International Labour Day: Begin investment in these 8 schemes to secure better future
There are multiple investment schemes which can help a worker secure his or her retirement, assist in their financial needs, help plan a better future for their children and spouse.
May 1 is celebrated as international labour day aka workers day in some countries. While this day definitely is a celebration, why not as a labourer make an investment resolution. India is filled with a host of schemes, which can help a worker secure his or her retirement, assist in their financial needs, help plan a better future for their children and spouse. One of the best features to opt for parking money in schemes now is that they are guaranteed, risk free, better gains and diversified. That said, let’s make this labour day count for better future ahead.
Here’s a pool of schemes which is quite affordable and attractive.
1. Bank Fixed Deposits!
This is a traditional one and has been a comfortable investment scheme for generations after generations in India. Every age group can opt for fixed deposit schemes at bank, however, in case of a minor - a parent or guardian can open an FD on their name keeping them as nominee. The FD is transferable. At present, FD rates have become very attractive, as banks have stirred competition not only amongst each other but also against government’s small saving schemes. Generally, interest rates higher if the deposit is for senior citizen than compared to normal category. A citizen can open their FD account with just minimum investment of Rs 1,000. Tenures can be selected to shortest 7 days and maximum 10 years. Interest rates get quarterly and annually compounded.
However, interest earned on FDs is taxable, as bank deducts a certain sum as part of tax deducted at source (TDS). But not to worry, the government also allows breather of Rs 10,000 which are not taxable. This means, your interest income upto Rs 10,000 is free of tax, but above that will fall under tax rates. In Budget 2019, the government has increased the TDS limit to Rs 40,000. Apart from this, there is also tax exemption of Rs 1.5 lakh allowed under section 80C of Income Tax Act.
Lenders like Axis Bank, Bank of Baroda, Bank of India, Central Bank of India, Canara Bank, HDFC Bank, SBI, ICICI Bank, Yes Bank, PNB and IDBI Bank among others offer interest rates on FD ranging lowest at 3.50% to highest 8%. One can also opt for loan against your investment in FDs.
2. Public Provident Fund (PPF):
This one among most popular scheme of government, which rationalizes small investments with guaranteed reasonable returns. A citizen can earn up to 8% interest rates currently on PPF. It needs to be noted that, rates change time to time. Investment here can be begun with minimum Rs 500, and is usually a long term scheme. Risk under this scheme is almost nil as it is developed for lower and middle class groups. Being long term, one has to stay invested in PPF account for a lock-in period of 15 years.
Not many are aware that, PPF scheme falls under EEE which means exempt-exempt-exempt regime of taxation. Any invest upto Rs 1.5 lakh made in PPF is tax exempt under section 80C, while the interest earned and maturity proceeds are also tax free. However, the interest income arising from PPF, must be declared in your Income Tax Return (ITR) filing. Just like FDs, you can avail loan against PPF. You can open a PPF account at your bank as well.
Surely, one can agree it is a whole package of benefits.
3. National Pension Scheme (NPS):
Especially meant for retirement, the NPS is a voluntary and long-term investment. It is compulsory for government employees to contribute to NPS from their monthly income. However, private employees can also opt for their own NPS investment. The proceeds from NPS is divided into two category, one where 60% of gains can be withdrawn at maturity while remaining 40% to be kept as annuity which will help you receive pension every month. Maturity period here is 60 years of age, and with minimum investment of Rs 500 one can open this scheme. Tax exemptions are given under section 80C, 80CCD(1) and 80CCD(2).
Investment in NPS is diversified, as 50% of it belongs in equities which also gives the privilege of earning higher returns of stock market but at the same time reducing risk. One can open NPS scheme both online and offline. Returns given by NPS ranges from 8% to 14%, higher compared to other schemes.
4. Unit Linked Insurance Plan (ULIP):
Almost similar to NPS, the ULIPs are two-in-one benefit scheme. It allows investors to enjoy capital gains and also helps insure their future. Simply put, ULIPs are linked with capital markets, offering flexibility in either be equity or debt funds depending upon your appetite. An insurance company divides your investment by investing part as premium in bonds, equities, and using remaining amount for insurance cover. A lock-in period of between 3 years to 5 years is set in this scheme. Lock-in period means, you cannot withdraw before specified period, if did so then charges will be levied.
Apart from giving tax benefits under section 80C, if ULIPs kept till maturity then gains are completely tax free under section 10(10D) of Income Tax act. Benefits of ULIPs are that, they give life insurance against loss in future, tax free, helps in long term finance goals and are diversified.
5. Equity Linked Savings Scheme (ELSS):
To best describe ELSS is that, they have lowest lock-in period, higher interest rates compared to traditional ones, gives SIP options, equity linked and dual tax benefit. For instance, if you have invested in 5-year bank FDs or National Savings Certificate, interest earned are taxable, but in case of ELSS they are partially taxed. Returns given in ELSS ranges from 15% to 18%.
One can enter ELSS scheme, by selecting best mutual funds, track their investment online 24X7, withdraw gains in anytime without paperwork, investment followed online and bank graded data security. Tax deduction is allowed under section 80C. Being equity investment, ELSS is suitable for investors who are comfortable with risk and want to reap longtime benefits.
6. Post Office Deposits:
Post office schemes rule the deposit investment pool by giving much higher return than banks. 1 year post office deposit helps a citizen earn up to 7% interest rate. The same is applicable for 2 year, 3 year time deposit. But in case of 5-year time deposit, the interest rises to 7.8%. For senior citizen, there is 5-year saving scheme which gives 8.7% rates. The interest are compounded quarterly for this form of savings.
A post office saving schemes is defined as a list of products which guarantee reliability and risk-free returns on investment.
Apart from that, majority of post office schemes eligible for tax exemption under section 80C, pools like PPF, SCSS, Sukanya Samriddhi also allows tax deduction earned on interest earned.
7. Systematic Investment Plans (SIP):
SIPs stand out with lowest lock-in period and tax-saving options. With SIP, one can also avail the benefit of equity-linked saving schemes (ELSS) which has lowest 3-year lock-in period and gives higher returns compared to traditional method of fixed deposits. A person can begin investment in SIP with just Rs 500 and there is no maximum limit.
Investment amount in SIP starts as low as Rs 500 per month, which eliminates the burden of managing your overall expenses on monthly basis, as very little is deducted.
Hassle-free and flexible. Any citizen can create/update/cancel SIP anytime.
8. Gold ETF:
Everything that glitters is not gold, but this scheme can help you give more than yellow metal kind gains. Indians especially women are high lovers of gold, silver and diamond, however, reducing risks of loss Gold ETF is an alternative to the shining metal. Gold Exchange Traded Funds (GTF) are unique form of investment, and are traded on stock exchanges just like equities. For investment in Gold ETF, you need to have a demat account. You can chose host of Gold ETFs schemes online.
Benefits of investing in Gold ETF is that they eliminate worry on adulteration or impurities, electronic form, tracks your investment value in real time and extremely liquid. They are like holding an invisible gold.
So let’s take a step further in giving a better future to ourselves and family members. If you planning for investment, then take note of above mentioned schemes.