Money Today experts answer your loan, tax, insurance queries

Investing

I am 26 and earn Rs 35,000 per month. I have four dependants, including two younger sisters, and am the sole earning member of the family. I wish to take an appropriate insurance policy to secure my family's future in case of my death. Should I go for a unit-linked insurance product or a term insurance policy? -Sachin, Mumbai
Since you are the only earning member, we suggest you take a term policy with adequate cover over Ulips. A term policy is a pure insurance product and provides financial protection to your family if something were to happen to you while, a Ulip is an insurance-cum-investment product.

I am 49 years old and want to save for my retirement. My current household expense is about Rs 4.2 lakh pa. My investments include a provident fund of Rs 8.7 lakh. How much should I invest in mutual funds to maintain my current lifestyle? Also, should I continue with my PPF? -Kingshuk, Mumbai
First, you should continue investing in PPF for financial stability. You have about 11 years to retire. Assuming that you live till 80 years, you will need an income for 20 years post retirement.

RATE	INVESTMENT
8%	Rs 10,39,321
10%	Rs 9,33,562
12%	Rs 8,37,586
15%	Rs 7,10,493

Considering an annual inflation of 8% over the 31-year period, you will require a corpus of Rs 5 crore to maintain expenses of Rs 4.2 lakh pa (about Rs 1.73 crore for 20 years). When you turn 60, you can invest this Rs 1.73 crore in products that yield at least 10% to take care of your retirement.

To get Rs 1.73 crore in 11 years, you will need to invest the above amounts every year considering the different rates of return on investment.

Rajesh Krishnamoorthy, Managing Director, Fundsupermart & iFAST Financial India, has tackled the questions on financial planning.

Home Loan

Is the amount paid towards a home loan in a year dependent on the amount of loan the bank has disbursed or the amount sanctioned? I have been sanctioned a home loan of Rs 20 lakh. But, as per the builder's plan, the bank only needs to pay Rs 10 lakh in the first year the construction begins. So what would be the EMI that I have to pay in the first year? -Abhinav Rao, New Delhi
As the property is under construction, it is true that most lenders will make the disbursement in parts based on the progress of construction. Now, till the housing loan is fully disbursed, you have to pay simple interest at the rate you have agreed with the lender. This is known as the Pre-EMI. You will start paying your EMI from the month following the full disbursement of Rs 20 lakh. In one opts for tranche EMIs, then it will be paid on the disbursed amount.

I wish to purchase a house with my mother as co-owner and co-applicant of the loan. However, I will be paying all the EMIs. Am I eligible for full tax benefits on the interest and principal or only a partial amount as my mother is a co-applicant? -Ketki Dhuru, Bombay
You will be eligible to claim the tax benefit on interest and principal components of your repayment during the year as you will be the only one paying the EMIs. Also, if the EMIs were to be jointly paid by the owner and co-owner, the claims should be made in proportion to the payments made. You can claim up to Rs 1.5 lakh on interest and Rs 1 lakh on principal.

Renu Karnad is the Managing Director of Housing Development Finance Corporation. She will answer queries on home loans.