high, appreciation expected
Oct 23, 2013
MUMBAI: Prices of residential properties on the Mira-Bhayander stretch – the suburban location in Thane district, have doubled in the past three years on the back of growing connectivity and infrastructure and there is scope for further appreciation in the near future. The locality is administered by the Mira-Bhayander Municipal Corporation (MBMC). A 1,000-sq ft apartment in a multi-storeyed building is available in the range of Rs 75-80 lakhs at present.
Property owners oppose Greater Mumbai civic body’s tax formula
Oct 23, 2013
MUMBAI: Mumbai-based Property Owners Association is going to challenge the Municipal Corporation of Greater Mumbai’s recently revised basis and method of property tax computation
LIC HFL reduces home loan rates by 0.25%
Oct 23, 2013
MUMBAI: Housing finance company LIC Housing Finance (LIC HFL) today said it has reduced home loan rates by 0.25% with effect from October 15.
NSEL accused face attachment of property
Oct 23, 2013
MUMBAI: National Spot Exchange Ltd’s promoters, directors and defaulters now face attachment of movable and immovable properties from the economic offences wing (EOW) of the police here, in connection with the Rs 5,600-crore payment disputes case.

Latest Realty News Of State

Realty Talk's