I am 33 years old and want to sell a property for 90 lakh that I bought 10 years ago for 8 lakh. I have never made any other investments. I want to pay minimum tax and invest the entire amount to get a monthly return for 30 years. Suggest investment avenues keeping in mind inflation. I am not too averse to risk.

Rohita Kumar

Your investment made 10 years ago when you were 23 years old has fetched you a great return. You should make sure you invest this money wisely and have some understanding about the instruments you choose.

You are liable to pay income-tax on the gains you derive. However, the Income-tax Act does give concession through cost inflation index and long-term capital gain tax helps you pay lower taxes than your marginal tax rate. You can reduce your tax liability if you reinvest the capital gains in a residential property or/and specified capital gain bonds, provided you hold the asset or the bonds for a specified period of time. These investments need to be done again within a specified time period and are subject to some further clauses.

But before you start the process of saving tax, you need to ask yourself a few questions. First, if you plan to reinvest in property, then why are you selling in the first place and how do you plan to get a monthly income? Second, investment in capital gains bonds yield a low taxable interest and the bonds also have a lock-in period. Are these better than other investment avenues or are you better off paying taxes and investing the surplus funds?

Investment options you can consider, assuming you can lock these funds for long, are a combination of debt and equity. Since you are not too risk-averse, you should have high equity exposure. To start with, open a Public Provident Fund account in case you don’t have it and invest in it every year. The maximum you can invest in it is 70,000.

Then, you can create a basket of mutual funds. Equity funds, multi-caps and balanced funds are best suited for you. Funds like HDFC Equity, DSP BlackRock Equity fund are good bets. In the space of balanced funds, consider HDFC Prudence, Birla Sun Life 95 Fund. You can allocate 60% of your investible surplus to these two categories. You can also invest in gold exchange-traded funds, but not more than 10% of your total portfolio. The debt space can take the balance 30%. Fixed maturity plans of various durations is a good option. Also, take some exposure to short-term funds for creating liquidity.

Lastly, consider a pure life cover for yourself; this is critical if you have dependants. This along with a health insurance should sum up your investment plan.

However, why you want a regular monthly income is not clear. At the age of 33, you should make your money work harder for you instead of using the interest or dividends for monthly consumption.

Queries and views at mintmoney@livemint.com