The best investment options for a salaried person should align with their financial goals, risk tolerance, and time horizon. Diversification, tax efficiency, and regular monitoring are key factors to consider. Options such as ULIP Plans, Capital Guarantee Plans, Mutual Funds, Fixed Deposits, PPF, and National Pension Scheme (NPS) offer a balanced approach to long-term financial growth.
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This article will help you to get an overview of the basic features of the best investment options in India for a salaried person. The best investment plans simplify everything by reducing or eliminating the liabilities from our life. The below-mentioned options would give you an insight into various kinds of investments that salaried people could go for.
Money Back Policy
Capital Guarantee Plans
Public Provident Fund (PPF)
Fixed Deposit (FD)
National Savings Certificate (NSC)
Monthly Income Scheme (MIS)
National Pension Scheme
Dual Benefit: ULIP are the best investment plans that offer both investment and insurance benefits.
Investment Flexibility: You can choose from a variety of funds, depending on your risk appetite and goals.
Tax Benefits: These best tax-saving investment options allow premiums paid towards ULIPs as tax-free up to ₹ 1.5 lakhs per annum under Section 80C of the Income Tax Act, 1961. The amount received at maturity is also tax-free under Section 10(10D) of the IT Act.
Systematic Investment Plan (SIP): You can invest a fixed amount of money in your ULIP at regular intervals. SIPs offer various benefits, such as rupee-cost averaging, disciplined investing, and the power of compounding. You can also use a SIP calculator to estimate your future returns.
Lock-in Period: ULIPs typically have a lock-in period of five years, which encourages long-term financial planning and disciplined savings.
Partial Withdrawals: Many ULIPs permit partial withdrawals after the lock-in period
Fund Switching: These investment plans offer the option to switch between investment funds, enabling investors to reallocate their assets based on market conditions or changing goals.
Maturity Benefit: At the end of the policy term, ULIPs provide a maturity benefit, which includes the fund value on maturity.
Death Benefit: In case of your unfortunate demise, the nominee receives the higher of the sum assured or the fund value, ensuring financial security for the family.
Guaranteed returns: Traditional plans offer guaranteed returns, which means that you know exactly how much money you will receive at maturity.
Death benefit: Traditional plans also provide a death benefit, which is paid out to your beneficiaries if you pass away during the policy term.
Tax benefits: Premiums paid towards traditional plans are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The withdrawal amount is also tax-free under Section 10(10D) of the IT Act.
Types of Traditional Plans:
Pure protection: Term plans provide pure life protection for a specified period of time.
Affordable: Term plans are very affordable, especially when you are young.
High Life Cover at Low Premium Rates: Term plans offer the highest life cover at a very affordable price.
Comprehensive Coverage: Term plans provide comprehensive coverage against death due to any cause, including accidents and illnesses.
Flexibility: You can choose the policy term and sum assured that best suits your needs.
Tax Benefits: Term plans offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
Whole Life Plans:
Lifetime Coverage: Provides lifelong protection for your family, even after retirement.
Guaranteed Death Benefit: Pays a lump sum benefit to your beneficiaries upon your death, regardless of when it occurs.
Cash Value Growth: Whole life plans have a cash value component that grows over time. You can access this cash value through loans or withdrawals, which can be helpful for unexpected expenses or to supplement your retirement income.
Level Premiums: Premiums remain the same throughout the life of the policy, making it easier to budget.
Tax Benefits: Whole life insurance plans offer a number of tax benefits, including tax-deferred growth of the cash value and tax-free death benefits for your beneficiaries.
Dual Benefit: Endowment plans provide both life insurance and savings benefits.
Guaranteed Returns: Endowment plans offer a guaranteed sum assured, which is paid out on maturity or upon the policyholder's death.
Flexibility of Tenure: The tenure of policy in endowment plans is decided for a particular period, say 15, 20, 25 or 30 years.
Flexible Premium Payment Options: Salaried persons can choose to pay their premiums monthly, quarterly, half-yearly, or yearly.
Tax Benefits: Salaried persons can avail of tax benefits on the premiums paid and the maturity amount received under endowment plans.
Riders: Salaried persons can add riders to their endowment plans to enhance the coverage, such as critical illness riders, accidental death benefit riders, and waiver of premium riders.
Guaranteed Returns: Money-back policies offer guaranteed returns on investment, making them a safe and reliable option for salaried persons.
Life Insurance Coverage: These best investment options for salaried employees also provide life insurance coverage, which means that the nominee will receive the sum assured if you pass away during the policy term.
Regular Payouts: The money-back policies pay out a certain percentage of the sum assured at regular intervals, such as every 5 or 10 years. This provides salaried persons with a regular source of income that they can use to meet their financial goals, such as paying for their children's education or saving for retirement.
Tax Benefits: These best investment options also offer tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
Guaranteed Capital Protection: Your capital is guaranteed to be returned with the Capital Guarantee Plans, regardless of market performance.
Market-Linked Returns: You have the potential to earn market-linked returns on your investment. This allows you to participate in the growth of the market while still protecting your capital.
Life Cover: The capital guarantee plans also offer life cover. This means that if you die during the policy term, your beneficiaries will receive a lump sum payment.
Tax Benefits: Salaried persons can avail of tax benefits on the premiums paid towards capital guarantee plans under Section 80C of the Income Tax Act, 1961. You can also avail of tax benefits under Section 10(10D) of the IT Act.
Guaranteed Returns: PPF offers guaranteed returns at 7.1% p.a., which are set by the government every quarter.
Tax Benefits: Salaried persons can claim tax deductions on their PPF contributions up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. The interest earned and maturity proceeds are also tax-free.
Long-Term Investment: PPF is a long-term investment option with a lock-in period of 15 years.
Loan Facility: Salaried persons can avail of a loan against their PPF balance after completing 3 years of investment.
Flexible Contributions: Salaried persons can make a minimum contribution of Rs. 500 per financial year to their PPF account. They can also make contributions in installments.
Guaranteed Returns: FDs offer guaranteed returns at 3% to 9% p.a. The FD interest rates are set by the bank or financial institution where you deposit your money.
Flexible Tenure: Salaried persons can choose an FD tenure that suits their needs, ranging from 7 days to 10 years.
Easy to Open and Manage: FDs can be opened and managed easily, both online and offline.
Loan Facility: Salaried persons can avail of a loan against their FD balance.
Tax Benefits: Salaried persons can invest in tax-saver FDs to save taxes under Section 80C of the Income Tax Act, 1961.
Guaranteed Returns: NSCs offer guaranteed returns at 7.7% p.a., which are set by the government every quarter.
Tax Benefits: Salaried persons can claim tax deductions on their NSC investments up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.
Long-Term Investment: NSCs have a lock-in period of 5 years. This makes them a good option for salaried persons who are saving for retirement or other long-term goals.
Nomination Facility: Salaried persons can nominate a beneficiary to receive the maturity proceeds of their NSC.
Loan Facility: NSC certificates can be used as collateral to secure loans from banks.
Regular income: MIS provides you with a regular monthly income stream, irrespective of market fluctuations.
Guaranteed returns: MIS offers a fixed interest rate, currently 7.4% per annum.
Low Investment Amount: The minimum investment amount for MIS is Rs. 1,000, and the maximum investment amount is Rs. 9 lakh for a single account and Rs. 15 lakh for a joint account.
Tax benefits: MIS is a tax-saving scheme. The investor can claim a deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
Flexible tenure: The tenure of MIS is 5 years. However, the investor can extend the tenure for another 5 years by paying a nominal fee.
Safe Investment: MIS is a government investment scheme, making it a safe and secure investment option.
Flexibility: Salaried persons can start saving for retirement with a low minimum contribution of ₹500 per month. They can also choose their own investment mix and change it as needed.
Portability: NPS accounts are portable, which means that salaried persons can transfer their accounts between different employers and/or locations without losing any benefits.
Tax Benefits: Salaried persons can claim a deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act for their NPS contributions. Additionally, employers' contributions to NPS are tax-free for salaried persons.
Market-Linked Returns: NPS offers market-linked returns, which means that salaried persons have the potential to earn higher returns over the long term.
Choice of Annuity Provider: At retirement, salaried persons can choose to purchase an annuity from any of the PFRDA-approved annuity providers. This gives them the flexibility to choose the annuity plan that best meets their needs.
Diversification: Mutual funds invest in a basket of securities, which helps to spread out the risk. This is especially important for salaried persons who have a limited number of income sources.
Professional Management: Mutual funds are managed by professional fund managers who have the expertise and experience to track the market and make informed investment decisions.
Affordability: Salaried persons can start investing in mutual funds with a small amount of money, as low as Rs. 500 per month, through a Systematic Investment Plan (SIP).
Liquidity: Mutual funds are liquid investments, which means that salaried persons can redeem their investments at any time.
Variety of Options: Mutual funds offer a variety of investment options, including equity funds, debt funds, and hybrid funds. This allows salaried persons to choose the investment option that best suits their risk appetite and financial goals.
Be very specific about your needs, your understanding of the instrument and your ability to take risks. A certain investment option might offer you decent returns but may not be eligible for tax deduction. If your requirement is a tax deduction, then choose from tax-saving investments that help you save money from your taxable income. If income is what you expect, then invest in ULIPs or equity, but keep the risks involved in mind, too. If you mean to protect your life, then choose term insurance over all other products.
Unit Linked Insurance Plan (ULIP)
Money Back Plans
Capital Guarantee Plans
Money Back Policies
National Pension Scheme (NPS)
Public Provident Fund (PPF)
Create a budget and track your income and expenses
Set financial goals
Choose the right investment products
Start investing early and regularly
Understand the financial situation, including income, expenses, debt, and financial goals
Start early: The earlier you start investing, the more time your money has to grow.
Invest regularly: One of the best ways to grow your wealth over time is to invest regularly. This can be done through a Systematic Investment Plan (SIP)
Diversify your investments: It is important to diversify your investments to reduce your risk.
Choose the right investment products: There are a variety of different investment options available, so it is important to choose the ones that are right for you.
Unit Linked Insurance Plan (ULIP)
Public Provident Fund (PPF)
National Pension System (NPS)
Fixed deposits (FDs)
Equity-linked savings schemes (ELSS)
Past 10 Year annualised returns as on 01-12-2023
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
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