When it comes to investments, one of the topmost benefits that every person considers is the tax saving. A lot of people do not even think beyond the savings that they can enjoy on taxes with the help of different investment plans. However, there are a lot of associated benefits which go beyond just income tax savings tips and can prove to be much more important as well. In this article, we will discuss a few investment instruments and their benefits other than saving taxes.
Life Insurance Plans
Many people invest in insurance plans for the sake of saving taxes. Life insurance is the first instrument anyone or everyone will suggest for your investment portfolio while they give you a dose of income tax savings tips. However, if you choose wisely, insurance plans can do much more. There are four main types of insurance plans available in India.
Term plan: It is a type of life insurance that provides coverage for a certain period of time. In case of the death of the life assured, during the policy tenure, a death benefit (or sum assured) is paid out. Various term insurance plans offer a very high coverage at quite low monthly premiums. It is considered one of the best insurance plans if you want to give your family financial security in your absence.
Endowment plan: These plans offer a lump sum amount at the time of maturity or death. Some plans also offer payment at the time of critical illness.
ULIPs: If you want to see your money grow and enjoy life cover as well, investing in ULIPs is one of the best ways to do so. You will get units in this plan which will fluctuate as per the market price.
Money Back Plans: In such plans, you get not only a lump sum amount but also monthly income as well after maturity.
Public Provident Fund
Also known as PPF, the premium for this fund gets deducted from your salary. You can not only save tax on this, but this plan also gives you a sound financial status after retirement. PPF funds often come in handy in case you need urgent funds in situations like a wedding or critical illness. The lock-in period is 15 years and can be increased indefinitely in blocks of 5 years. Also, the interest rate is 7.6% along with the fact that the maturity amount is totally tax-free.
Fixed Deposits and Recurring Deposits
When it comes to safe investments, there is nothing better than FDs and RDs. Banks provide a stable percentage of interest on FDs. People often invest in these for the sake of saving taxes, but they are much more valuable. FDs can be the funds for the rainy day. No matter you need money for business, illness, wedding or your child’s education, these instruments can be a lifesaver. Also, if you do not want to break your FD, in case of emergency, you can apply for a loan against the amount.
Sukanya Samridhi Yojna
Started as an option to save money for your girl child, it is now one of the soundest options to save tax. However, the main aim of this scheme is to save money for the education and other necessities of the girl child when she becomes an adult. You can open this account for your girl child up to the age of 10. The best part is that this account will attract a tax-free interest of 8.1%. The account will remain operative for a time of 21 years. It needs to be closed once your child gets married. The amount accumulated can be withdrawn by the girl child.
If you are looking for stable growth for a longer period of time or quick growth in a short period, mutual funds are suitable in both cases. Other than saving taxes, you can use mutual fund investment to plan important aspects of your life like- wedding, education, illness, travel, buying a vehicle or even buying a house.
When you plan your investments, think beyond just tax savings. Make sure you read the documents properly and understand all benefits you will get with the investment plan. Do not invest all your money at once place. Ensure you have a sound mix of all available options for the best results.