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Best long term plans to consider investing

dateKnowledge Centre Team dateFebruary 05, 2021 views145 Views
Best long term plans to consider investing

Investment planning is a crucial part if you want to safeguard your financial prospects. Everyone has a desire to experience the life of his dreams. If we compare the financial knowledge in the past decades with the prevailing time, the stone has completely turned.

Nowadays, people are aware of the various possible avenues like life insurance plans where their funds can sit and form a healthy corpus for the times ahead. Everyone wants to put their hard-earned cash in a rewarding as well as a secure pool.

Why are the rich getting richer while the poor are getting poorer?

In the current time, putting the money in the best pool is of utmost importance because gaining money alone can't make one live a life of dreams. With an escalation in inflation each year, it is necessary to consider this factor while analyzing the increase in revenue each year. If the addition in earnings each year exceeds inflation, your money is doing good. Otherwise, the alarms have been raised to consider some serious financial planning.

To summarize, it is essential to increase your wealth at a rate exceeding inflation. Keeping your cash locked in banks alone would not make your wealth grow.

Money is a must requirement at any stage of life. One has to build a corpus to sustain well in life. Be it education and marriage of loved ones or buying luxury, or retirement funds, money is the driver in every walk of life.

While exploring different channels to build a corpus, people tend to look for a savings plan that would create a significant corpus at a greater rate. Due to multiple savings plans on offer, it becomes a tricky situation to consider one over another.

What defines a Savings Plan?

Saving plans are financial instruments that create resources for the times ahead and meet the financial goals by periodical contribution into various funds and schemes. Moreover, it also plays a remedial role by motivating investors to exercise disciplined investing.

Advantages of Savings Plan

There are respective advantages of opting for a savings plan for your financial holdings. With a few of them explained in brief, let's get started:

#1- Wealth creation: Putting the money in a clean portfolio and at the right moment makes your idle funds to multiply in the best way. A savings plan allows the investor to make money in the long run by offering well-organized and regular contributions. By earning adequate returns, one can be sure of securing the loved ones for unpredictable times ahead.

#2- A Protection to your dearest ones: Savings with dual nature are beneficial for the family in the event of the ill-fated death of the supporter of the family. With the double plan, the family gets secured by receiving the insured amount and the fund value in a lump sum or annuity.

#3- Taxation benefits: Putting the money in Government plans and the notified schemes provide the investor with a chance to increase his wealth but also gifts with certain tax benefits under section 80C and 10(10D) of the Income Tax Act, in the form of deductions from total income computed for tax.

#4- Reach financial goals: Opting for plans with a long-term lock-in period helps investors reach their monetary goals. The lock-in feature of such investments plays a remedial measure in making the investor commit his funds in the investment for longer.

Whether it is for buying a house, or the car you always wanted, or meeting the education costs of children, or for your post-retirement plans. Goal-centric planning is the best way one can hit an enormous corpus in the future.

The first action towards picking a plan is to undergo a risk-return evaluation of the scheme. If one has a high risk-taking capability, he may opt for a High-Risk savings plan. A low-Risk saving plan does well with investors having a lower risk appetite.

Long term investment plans

Some of the best long term saving plans include:

Low-Risk Investments Plan: Low-risk plans are popular amongst people who wish to play on a safer side in their journey to capital appreciation. Such schemes have a significant part of Government securities and plans as a base for investing. Following are the recommended options, which one must consider if Low-risk investing is a priority.

  • Public Provident Funds: Public Provident Fund is still a choice for many investors, with goodies like tax-free interest upon maturity, lower risk, and a sovereign guarantee backed principal and interest, creating a safe avenue for the investors willing to pool their funds safely. Moreover, the interest rates are revised every three months by the Government of India.
  • Senior Citizen Savings Scheme: Senior Citizen Savings Scheme is the most popular financial planning model amongst retirees aged 60 or above. The scheme has a manner that suits the needs of veterans. The savings scheme can be opted from any bank or post office and holds for five years, which may extend for a further period of 3 years subject to maturity.

    Furthermore, the upper limit for investment is Rs. 15,00,000 in aggregate, which stipulates that one can open multiple accounts subject to the maximum limit. The rate of interest remains the same throughout the scheme and the interest earned attracts taxation that can be made exempt up to a maximum limit of Rs. 50,000, under Section 80TTB of Income Tax Act, 1961.

  • National Pension Scheme: The Pension Fund Regulatory and Development Authority regulates the National Pension Scheme, which implies another safer alternative to park funds. The minimum yearly deposit for a tier-1 account is Rs. 1000 to render the account active. It is an aggregate of liquid funds, government securities, and fixed deposits.
  • Pradhan Mantri Vaya Vandan Yojana: The scheme is helpful to senior citizens aged 60 years and above as it secures a yearly return of 7.5%. The yojana provides income as a regular annuity as per the terms agreed upon by the investor.

    The highest amount of pension reaped out of the scheme is Rs. 9,250, with the lowest Rs. 1,000 per month.

    The scheme has a tenure of 10 years with a ceiling on investment limited to Rs.15,00,000. The sum contribution is paid back to the Senior-Citizen at the point of maturity. In the event of sudden demise, the nominee to the scheme becomes the recipient of the amount.

  • Bank Fixed Deposits: Fixed deposits are the most popular and safest avenues to create a corpus for the future. The interest earned forms part of the ordinary slab, making taxation go easy for the lower-income group.

    In an attempt to safeguard the depositors, the insurable amount has seen an increase to Rs. 5,00,000, for principal and interest with effect from the 4th Day of February 2020.

  • Gold Bonds: Gold has always been a saviour when it comes to financial security. Over time, investing in gold has turned into paper gold. Paper Gold or Gold Bonds are instruments that are made available through Gold Exchange Traded Funds. The buying and selling of gold take place in the stock market, keeping gold as a derivative.

High-Risk Investments: High-Risk investments are an avenue for the risk-takers who aim for capital appreciation in the longer run. Let's get going with the popular plans prevailing in the market.

  • Debt Oriented Mutual Funds: Debt Oriented Mutual funds are the choice when constant return over time is the priority. The risk involved with the Debt Oriented Fund is relatively lesser as compared to the Equity counterparts. It certainly has some risks, namely interest and credit rate risk, which makes the investor consider thorough research before investing.
  • Unit-Linked Insurance Plans: The unit-linked insurance plan is an investment plan that is a blend of investment and insurance schemes, fetching the investor a unit of funds in which his money sits.

The returns are dependent upon the fund value of the funds as well as on the amount invested. Such returns are subject to the risks of the capital market.

Canara HSBC Oriental Bank of Commerce Life Commerce Guaranteed Savings is one of the plans to consider for investing in ULIP. The savings plan highlights life cover with tax benefits that prevails during the period. The minimum and the maximum age to subscribe to the scheme are 18 and 60 years. The plan features various other goodies like multiple selections of the term and the payment methods that suit one's needs, facility to meet contingent liquidity requirements, and guaranteed sum assured on maturity, which equals the sum as one would get on maturity.

  • Equity Oriented Mutual Funds: Equity oriented Mutual Funds keeps the money, primarily in the equity stocks. As we all know the hazards associated with the capital market, the fund manager is of utmost importance for investors by managing the funds and safeguarding their interests. The returns are proportional to the proficiency of the fund manager with the funds.

When is the right time to get started?

It is crucial to have a timeline planned for winning future objects before opting in any scheme. It is more rewarding if we give it an early start as it provides the investor with a bit more time to create a premium on a corpus that is the icing on a cake.

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Filing Income Tax Return (ITR) is a mandatory exercise for all taxpayers, through which they report their gross taxable income in a particular financial year, claim tax deductions, and declare net tax liability to the Income Tax Department.

As a taxpayer, you can either file the ITR online via the e-portal of the Income Tax Department (the process referred to as e-filing). You can also file your income tax return offline by downloading the applicable ITR and uploading the generated XML file after filling it out. Here are the different steps involved in filing Income Tax in India.

TCS or Tax Collected at Source is a tax levied by the government of India. TCS is payable by the seller who collects the tax, in turn, from the buyers at the time of sale of goods. These goods or commodities are listed under Section 206C of the Income Tax Act, 1961.

Capital gains are described as the profits that you accrue or receive through the sale of capital assets. When you sell any capital asset for an amount, more than you paid for it, your sale accrues capital gains. There are two types of capital gains – long-term and short-term.

Long-term capital assets are those, which you hold for 36 months or more. On the other hand, short-term assets are held for shorter durations. These capital assets include investment products such as stocks or mutual funds, and real estate products including land or house.

In India, maximizing tax savings is an integral part of financial planning. While you may include different financial instruments in your portfolio that help save your earnings and accumulate significant wealth over a period, you must also incorporate instruments that can help you reduce your tax liability.

In other words, it is advisable that you keep tax saving as one of the primary goals while planning your investments, regardless of your age or income. To maximize your tax savings through legal avenues, it is prudent that you start with your investment planning early on in a given financial year. Every year, as the government announces the Union Budget, you can identify which instruments will allow you to avail of maximal tax savings, as per different sections under the Income Tax Act, 1961.

In India, getting a full refund of income tax is only possible when the tax is deducted at the source, or you have paid advance tax, and the refunded amount is below the taxable limit. To ensure that you receive the full refund of income tax, you must plan your taxes correctly and e-file the income tax return (ITR) on time. Let us look at the different aspects of Income Tax Refund and how you can claim a maximum refund.

The Income Tax Act 1961 lists ‘Income from Other Sources’ as one of the five heads of incomes, subject to taxation. Income From Other Sources essentially includes all receipts of earnings that otherwise cannot be classified under any remaining heads of income.

In India, calculation of the total tax liability, i.e. income tax payable is an essential activity for all taxpayers. Each year, the government presents the Annual Budget, which may introduce changes to the existing income tax structure. As taxpayer, subsequently, you must start with your financial planning for that financial year (also known as FY) and look into different tax-saving investments that can help you lower your grosss taxable income.

In India, the calculation of tax liability is based upon different income tax rate slabs. In other words, the amount of tax you have to pay or can save depends upon your overall taxable income and the tax category in which your income falls into.

In India, advance tax refers to the activity of paying a portion of your taxes before the financial year ends. According to Section 208 of the Income Tax 1961, every individual whose estimated income tax liability for a given financial year is Rs 10,000 or more should pay his or her tax in advance, hence the term ‘advance tax ‘pay-as-you-earn’ scheme. The payment of the advance tax must be made in the financial year in which the taxpayer receives the income.

The Dual GST structure in India is essentially a simple tax with different taxation rates – the Central Goods and Service Tax (or CGST) and the State Goods and Service Tax (or SGST). As the name suggests, the dual GST structure implies that both the Central and State governments can levy and collect taxes via appropriate legislation.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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