Top 5 Smart Financial Planning Options

Financial Planning is what everyone does nowadays. But, to achieve your financial goals and objectives in the long term, you need to carry out smart financial planning. Your financial planner who may be at Mumbai, Delhi or Chennai, may advise you in detail, but here are top 5 financial planning options which you should keep in mind while discussing with him.

  • Chapter VI deduction

Chapter VI deduction can be claimed for Rs. 150000, when you invest in tax saving instruments as prescribed under section 80C. This is the first and foremost thing to be looked upon by the salaried. Higher the tax bracket, the higher will be the benefit in the context of tax saved. For e.g. if you are in the 30% tax bracket, then you straight away save around Rs.45000 on total investment of Rs.150000.

Most popular investment is PPF (Public Provident Fund), where you get the benefit of long term compounding (15 years), even if the rate of interest is not that attractive. This is EEE (Exempt investment- Exempt yearly outflow- Exempt maturity proceeds) instrument; hence you only need to worry about liquidity factor. This is because, PPF allows to withdraw partially only from 7th year only subject to certain conditions.

The Amendment has brought in deduction for NPS (National Pension Plan) investment under section 80CCD (1b). This gives an additional benefit of Rs.50000 over and above the chapter VI deduction. However, there are certain rules which require that at least 40% of the corpus has to be put in for monthly annual pension after age of 60 years. Also, the maturity proceeds in lump sum and in monthly phases, are both taxable.

For those who have daughters under the age of 10 years, will rejoice more. SukanyaSamruddhiYojana (SSY) is newly introduced for those who have daughter less than 10 years. This scheme currently gives out @ 9.2% (for 2015-16) and is a tax saving instrument under section 80C 9limit of Rs.150000). It gives a fairly higher rate of interest than fixed deposits and PPF. However, lower liquidity due to partial withdrawal only after the child turns 18 and total tenure being till daughter turning 21, is a bit of concern.

Your financial planner may advise you to invest in ELSS (Equity Linked Saving Scheme) mutual funds, if you are more of an aggressive investor. This investment also has an overall cap of Rs. 150000 however; it allows you to enjoy equity exposure along with tax exemption. You can also invest in lump sum or in SIP (System Investment Plan) to enjoy compounding effect (3 year locks in period) and rupee cost averaging.

  • Buy a house

Seems a bit of typical financial advice, which you have been listening to since you started earning. But, buying a house is more secure and at the same time tax saving investment. If you have one house, buying second also would be worth it. The reasons can be stated as below.

  1. It saves your rental outflow, where you don’t own any house. This is particularly useful when you are staying in metros like Mumbai, Delhi etc. Your financial planner will advise you the same.
  2. It leads to asset creation.
  3. It adds up to your income, in case you buy a second house and rent it.
  4. Most importantly, house purchase saves you tax. SOP (Self Occupied Property) is the property where the owner owns only the said house. LOP or DLOP (Let Out or Deemed Let out Property) is the second or later properties which are let out or are assumed to be let out for tax purposes.

Interest on housing loan can be claimed for SOP at Rs.200000 and for any amount for LOP or DLOP. This loss in house property (negative income under the head house property) will reduce your taxable income as it can be set off against salary income also.

  • Mutual Fund investment (other than tax saving)

Now that you are done with the tax aspects of your financial planning, let’s move on to non-tax saving mutual funds. Your financial planner will be able to advise you better based on your financial goals and objectives. Here are some of the picks which you can discuss in detail with your financial planner.

  1. Direct mutual Funds

These funds don’t charge intermediary fees and hence carry lower expense ratio compared to other mutual funds. Such low costs lead to higher returns.

  1. Debt Funds

These funds from short term instruments result in higher returns as compared to bank fixed deposits. Tax liability arises when you redeem the units held.

  1. Money Market Mutual funds

This is for conservative investors who wish to earn moderate returns, other than a fixed deposit route.

  1. Balanced funds

If you wish simultaneous exposure to equity and debt, then balanced funds are for you. These funds have predetermined proportionate exposure to equity and debt.

These are just a few types of mutual funds. However, every investor has a different financial planning depending upon his financial goals. Hence, consult your financial planner to get to know and invest in appropriate mutual funds.

  • Gold Bonds

As an Indian, we love our shining metal and would store loads of physical gold. It has been a part of our thinking that gold is a last resort and is not to be sold otherwise.  However, the gold bonds offered by the government give various advantages like no insecurity over purity of gold, compounding effect of interest rate over gold price and most important no worry about its safety.  So take out all bars and coins and work them for earning 2.75% interest instead of keeping them idle.

  • Contingency reserves

This is most important of all. Buffering up cash or liquid reserves would certainly result advantageous due to the following factors.

  1. Can be used as emergency reserves in case of medical emergency or sudden job cut etc.
  2. Can be utilized for investing in stock markets, where bearish trends set in and your favorites are trading at much lower prices. This would definitely give you rupee cost averaging.
  3. Can be used for meeting unforeseen expenses.


These were the five most important options for smart financial planning. Even though these tips are written considering a general class, you may need to consult your financial planner to customize the investment pattern according to your affordability, liquidity needs and long term financial goals. You will be able to locate financial planner in Mumbai, Delhi or even small cities like Indore, Thane etc. on websites or yellow pages.

Author Bio: – Soniya Scott is a Certified Financial Planner by qualification and content developer by passion. She work in Financial Hospital She holds expertise in Tax planning and Financial Planning.