Financial planning for soldiers

Indian soldiers in the armed forces need to be prepared for their personal finance battles. This week we’re focusing on the financial well-being of the defence personnel in the various armed forces and how they can be prepared for challenges on their personal finance front.

Money9 Helpline hosted the Hum Fauji initiative’s CEO, Col Sanjeev Govila to discuss the significance of financial planning for defence officers.

Edited excerpts

Subhash Saini- As the contribution in a year beyond Rs 5 lakhs is taxed, is there any safe tax-saving investment especially for defence personnel?

Col Govila:  As an investor, you should first check how many safe investments options giving 6-7% returns are available to you. The first one is PPF. However, you can’t invest more than Rs 1.5 lakh in PPF in a year. The second option we have is RBI floating rate bonds. It’s a very good scheme to consider as it is issued by the government and there is no issue of security. It offers 7.15% returns, which is 0.35% more than National Saving Certificates(NSC). But it does have drawbacks like the fund is locked for 7 years. Also, you will receive interest twice a year, which is fully taxable. Another option is to go for debt mutual funds it is a very good investment scheme. You can invest any time as well as withdraw anytime. There is SIP’s you can invest in which work like a bank’s recurring schemes. You can save a good amount of tax as compared to bank FD’s by investing in them. If you keep the investment for more than 3 years, you can also save the tax up to 70-80%.

Anand Saxena: I am a CRPF Subedar. My son is in class 2nd. I want a corpus of 15 lakhs for my son’s higher education. What kind of fund can you suggest for achieving my goal?

Col Govila: I suggest you invest in an equity mutual fund. The market will fluctuate but you don’t have to panic as the market has a dynamic nature. If you are scared of taking risks then I suggest you invest in dynamic asset mutual funds. You just have to watch the track record and definitely, you will be able to build a corpus of more than Rs 15 lakh.