Are you one of those investors who want assurance on your invested capital? Or you are looking for temporary safety for your money until the economic situation improves? You may even be looking to keep your accumulated financial wealth safe.
Following five investments cum savings plans will give you the safety and more for your money in these turbulent times:
Guaranteed savings plans are safe investment plans from life insurance companies. Investment in these plans is tax-deductible under section 80C and the maturity value is tax-free under section 10(10D).
Thus, you have a savings plan which guarantees a minimum rate of return completely tax-free. You should note that these plans guarantee a minimum return on your investment. So, you have a chance to earn higher, but your returns will not drop below the minimum guaranteed amount.
Also, the best savings plans offer better returns to long-term investors. Canara HSBC OBC Life’s guaranteed savings plan adds bonuses for investors who continue investing for a longer period. The plan offers two bonus additions for investors in the form of guaranteed yearly additions & guaranteed loyalty additions.
For example, if you choose a premium payment term of 10 years, your guaranteed yearly addition would be 12% of the premiums paid, whereas for an investor paying premiums only for five years it is only 8%.
Similarly, loyalty additions are added at 20% for 10-year investors instead of 10%, which is applicable for five-year investors.
Guaranteed Savings Plan from Canara HSBC Oriental Bank of Commerce Life Insurance also offers unique protection features. The scheme can protect your future investments in the plan in case of your early death. While your family receives the life cover sum assured upon death, the policy continues.
The insurer will invest all the remaining premiums on your behalf as you would’ve done if you were alive. At maturity, your family receives the intended fund value with all the guaranteed additions. This maturity value is also exempt from tax.
This feature makes this plan a perfect solution to meet your child’s education and marriage goals.
Both PPF and SSY carry similar investment and return profiles. The only difference is that anyone can open a PPF account and only one PPF account. However, only a legal guardian or parent of a girl child can open one SSY per child for up to two girls.
So, if you are looking after a girl child financially you can open one PPF and one SSY accounts. The maximum investment in both instruments is limited to Rs. 1.5 lakhs. Both investments offer tax-free maturity value.
Both instruments have a dynamic rate of return which is adjusted at the beginning of the financial year. The normal maturity period for PPF is 15 years, after which you can extend the account for another 5 years and so on.
SSY account, however, matures with the child’s age. You can close the account once the child has turned 21 or on her marriage. SSY is a great way to accumulate tax-free wealth for your girl child.
National Savings Certificate of NSC VIII-issue is another popular tax saving instrument with guaranteed returns. The returns on new issues are revised at the beginning of every financial year.
Investment in NSC qualifies for the 80C deduction, but the interest accumulated in the account becomes taxable at maturity. The tax rate applicable to NSC interest is as per your income tax slab.
So, you can say that the returns are not as guaranteed as it says. But this is a perfect scheme for you to grow your money safely, as once you invest your rate of interest is fixed.
KVP investment also offers a fixed guaranteed rate of return, which is revised every financial year. However, unlike NSC and other investments, KVP does not have a definite maturity period. You can hold KVP until your money investment doubles.
As per the latest rates (w.e.f. 1st April 2020), the money will double in 124 months or 10 years 4 months. You can withdraw the entire money after that.
You can also withdraw part of the money without penalty after 2.5 years. Withdrawals before this period attract lower interest, so you should avoid.
KVP investments do not provide any tax rebate under section 80C. So, the instrument is fully taxable. But you will need to add the interest to your annual income only at maturity.
Bank and post office fixed deposits have been the oldest guaranteed investment schemes in India. You can opt for various maturities with fixed and recurring deposits.
The only difference between a bank fixed deposit and post office deposit will be the TDS deduction. While bank FDs need to deduct 10% TDS every year on the interest, the post office does not.
Both banks and Post Office provide 5-year tax-saving deposit. The investment in the FD is eligible for deduction under section 80C. However, the interest accrued annually is taxable.
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