By 
The Union Budget 2020 has introduced an alternate income tax structure in India. Due to the announcement of the new tax regime, many of you might be in a frenzy to understand which investment tools can be suitable to reduce your tax liability. The new tax regime can save you from hassle, but not money. Hence, many of you might stick to the old tax regime. Therefore, let’s go through the top four investment tools you can opt for if you plan to stick to the old tax regime:
- Unit Linked Insurance Plan (ULIP)
A ULIP policy is a dual-benefit financial product, which can club investment and insurance together under a single plan. Investors look at ULIP products with the objective of getting their life goals done. While the investment component can let you receive returns, the insurance element can offer financial protection to your loved ones as a death benefit. Along with its dual benefits, you can also claim dual tax exemptions under Section 80C and Section 10(10D) of the Income Tax Act, 1961. As a policyholder, you can be liable to claim a deduction up to Rs. 1,50,000 on your taxable income, while your family members can obtain a tax-free pay-out in accordance with Section 10(10D).
- Mutual Fund (MF)
If you want to opt for a lucrative investment, you should park your money under MFs. With MFs, you can receive high returns on investment based on the market performance during the on-going tenure. The two main types of mutual funds can be as follows:
- Equity Mutual Fund
Equity mutual funds are market-linked. Due to high-risk involvement, you should analyse the market scenario and opt for equity funds accordingly.
- Debt Mutual Fund
Debt mutual funds can let you earn more interest as well as generate capital appreciation. If you wish to obtain a steady return on investment, you should invest in debt funds.
- Senior Citizens Savings Scheme (SCSS)
As the name suggests, the SCSS scheme can be one of the most popular tax saving investment options for senior citizens above 60 years. Since it offers a fixed flow of income, you need not worry about your future when you turn old. Additionally, it can provide an attractive interest rate, which might be 8.6 interest per annum. To open an account under the SCSS scheme, you can apply at post offices or banks. After you start an account, you should deposit a maximum amount of Rs. 15 Lakhs.
- Public Provident Fund (PPF)
Another popular types of investments can be PPFs. The primary reason for its popularity amongst investors can be that it is tax-free. When you invest in PPF, you can earn compound interest on your accumulated wealth. If you stay invested until the completion of the tenure of 15 years, your generated corpus can multiply to fulfil your long-term dreams. As an account holder, you can even extend the tenure for the next five years. However, you might be unable to withdraw your funds until the sixth year.
To sum up, you should have proper knowledge of every investment product in the market. You should identify your investment goals, whether they are long-term or short-term, and choose tools that can align with your goals. ULIP plans can help you achieve your life goals if you have planned for a long term. The investment options mentioned above vary from high-risk to low-risk. Therefore, evaluate your risk appetite before you understand where to invest money for the growth of your funds.
Comments