Solutions: Avinash Waghle 1) B) Value of flat 4400000 Down payment made 400000 Outstanding to be met by loan 4000000 Release of 1st installment on 01.10.2009 800000 4000000*0.2 Term outstanding 180 months 15*12 Release of 2nd installment on 01.04.2010 800000 4000000*0.2 Term outstanding 174 months 180 6 Release of 3rd installment on 01.01.2011 1200000 4000000*0.3 Term outstanding 165 months 174 9 Release of Final installment on 01.01.2012 1200000 4000000*0.3 Term outstanding 153 months 165 12 Tenure of loan is 15 years from 01.10.2009 4400000 400000 Release of 1st installment on 01.10.2009 800000 Term outstanding 180 months Rate of interest 12.50% p.a. Principal EMI Repayment Repayment EMI from 01.11.2009 to 01.04.2010 9,860 Outstanding Interest Principal PMT(12.5%/12,180, 800000,0,0) 1 Oct 09 800000 1 Nov 09 798,473 9,860 8333 1,527 1 Dec 09 796,930 9,860 8317 1,543 1 Jan 10 795,372 9,860 8301 1,559 1 Feb 10 793,797 9,860 8285 1,575 1 Mar 10 792,205 9,860 8269 1,591 Release of 2nd installment on 01.04.2010 800000 1 Apr 10 1,590,597 9,860 8252 1,608 Principal outstanding of earlier installment 790597 1 May 10 1,587,328 19,838 16569 3,269 Total loan outstanding 1590597 1 Jun 10 1,584,025 19,838 16535 3,303 Term outstanding (months) 174 1 Jul 10 1,580,688 19,838 16500 3,337 Rate of interest 12.50% 1 Aug 10 1,577,316 19,838 16465 3,372 EMI from 01.05.2010 to 01.01.2011 19,838 1 Sep 10 1,573,908 19,838 16430 3,407 PMT(12.5%/12,174, 1590597,0,0) 1 Oct 10 1,570,466 19,838 16395 3,443 1 Nov 10 1,566,987 19,838 16359 3,479
1 Dec 10 1,563,472 19,838 16323 3,515 Release of 3rd installment on 01.01.2011 1200000 1 Jan 11 2,759,921 19,838 16286 3,551 Principal outstanding of earlier installment 1559921 1 Feb 11 2,753,572 35,098 28749 6,349 Total loan outstanding 2759921 1 Mar 11 2,747,157 35,098 28683 6,415 Term outstanding (months) 165 1 Apr 11 2,740,675 35,098 28616 6,482 Rate of interest 12.50% 1 May 11 2,734,125 35,098 28549 6,549 EMI from 01.02.2011 to 01.01.2012 35,098 1 Jun 11 2,727,508 35,098 28480 6,618 PMT(12.5%/12,165, 2759921,0,0) 1 Jul 11 2,720,821 35,098 28412 6,687 1 Aug 11 2,714,065 35,098 28342 6,756 1 Sep 11 2,707,238 35,098 28272 6,827 1 Oct 11 2,700,341 35,098 28200 6,898 1 Nov 11 2,693,371 35,098 28129 6,970 1 Dec 11 2,686,329 35,098 28056 7,042 Release of Final installment on 01.01.2012 1200000 1 Jan 12 3,879,213 35,098 27983 7,116 Principal outstanding of earlier installment 2679213 1 Feb 12 3,868,804 50,818 40408 10,410 Total loan outstanding 3879213 Term outstanding (months) 153 Rate of interest 12.50% EMI from 01.02.2012 to 01.10.2024 50,818 PMT(12.5%/12,153, 3879213,0,0) 2) C) Current cost of Alisha's higher education 2,500,000 Cost estimated after 10 years 4,477,119 (inflation 6%) 2500000*(1.06)^10 (1) Proceeds from Nifty divestment Current price of units 417.75 Current level of NSE Nifty 4527.25 Expected level of NSE Nifty 15000 Expected price of Nifty units 1384.12 417.75*15000/4527.25 Sale proceeds of 2000 units 2,768,237 1384.12*2000
(2) Proceeds from Equity Scheme redemption Current Value of units = 308870 SIP of Rs. 15,000 p.m. for 2 years @ 20% growth 20% p.a. = 1.5309% p.m. effective ((1.2)^(1/12)) 1 Value of units at the end of SIP period of 2 years 882479 FV(1.5309%,24, 15000, 308870,1) This is allowed to grow for 8 more years @11% Therefore, Value at the end of 10 years = 2,033,705 882479*1.11^8 (1) + (2) Value of investments after 10 years 4,801,942 2033705+2768237 Therefore expected Surplus = 324823 4801942 4477119 3) A) Pension Scheme Current balance 197925 CAGR 9.50% Monthly effective rate 0.7592% ((1+9.5%)^(1/12)) 1 Present age of Avinash 37 years Switch in mode SIP till 39 years Amount Rs. 15000 per month Retirement age 60 years Annuity period 240 months (80 60)*12 Estimated balance in the Pension Fund scheme after 2 years 633,553 FV(0.7592%,24, 15000, 197925,1) Estimation of Retirement Corpus Inflation 6.00% Inflation Monthly 0.4868% (1+6%)^(1/12) 1 Inflation adjusted rate of return (monthly) 0.2711% (1+0.7592%)/(1+0.4868%) 1 Amount of household expenses in the first month 143,241 (75000/2)*(1.06)^23 Corpus required to have these expenses for 20 years 25,315,962 PV(0.2711%,240, 143241,0,1) SIP required per month to accumulate this annuity in 21 years 27709 PMT(0.7592%,(60 39)*12, 633553,25315962,1)
4) B) Current expenditure of Rs. 75,000 p.m. would be equivalent to (@6% inflation) after 23 years 286481 FV(6%,23,0, 75000,1) Curtailed expenditure p.m. in the first year after retirement = 143241 286481*0.5 Accumlated corpus 20000000 Real rate of return p.a. 3.9623% (1+10.2%)/(1+6%) 1 Monthly effective rate 0.3243% ((1+3.9623%)^(1/12)) 1 Rs 2 crore shall last in the Annuity Plan which gives an inflation linked annuity of Rs. 1,43,241 in the first month of retirement for 185 Months or 15.45 years or 15 5 NPER(0.3243%, 143241,20000000,0,1) years & months 5) B) Annual rate of growth in equity markets (equity portfolio which is Rs. 6.76 lakh today) 20% p.a. in the next 2 years Value at the end of 2nd year Rs. 9.73 lakh 6.76*1.2^2 11% p.a. in the next 8 years Value at the end of 10th year Rs. 22.43 lakh 9.73*1.11^8 The Equity portfolio is redeemed 20% from the beginning of 11th year and invested in MMMF yielding 6% p.a. 22.43*0.2 Amount redeemed Equity portfolio 11th year begin Rs. 4.49 lakh Remaining Equity portfolio 11th begin 17.95 Amount accumulated MMMF 11th year end Rs. 4.76 lakh 22.43*0.8 4.49*1.06 (17.95*1.11)*0.2 Amount redeemed Equity portfolio 12th year begin Rs. 3.98 lakh Remaining Equity portfolio 12th begin 15.94 Amount accumulated MMMF 12th year end Rs. 9.26 lakh 17.95*1.11*0.8 (4.76+3.98)*1.06 15.94*1.11*0.2 Amount redeemed Equity portfolio 13th year begin Rs. 3.54 lakh Remaining Equity portfolio 13th begin 14.15 Amount accumulated MMMF 13th year end Rs. 13.57 lakh 15.94*1.11*0.8 (9.26+3.54)*1.06 14.15*1.11*0.2 Amount redeemed Equity portfolio 14th year begin Rs. 3.14 lakh Remaining Equity portfolio 14th begin 12.57 Amount accumulated MMMF 14th year end Rs. 17.71 lakh 14.15*1.11*0.8
(13.57+3.14)*1.06 12.57*1.11 Amount redeemed Equity portfolio 15th year begin Rs. 13.95 lakh Amount accumulated MMMF 15th year end Rs. 33.56 lakh (17.71+13.95)*1.06 1500000*(1.06)^15 Inflated Marriage expenses after 15 years 3594837 Shortfall in meeting marriage expenses Rs. 2.38 lakh (3594837/100000) 33.56 6) C) Rutwik 's higher education expenses after 15 years 5,991,395 FV(0.06,15,0, 2500000,0) Current Value of units in Balanced mutual fund scheme 365,000 Monthly Investment 12000 rate of return 9% p.a. Monthly rate 0.7207% (1.09)^(1/12) 1 Acculated value after 15 years 5,760,878 FV(0.7207%,180, 12000, 365000,1) Shortfall 230,517 5991395 5760878 7) C) Avinash s mother will get priority over her husband and sons (Section 8 of Chapter II / Hindu Succesion Act) 8) A) 9) A) 10) B) 11) A) Policy Sum Assured/Face Value= 2000000 Reversionary Bonus for first five years=60*2000*5= 600000 60*2000*5 Reversionary Bonus for next ten years=55*2000*10= 1100000 55*2000*10 Final Additional Bonus=325*2000000/1000= 650000 (325*2000) Total MV= 4350000
12) A) The car has been used from 17 9 2005 to 24 8 2008 and the completed years in this case are two. Therfore WDV shall be determined as under Orignal cost 650000 Less:Depreciation 130000 For First Year @20% 650000*0.2 WDV 520000 650000 130000 Less:Depreciation 104000 For Second Year @20% 520000*0.2 WDV 416000 520000 104000 Sale price 250000 Value of benefit 166000 to be added in Income 416000 250000 13) A) 1st year 2nd year 3rd year Premium paid 100000 100000 100000 Allocation charge 15000 3000 3000 Net amount for investment 85000 97000 97000 (a) Growth end of year @ 7% 90950 196822 308406 Policy charges 840 840 840 Mortality charges 1800 1800 1800 Fund management charges 1364 2952 4626 (b) Total charges ded. Year end 4004 5592 7266 (a) (b) Growth in the value 86946 191230 301140 14) D) Less : 5% surrender charge Surrender Value of Policy 15057 301140*0.05 286083 301140 15057
Solutions: Dr. Vijay Mohan 15) A) Commuted value of Pension 450000 Rate of Computation 50% Full value of Pension 900000 Since Dr. Vijay is also receiving Gratuity 1/3 of the full value of pension is exempt 300000 900000/3 Taxable value of pension 150000 450000-300000 16) D) Dr. Vijay Mohan Covered under the payment of Gratuity Act, 1972 a. Gratuity Receiveable 800000 b. 15 days salary for every completed year of service or part thereof in excess of 6 months is taken as full year 646153.85 40000*(15/26)*28 c. Maximum Rs. 350,000 Salary 40000 25000+15000 No. of year of service 28 Least of the above three is exempted 350000 Taxable 450000 800000 350000 17) B) Household Expenditure at Proceeds from Regular Pension Net amount to be covered from Debt 35000 p.m. 15000 p.m. 20000 p.m. 35000 15000 Inflation 6.30% p.a. 0.5104% p.m. Returns on Debt funds 9.00% p.a. 0.7207% p.m. Inflation adjusted returns 2.54% p.a. 0.2092% p.m. (1+9%)/(1+6.3%) 1 (1+0.7207%)/(1+0.5104%) 1 Inflation adjusted monthly pension is required for 20 years post 240 months Whole Corpus required 6,612,186 PV(0.2092%,240, 35000,0,1) PV of Regular monthly pension 1722187 PV(0.7207%,240, 15000,0,1) Net Corpus required additionally 4890000 6612186 1722187
18) A) 19) A) Cost of Marriage to be accumulated for Pooja 3,000,000 Time duration of PF proceeds 3.5 years 75% of PF invested 1,500,000 Rate of return Debt Fund 9.00% p.a. Investment accumulated till marriage Remaining amount to be made from Equity Fund 2,028,075 971,925 1500000*(1+9%)^3.5 3000000 2028075 Monthly investments in EquityFund for time 4 years 48 months Rate of return Equity Fund 15.00% p.a. 1.1715% p. m. effective (1+15%)^(1/12) 1 Monthly investment to be made 15025 PMT(1.1715%,48,0, 971925,1) 20) A) Monthly taxable (Basic+DA+HRA) 48000 Non Taxable 2000 800+1200 Total yearly taxable income 576000 48000*12 Deduction U/s 80C 80000 Deduction U/s 80D 15000 Taxable Income 481000 576000 80000 15000 Tax payable upto Rs. 150000 0 150000 to 300000 15000 150000*0.1 above 300000 36200 (481000 300000)*0.2 Tax payable 51200 0+15000+36200 Education Cess 1536 51200*0.03 Total Tax payable 52736 51200+1536 21) B) 22) B)
23) B) Investment made every month 1000 Year Year Year Year Year 1 2 3 4 5 Equity Value of investment at the end of year 12954 27502 43528 61184 80635 FV((1+15%)^(1/12 ) 1,12, 1000,0,1) FV((1+15%)^(1/ 12) 1,12, 1000, (37950/3),1) FV((1+15%)^(1/ 12) 1,12, 1000, (79758/3),1) FV((1+15%)^(1/12) 1,12, 1000, (125817/3),1) FV((1+15%)^(1/1 2) 1,12, 1000, (176558/3),1) Debt Risk Free Value of investment at the end of year Value of investment at the end of year 12577 26366 41556 58291 76727 FV((1+9%)^(1/1 FV((1+9%)^(1/1 FV((1+9%)^(1/12) 2) 1,12, 1000, 2) 1,12, 1000, 1,12, 1000, (37950/3),1) (79758/3),1) (125817/3),1) FV((1+9%)^(1/12) 1,12, 1000,0,1) FV((1+6.5%)^(1/1 2) 1,12, 1000,0,1) FV((1+9%)^(1/12 ) 1,12, 1000, (176558/3),1) 12418 25891 40733 57083 75097 FV((1+6.5%)^(1/ FV((1+6.5%)^(1/12) FV((1+6.5%)^(1/ 12) 1,12, 1000, 1,12, 1000, 12) 1,12, 1000, (37950/3),1) (125817/3),1) (176558/3),1) FV((1+6.5%)^(1 /12) 1,12, 1000, (79758/3),1) Total amount across investments to be balance in the beginning of a fresh year 37950 79758 125817 176558 232458 Total amount accumulated in 5 years 232458 Per month investment 3000 Time period of invetment 60 months Rate of return per month effective 0.81% RATE(60, 3000,0,232458,1) Annual Effective rate of return 10.16% (1+0.81%)^12 1
24) B) 25) A) Leave entitlment 36 days Accumlated leave 380 days As per Section 10 (10AA) (ii) Minimum of the following four is exempt from tax a. Leave encashment actually received 400000 b. 10 Months' average Salary 400000 (25000+15000)*10 c. Cash equivalent of unavailed leave as reduced from a maximum of 30 days leave per year of completed service on the basis of 10 months average salary immediately preceeding retirement Days Total leave entitlement in the entire career 972 36*27 Unavailed leave 380 Leave Availed 592 972 380 Maximum premissble leave as per section 810 30*27 Therefore unavailed leave encashment exempt for 218 810 592 Average Salary for 10 months preceeding retirement 40000 Therfore leave encashment exempt 290667 d. Amount specified by govt. Rs. 300000 Least of the above (a,b,c & d) 290667 Taxable leave encashment 109333 400000 290667 26) A) 27) B) 28) A)