Have you recently started working or working for some-time and thinking about investments or tax savings? This post is beneficial for everyone even if you have 10+ Work Experience. It is based on past experience as I started investing after 12 years of work experience.
Why do we save money? I see two reasons – Savings for Future & Better returns from savings! Most of the people (including your parents) around you may advise for FD investments . However there are financial instruments better than FD that can provide better returns and are SAFE.
Here is the list that will help you plan your investments for tax savings and growth
- Fixed deposits
Also, popularly known as FD. This instrument is still the most popular instrument as it provides better returns (interest rate) than keeping your money in saving account. As on today, the returns from saving account is just ~3.5% compared to ~6.5% from FD. There is no minimum lock-in period for FD.
More details : Benefits of Fixed Deposits (FDs) in India
- Public Provident Fund
Also, popularly known as PPF, is backed by Govt. of India with returns upto ~8.5%! Also the icing on the cake is interest on PPF is tax free unlike FD interest which is taxable. The maximum limit for PPF is 1.5Lac INR per annum with lock-in period of 15 Years. One of the most important benefits is that you can avail tax benefit under section 80(c).
- National Pension Scheme
Also, popularly known as NPS, is backed by Govt. of India with returns depending on market situation. The average returns till date have been over ~10% . This makes it an attractive investment. It also helps save taxes under the section 80CCD and 80C. However, it is worth noting that there is a lock-in till you attain 60 years in age. Also, 40% of your savings is kept as annuity by Govt to give you regular pension in old age without paying any premiums.
More details : How good is the NPS (National pension Scheme)?
- Employee Provident Fund
Also, popularly known as PF, is automatically started when you join any organisation. The important thing to remember is to keep track of it as every month some amount is automatically getting invested by you and your company. Most youngsters forget this. This has multiple benefits including tax savings, loan facilities etc.
More details : EPF Account: Here Are 5 Benefits EPFO Offers To Employees
- Mutual Funds
MF are subjected to market risk! Scared? Yes, they are linked to the market’s up and down but if done cautiously, they can be the best investment. If you think, it is difficult, Take the help of some senior person who is already investing. Couple of serious discussion with him will give you lots of insights! Just to keep you more confidence, MF are refugated by Govt body SEBI that takes care of investors. There is NO Lock-IN period for mutual funds!
More details : Beginners guide to Mutual Funds
- Term Insurance
Term insurance helps to get bigger value insurance in lesser premium amount. There are no returns in it hence the insurance value is high which can be availed in event of mishaps. For e.g. 1 Crore INR insurance is available for less than 1000 bucks per month. It is recommended to buy all additional riders like accidental and critical illness along with term insurance to be safer.
More Details : Term Insurance Plan with Maturity Benefits India
- Medical Insurance
Medical insurance is really important if you exists! Even though your company gives you medical insurance but a separate medical insurance will provide additional benefits in terms of tax benefits and many others. It is strongly recommended to have one from early life
More details : The Importance of Health Insurance
Though, there are some cons of every instrument listed above but the pros take a lead over it. It is strongly recommended not to overthink on them as you will keep losing time and money!
I also want you guys to read this book – Rich Dad Poor Dad as soon as possible. This book will give you insights for long term benefits.
Do, let me know in the comments if you want me to write on any new topic. My old & new blogs are available here – My Little Blog!