Tax Saving Investment Options: ELSS, PPF, NPS and More

Explore various tax-saving investment options in India, including ELSS, PPF, NPS, and more. Learn the benefits, features, and eligibility criteria to make well-informed investment decisions.

"Discover the best tax-saving investment options in India, including ELSS, PPF, NPS, SSY, and more, to help you maximize your savings and build a secure financial future. Our comprehensive guide covers everything from the benefits of Equity-Linked Saving Schemes and Public Provident Funds to the features of National Pension System and Sukanya Samriddhi Yojana. Additionally, learn about insurance policies, ULIPs, and other Section 80C investments that can help you save tax while achieving your financial goals. Stay ahead in the world of personal finance by making well-informed investment decisions with our expert insights and guidance."

Tax Saving Investment Options: ELSS, PPF, NPS and More

Saving tax is a crucial aspect of financial planning, and India offers numerous investment options to help investors save tax while also growing their wealth. In this post, we will discuss the popular tax-saving investment options, such as Equity-Linked Saving Scheme (ELSS), Public Provident Fund (PPF), National Pension System (NPS), and more. By understanding the benefits, features, and eligibility criteria of these instruments, you can make informed decisions that align with your financial goals and risk appetite.

1.    Equity-Linked Saving Scheme (ELSS)

ELSS is a type of diversified equity mutual fund that qualifies for tax deductions under Section 80C of the Income Tax Act. These funds invest primarily in equity and equity-related instruments, offering the potential for higher returns compared to other tax-saving options.

a. Lock-in Period: ELSS has a lock-in period of three years, making it a relatively more liquid option among tax-saving investments.

b. Tax Benefits: Investments in ELSS qualify for tax deductions up to ₹1.5 lakh per financial year under Section 80C.

c. Risk Profile: As ELSS funds invest in equities, they carry a higher risk compared to debt-oriented tax-saving instruments. However, they also offer the potential for higher returns in the long run.

2.    Public Provident Fund (PPF)

PPF is a long-term, government-backed savings scheme that offers tax benefits and a secure, fixed return on investment.

a. Lock-in Period: PPF has a lock-in period of 15 years, with the option to extend the account in blocks of five years after maturity.

b. Tax Benefits: Investments in PPF are eligible for tax deductions up to ₹1.5 lakh per financial year under Section 80C. The interest earned and the maturity amount are also tax-exempt.

c. Risk Profile: PPF is a low-risk investment option, as it is backed by the government and offers a guaranteed, fixed interest rate.

3.    National Pension System (NPS)

NPS is a voluntary, government-backed pension scheme aimed at providing financial security during retirement. It invests in a mix of equity, corporate bonds, and government securities.

a. Lock-in Period: NPS has a lock-in period until the investor reaches the age of 60, with a minimum of 10 years of contribution.

b. Tax Benefits: Investments in NPS qualify for tax deductions up to ₹1.5 lakh per financial year under Section 80C. Additionally, an exclusive deduction of ₹50,000 is available under Section 80CCD(1B).

c. Risk Profile: The risk profile of NPS depends on the chosen investment mix, with options ranging from conservative to aggressive.

4.    Other Tax-Saving Investment Options

Apart from ELSS, PPF, and NPS, there are several other tax-saving investment options to consider:

a. 5-Year Tax-Saving Fixed Deposits: Offered by banks, these fixed deposits qualify for tax deductions under Section 80C, with a lock-in period of five years.

b. Life Insurance Policies: Premiums paid towards life insurance policies, including term plans, endowment plans, and Unit-Linked Insurance Plans (ULIPs), are eligible for tax deductions under Section 80C.

Keywords: Tax Saving Investment Options, ELSS, PPF, NPS, SSY, Sukanya Samriddhi Yojana, LIC, insurance, ULIP, 80C investments.

How to verify Income Tax Returns Using An ATM

ATM  का उपयोग करके आयकर रिटर्न कैसे सत्यापित करें 

आयकर दाखिल करना एक बहुत ही कठिन काम है। बहुत सारे लोग यह नहीं समझते हैं कि सत्यापन के बिना कर रिटर्न दाखिल करने की प्रक्रिया अधूरी है। कर रिटर्न की पुष्टि करने के कई तरीके हैं, जैसे डिजिटल हस्ताक्षर प्रमाण पत्र का उपयोग करना, केंद्रीय प्रसंस्करण केंद्र (सीपीसी) - बेंगलुरु आदि को आईटीआर-वी की भौतिक प्रतिलिपि भेजना, ऐसे करदाताओं की सुविधा के लिए जिनके पास इंटरनेट नहीं है। बैंकिंग सुविधा, आयकर विभाग अब करदाताओं को एटीएम में अपने कर रिटर्न को सत्यापित करने की अनुमति दे रहा है।

इलेक्ट्रॉनिक सत्यापन कोड (Electronic Verification Code)

एक इलेक्ट्रॉनिक सत्यापन कोड या ईवीसी एक दस अंकों का अल्फ़ान्यूमेरिक कोड है जिसे ई-सत्यापन द्वारा कर रिटर्न दाखिल करने की प्रक्रिया को पूरा करना आवश्यक है। यह कोड IT विभाग द्वारा जनरेट किया गया है और केवल 72 घंटे या तीन दिनों के लिए वैध है। यदि तीन दिनों के भीतर उपयोग नहीं किया जाता है, तो ईवीसी निरर्थक हो जाता है और ई-सत्यापन की प्रक्रिया के लिए पुनर्जीवित होना पड़ता है।

इंटरनेट बैंकिंग, आधार ओटीपी सहित या आईटी विभाग की वेबसाइट पर जाकर पैन का उपयोग करने के लिए लॉग इन करने के कई तरीके हैं।

ATM के माध्यम से EVC बनाना

आयकर विभाग एटीएम का उपयोग करके कर रिटर्न के ई-सत्यापन की भी अनुमति देता है। इस सुविधा का उपयोग करने के लिए, आपको अपना कार्ड स्वाइप करना होगा, और फिर "आईटी फाइलिंग के लिए पिन" लेबल वाले विकल्प का चयन करना होगा। आपको अपने मोबाइल नंबर और ई-मेल पर ईवीसी प्राप्त होगा। हालाँकि, इस सुविधा का उपयोग करने के लिए, यह अनिवार्य है कि आपका बैंक खाता पैन सत्यापित हो। सभी बैंक यह सुविधा नहीं देते हैं। एसबीआई, पंजाब नेशनल बैंक, यूनाइटेड बैंक ऑफ इंडिया, केनरा बैंक, एक्सिस बैंक, और कुछ अन्य बैंक एटीएम के माध्यम से आईटीआर के ई-सत्यापन की अनुमति देने वाले एकमात्र व्यक्ति हैं।

हालाँकि यह सुविधा कुछ बैंकों के खाताधारकों तक सीमित है, लेकिन IT विभाग का कहना है कि यह सुविधा सभी संस्थागत बैंक खाताधारकों को उपलब्ध होगी, चाहे उनका बैंक कोई भी हो।

अपने टैक्स रिटर्न को ई-वेरिफाई करने के लिए ईवीसी का उपयोग करना 

(EVC to e-verify tax returns)

आपके EVC को सफलतापूर्वक तैयार करने के बाद, आयकर विभाग की वेबसाइट, www.incometaxefiling.gov.in पर जाएं और अपनी पंजीकृत उपयोगकर्ता आईडी का उपयोग करके लॉग इन करें। फिर, "ई-दायर रिटर्न" विकल्प चुनें और संबंधित मूल्यांकन वर्ष के लिए आईटीआर का चयन करें। ईवीसी दर्ज करें जो आपको अपने मोबाइल नंबर पर प्राप्त होता है जब चयनित आईटीआर ईवीसी के लिए पूछता है। सत्यापन की प्रक्रिया अब पूरी हो गई है।

निष्कर्ष 

अब जब आईटी विभाग ने करदाताओं को एटीएम के माध्यम से अपने आईटी रिटर्न को सत्यापित करने की अनुमति दी है, तो आपके कर रिटर्न की पुष्टि नहीं करने का कोई कारण नहीं है। कर रिटर्न दाखिल करने की प्रक्रिया में आयकर रिटर्न सत्यापित करना, और अपनी उंगलियों पर ई-सत्यापन के साथ प्रक्रिया पहले से कहीं अधिक सरल है।

How to verify Income Tax Returns Using An ATM

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7 Ways to Get Monthly Income after You Turn 60

What would you do when you turn 60 and they declare you officially as a senior citizen? Of course, your first concern will be your financial security. This is crucial because when you retire you are cut of from regular sources of income. Therefore, it is important you have a plan to survive the winter of your life in peace and happiness To tide over the loss of income you need to substantiate it with other sources of income. The government offers many options for us to invest and get regular monthly incomes. Many of us are still unaware of these products:

Senior Citizen Saving Scheme: This is a saving scheme started by the government of India designed specifically for senior citizens. The age limit is 60 years and 55 years for those who have retired by other methods. It gives a 9% interest rate per annum computed quarterly. The maturity period is 5 years and can be extended by 3 years. The interest is fully taxable but there is no tax deduction at the source.

Reverse Mortgage: This is a relatively new option announced in 2007 specifically targeted for senior citizens to receive a regular amount of income. Reverse mortgage works by pledging your house with the bank. The bank pays you a fixed amount of money for the house. Once you have moved out or in case of death, the bank gives an option to your heirs to close the loan. If not, the bank can sell the house and recover their loan amount and interest there of. The rest is given to your heirs.

Only people who have reached 60 years can opt for this option. If the co-applicant is your wife, she must be of 58 years. This age bars makes this specifically suited for senior citizens. The payment is credited to your account monthly or quarterly or in one go. Reverse mortgages are not taxed as it is considered as a loan and not as income.

Some of the banks that provide Reverse Mortgage in India now are State Bank of India, Central Bank of India, Union Bank of India, Bank of Baroda, LIC Housing Finance, Punjab National Bank, Canara Bank etc. Reverse mortgage is not popular at the moment because people are yet to take note of it. Till now only 7000 reverse-mortgages have been sold.

Also read: How to Become Financially Independent | 3 Steps

Immediate Annuity: Opting for an immediate annuity is another option when we are retired. It is a fixed income generating scheme, in which we pay a lump sum as single premium with the insurance agent and then receive a steady flow of income periodically. The payment amount and the annuity depend on your age and the product you choose.

You will receive annuity or the income from the next year of paying premium and it will be paid to you as long as you are alive. The annuity received increases with every year. There is an option for annuity to extend till the death of the spouse as well. Immediate Annuities are a good monthly income plan after retirement because it is secure and definite.

Nonetheless, in life long annuity plans sometimes the principal is not recovered because of immediate death of the individual. It is advisable to go for fixed tenure plans if you want to recover your principal. A popular annuity plan is LIC’s Jeevan Anand.

Senior Citizen Fixed Deposits: The most common and convenient method a senior citizen can receive a monthly income is by investing in senior citizen fixed deposits. At present, banks provide interest rate up to 9%. They can invest also in corporate fixed deposits, but they are riskier than bank deposits. Banks also provide monthly income plans. These are tax free at source. But, the interests are taxed.

Post Office Monthly Income Scheme: The Indian Post office department provides some secured investment plans which provide a monthly income for those investing in it. The rate of interest is 8.2% with a maturity period of 5 years. However, there is a ceiling on investment of Rs. 4.5 lakhs for an individual. Jointly an amount of Rs. 9 lakhs can be invested. Though, the tax is not deducted at the source, the returns are taxed.

Mutual Funds: Just like post offices, mutual funds also provide monthly income schemes to individuals. Senior citizens can also invest in these funds to get a monthly payment. However, these funds carry with it an element of risk because these are invested in equity markets. Therefore, you must be extra cautious when you invest in these funds. One can earn crores by investing in mutual funds.

To Know the magic of compounding in SIP must watch this video;

Also read: How to be millionaire in stock market?

Triple A Rated Bonds: Would your retired life be peaceful if you stay awake all night thinking about a risky investment? Definitely, it would be an awful way to spend your post retirement life. At that age what you need is a steady flow of income that is very low on risk. Triple A rated bonds are a good choice. Triple A is a rating given by the government, which means that the bond is highly secure and safe. The returns are pretty good with corporate AAA bonds fetching about 9.70%. Having an assured and pre-determined income enables you to plan ahead for future expenses.

Getting old is not such a bad thing. After a life’s hard work you really need some time to rest and be at peace with yourself. Only at old age could you actually get the time and opportunity to find that inner peace and happiness. This happiness lies in the fact how you prepare yourself before you grow old. The most important thing that we must consider is the options that can bring monthly income so that all of our expenses are easily met.

How to Invest Windfall Gain to Make more money out of it?

Windfall gain is the exceptional gain (or exceptional profit) is an unexpected gain in income that could be attributable to a lottery, unexpected inheritance or supply shortage. Exceptional gains are transitional in nature.

Sometimes, when fortune smiles down on you, it is not difficult to get hands on a windfall gain. There are countless ways you can acquire it. It might be from a lottery you took, an inheritance from a dead aunt you never knew, it might be from the game show “Kaun Banega Crorepati…” or whatever. Never mind where you get it.

 

How to Invest Your Windfall Gain

The main issue is what will you do with such a windfall gain?

Now, the problem here is not how to invest windfall gain to make more money out of it but to maintain it and to make it grow. This is where many of you ‘lucky’ people suddenly get unlucky again. We just don’t know how to handle large sums of money at one time and we get confused a lot. When the confusion overwhelms us, we begin to spend money in the most unproductive manner. Before long, you will find yourself in your old unlucky state.

Therefore, be smart with your money and invest windfall gain smartly. We found following ways to invest your windfall gain. If you follow these investment ideas, you can, of course, stretch your legs and retire early in peace.

1. Invest in Tax Saving Schemes: First, invest in tax saving schemes that give you moderate returns such as Public Provident Fund or National Saving Certificates etc. This helps you to save on the tax and also will give you a moderate return. Tax saving schemes are safe investments and so you can reduce your risks while making money on your money.

2. Invest in Mutual Funds: The tendency to take risk rises when you get a windfall because you did not feel the hardship in making it. To make money many squander their windfall gains at the stock exchange. If you do not have any prior knowledge about the market, do not invest in shares directly. Many will advise you to do it but once you are in it, it is hard to escape the lure and you will end up with nothing. Nevertheless, without taking risks you cannot make your money grow. So, the best option is to invest in Mutual Funds. There are highly respected fund houses like HDFC, ICICI etc. that gives you good returns. These fund managers know what they are doing and definitely knows a whole lot more about the markets than what you do. Therefore, let them do the trading and you can sit back and relax while you get handsome returns.

However, Mutual Funds are highly risky and you must be ready to take that risk. Anyway, this risk is much lower than if you had invested in stocks directly. Plan how much risk you are willing to take for the returns the fund managers are promising and invest only that much into it.

3. Invest in Insurance: Though insurance comes under tax saving schemes, this is added as a separate point in order to emphasise its importance. Taking insurance might not be an investment option but it makes sense when considering it as an investment against unfortunate events. Remember, your windfall gain was good fortune, likewise, unfortunate events might also happen.

Taking life insurance policy alone is not enough. You must also go for medical insurance that covers against diseases and accidents. There are schemes, which insure the health of your whole family too.

The most unexpected and huge expenses are usually related to medical care. Therefore, taking medical insurance will actually see to it that your money is not spent unnecessarily on medical bills. Besides, don’t worry that you will be losing money on medical insurance. There are offers that give you free check ups and treatment if you don’t claim any medical bills. This helps you to be aware of your health and also to maintain a healthy lifestyle.

3. Invest in Debt Instruments: Bonds, Government Securities, Corporate bonds etc. are all debt instruments. The purpose of investing in these instruments is to get continuous and moderate income. Debt instruments are not risky except for corporate bonds. So you can be sure that you will be getting a regular flow of income without being tensed.

Do not invest in long term bonds that might run for 20 or 30 years. Invest in medium term bonds because interest rates keep changing and you need to change your holdings in bonds, occasionally, to bonds that give you lower rates.

4. Invest in Bullion: Gold and Silver are shining like never before. As Indians, we have this penchant for bullion. However, the good news is that you can spend your money on this weakness. Gold has been growing rapidly these last few years and has given abnormal profits for those who were invested in it. Besides, this serves as a store of value and shields your money from inflation and weakness in the economy.

Buy jewellery for you wife and children, but make sure you invest more in gold coins and bars than in jewellery. This is because jewellery costs you more in making charges and sometimes the gold is not pure, so you would not get your money’s worth.

5. Invest in Small Business: If you have the entrepreneurship bone in your body, then use the money to start a business of your own. Study the pros and cons of your venture very thoroughly before starting. In addition, don’t invest all that you got in it. Put in an amount and keep the rest for other investments and as reserve money. Try to get funding from banks or from friends and relatives. Now there are Venture Capitalists who might be interested in giving you the extra funding.

6. Invest in Entertainment: What is life without some fun? Enjoy yourself with the money you got. Investing in entertainment gives you a feeling of well being and it reflects in your happiness and peace. Therefore, go out and dine in the most expensive restaurant or go for a tour. There is no harm in it. However, you must not indulge in it. This is why this point is the placed at the bottom.

When we get a windfall gain, most of us make entertainment the first priority. The downfall begins there. Once having fun is your priority, then maintaining your money will be an impossible thing to do. So have fun within your limits.

Making the best of the opportunities that providence gives us is what smart people do. A windfall gain is an opportunity to change your life forever. If you play it smart, you can live the rest of your life the way you want. However, if you don’t, then you are going to regret it every single day that you live on this planet.

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Untapped Investment Potential of Gold Purchase Plans

Why you should invest in Gold Purchase Plans?

Indians appetite for gold is unbelievable. It doesn’t matter to us if the price sky rockets, or if the Government imposes a ban or even if gold suddenly starts to bite us! We need gold to survive. The price of gold is amazingly higher than anyone ever had expected. Yet, the demand for it isn’t waning. India consumed 963.1 tonnes of gold in 2010, which is likely to increase to 1200 tons by 2020.

With prices all set to go higher, middle class Indians are opting for a way to bypass this irritant. The new found love in Gold Purchase Plans is a reflection of this.

Gold Purchase Plans Explained

So how does a Gold Purchase Plans actually work? There are two ways in which these plans operate;

1. Regular Investment Method: In this type of plan the jewelry companies accepts a regular monthly payment from customers usually as low as Rs. 1000 for a period of 12 months to 24 months. The customer is entitled to receive interest and bonus for the money invested.

Typically, for a customer who pays instalment for one year gets one month bonus. For example if you invest Rs. 1000 for one year your fund adds up to Rs 12,000. However, with one month bonus you get extra Rs. 1000 increasing your fund amount to Rs. 13,000. For two years investment some jewellers offer two month bonus.

At the end of maturity, the customer can opt for either gold coin for the amount or go for gold ornaments. If the customer chooses gold ornaments the jewellers discount charges on designing.

2. Systematic Gold Investment Plan: Some companies offers to credit an equal amount of gold to the customer’s account at the price prevailing when an instalment is paid. On maturity she can purchase the gold in the form of gold coins or ornaments. This way she can bypass increasing price of gold if she buys gold at a later date.

SIP method helps to average the cost of gold over the year. This is very useful as prices are going up. However, it also helps the customer to buy up gold when the price comes down on a correction. At lower prices more gold is purchased and at higher price fewer amount of gold is bought. This helps in averaging the cost of your gold purchase.

Overall, SIP method helps gold investors in the same manner as it helps investors in equities.

To Know the magic of compounding in SIP must watch this video;

Also read: How to Become Financially Independent | Follow these 3 Steps

How Customers and Jewellers’ Benefits from Gold Purchase Plans

These plans are provided by jewellers to attract more customers and make them spend more, even if the prices are high. However it is a win-win situation with both the consumer and the jeweller gaining from the transaction.

Benefits to Customer

1. Rupee Cost Averaging: For the customer Gold Purchase Plans works like a Systematic Investment Plan. Every month she can invest a part of her income into this plan. At maturity she gets gold worth the price of money invested. The money gains interest and jewellers also provide bonus for the investment. This makes it a good investment plan in gold especially for those who cannot pay at one go.

2. Helps Low Income Group to Invest in Gold: Considering the fact that gold is very important to our lives and is embedded in the cultural psyche of the Indians, most of us are forced to invest in gold. Thus, it forces people with limited income to purchase gold formarriages and other occasions. With Gold Purchase Plans people with low income can slowly make a corpus and purchase gold.

Benefits to Jeweller

1. Increased Flow of Money: A jeweller is benefited by having a regular flow of money every month. This helps the jeweller to buy gold and build inventory. Before the maturity date the jeweller can make use of the money invested for other investments or expenditure.

2. More Customers More Sale: More customers are attracted to jewellers who provide attractive Gold Purchase Plans. Furthermore, the prospect of buying lump sum gold through small systematic investments can make customer purchase more than they would have otherwise. All this contributes to the overall sale to rise thus profiting the jeweller.

Conclusion

Gold Purchase Plans are a good investment. Gold is now not only a hedge against inflation but is fast turning in to a safe investment asset. This makes it worthwhile to invest in gold in any form.

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In Need of Money? Think these options before you apply for personal Loan and Credit Cards

moneynbusiness.com

When we were children we were taught that the three essential things for man to survive are food, shelter and clothing. Guess they missed out one major thing; 'Money'. How can man survive without money? We are in constant need of it. And worst of all is that it is totally unpredictable. It is true that with personal loans and credit cards you can take care of these sudden expenses. Further, it is easy to obtain, and time saving. No wonder they are the darling of so many people. 

However, beware of these wolves in sheep’s clothing. Personal loans and credit cards charge you incredibly high interest rates. It ranges anywhere between 12% to 25% for personal loans and 30% or more for credit cards. 

Besides they have many hidden charges and fees. These are designed to suck your money as far as possible. Banks charge administrative and processing charges on personal loans. For credit cards, the banks charge on every cash advances. This may range from 3% to 5% of the total cash used. It raises the cost of using credit cards pretty high. 

Then there is the need to prove your credit worthiness. It might delay the processing time and raise the interest on the loan. 

However, if you are financially independent and you have assets of your own why in god’s name should you go for these high-cost options? Here is some other options where you can reduce the amount of interest paid, prove your credit worthiness;

1. Loan against Gold: One best option to get urgent money is by way of pledging your gold for the amount of money. This is a very easy and fast way to obtain money. You can lower the interest charged on it by providing gold more than the required amount. You can also decide the mode of repayment. You can either pay the full amount or recover your gold or else you can opt to repay it at regular intervals. 

The documentation and processing time is kept to the bare minimum. All you need is gold to pledge and your identity proof. You need not be a credit worthy person and moreover no one is going to ask why you need the loan amount. Every one seems to mind their own business here! 

2. Loan against Property: For huge amounts of loan, pledging your residential or commercial property is the best option. However the property must not be mortgaged. Banks provide about 50% of the value of the property as loan and 30% to 40% of the income received from the property if any. An interest rate between 13% to 16% is charged. The loan amount can be increased if the value of the property increases in the meantime. 

However, most banks charge processing fees and it takes around 10 days to 15 days for the loan to be processed. 

3. Loan against Insurance Policies: There is also an option to get loans on the insurance policy that we have taken. However, loans are only sanctioned on policies after three years of full payment of premium. The processing time is 2 days and the interest rate is 8% to 9%. You can avail loan about 90% of the surrender value of the policy. 

4. Loan against Shares: Banks provide you loans against shares and mutual fund units. These provide loans with 13% to 16% interest. Only individuals are eligible for this kind of loans. However, banks have stipulated on which share-loans can be given. This is because shares are highly volatile and banks prefer stocks of blue chip companies that are stable and provide good returns. 

Loans against shares and mutual funds provide liquidity to these instruments without actually having to sell. 

5. Loan against Saving Certificates: You can also pledge you’re saving in NSCs, Kisan Vikas Patra, Bonds etc. You can avail a loan amount about 75% to 100% of the face value of the certificates of 3 years and more. The interest charged is 4% above the bank rate and 5% above the certificate’s rate. However, the processing time it is limited with a loan being sanctioned within 1 to 2 days. 

With lots of other options available to avail of loans it is foolish to run for personal loans or use your credit cards lavishly every time you need money. However, think well before you choose which option to use because every option has its own advantage and disadvantage. Choose which is most suitable for you depending on the asset you posses and the money you need. 

However it is better to cultivate a disciplined financial behavior so as to come up with a contingency fund in the long run. With such a fund you need not raise an amount by pledging your asset. You can also join a reputed Chit fund if you have a need for money in the near future. 

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Types of Insurance Plans | Life Insurance Policy to buy

Various types of Life Insurance Policies;

What is Term Insurance Plans?

Term insurance plan is a life insurance product offered by an insurance company that provides financial coverage to the policyholder for a specified period of time. In the event of the death of the insured person during the term of the policy, the death benefit is paid by the company to the beneficiary. Term plans are the simplest form of life insurance. They provide life coverage with no savings / profits component. They are the most affordable form of life insurance since premiums are cheaper as compared to other life insurance plans. Online life insurance plans provide pure risk coverage, which explains the lower premiums. A fixed amount of money - the sum insured - is paid to the beneficiaries if the policyholder expires on the policy mandate. If the policyholder survives, there is no refund.

Also read: 6 Reasons Why you need 'Term Insurance Plan'

What are Endowment Plans?

Endowment plans differ from term plans in an essential aspect, that is, a maturity benefit. Unlike the term plans that reimburse the insured amount, as well as profits, only in the event of a death or causality during the policy, the endowment funds provide the insured amount in both scenarios: death and survival. Endowment plans require higher fees / expenses - reflected in premiums - to pay the insured amount, as well as profits, in either scenario: death or maturity. Profits are subject to premiums invested in the equity and debt markets.

What are Unit linked insurance plans (ULIP)?

Insurance policies related to the unit or the ULIP are insurance policies that offer you the opportunity to create wealth while ensuring the safety of a life cover. In ULIP, a portion of your premium is dedicated to your Life Cover and the rest is allocated to a common money pool, called the fund, which invests in equity, debt or a combination of both. The returns on your investments depend on the performance of the fund chosen by you.

ULIPs differ from traditional plans; as the name suggests, ULIP's performance is market-linked i.e. a portion of your premium is invested in stock market and fluctuation in market may affect your return. In ULIP you can choose the allocation for investments in stock markets/debt funds. However the value of the investment portfolio is accounted for by the net asset value (NAV). To this end, there are many similarities between ULIPs and mutual funds. ULIPs differ in one area, they are a combination of investment and insurance, while mutual funds are a pure investment avenue.

What are Whole life insurance plans?

Whole life insurance, or whole of the life insurance referred to as "direct life" or "ordinary life", is a life insurance policy that is guaranteed to remain in effect for lifetime of the insured, provided that the required premiums are paid on the due date.

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Be a Good Parent; Invest in Your Child’s Future

Watching your little kid play in front of you may make you wish that she stay as this cute little bundle of joy forever. However she grows, you know. And as the proud parents, it is pretty important that you get prepared for it. Well, this also goes for everyone who is married, expecting and to those who are about to be married; get prepared.

If you think that preparation means being just smiling parents who never quarrel in front of children, then you are making a big mistake. There is more to it than what you think. To know most things you can ask your own mom and dad, read parenting books or speak to your married friends.

Among all that, it is important you set your financial background secured. For a bright future for your daughter, it is important that you are financially sound. Therefore start to invest in your child as early as possible.

Places to Invest for Your Child’s Future

Insurance Policy: The first thing about being prepared is to provide security for your child, even if either you or your spouse is gone. The best option is to start an insurance policy in your name and the claims made out in your child’s name. This way you make sure that she gets a chance to make it on her own, even in your absence.

Moreover, these provide tax benefits and no loans can be taken on these policies thus preventing funds from being used for other purposes. Thus it is always wise that you invest in child insurance policies.

ULIPs: Unit Linked Insurance Plans are same as insurance policies except that they provide income too. It is a better option because insurance policies do not provide income but is rather a security measure. However, these ULIPs invest in equity markets to provide income. This makes it a riskier investment than insurance policies.

Because of this double advantage these are more suitable investment options than other forms of fixed savings like NSC, post office savings, bank deposits etc.

Bullions: You may think that this is a traditional form of investment, especially for the girl child. However things are changing. Investing in bullions is also a good strategy to tide over rising prices and as an investment asset. This is mainly due to the growing demand for bullions across the world. Investing small amounts in bullions every year can go a long way in supporting your child when she grows up. Bullions have been steadily rising for many decades now.

You can also try to invest in gold bars and coins instead of jewelry. This will ensure we are not cheated on the money we pay for as in the case of jewelry. This is a risk free investment as gold and silver always will have an intrinsic value. Besides, silver has industrial applications too, increasing its demand world wide.

Real Estate: This is also a value appreciating asset like the bullions. One problem though, is that land or property is hard to buy, considering the huge amount needed to acquire it. However, real estate has the potential to provide a steady flow of income in the form of rent. It can be used as collateral in obtaining huge amounts of loans. Moreover, your children will feel secured growing up as there is a definite way to cover up their future expenses for education and living.

Equities: You can buy stocks in the name of your kids, but remember that investing in shares is highly risky. If you feel like the market will go up then invest long-term in stocks with a good track record. In comparison to stocks, it is always better to invest in mutual funds as your fund manager will know better about the markets than you do. Any way, do not invest your bulk savings into equities for kids, but rather choose to invest 10% to 15% of your income into it. For better earnings over a long term, you can opt for an SIP plan to invest in mutual funds for kids.

There are other savings options where you can invest your money for the future of your child. These include bank deposits, National Saving Certificates (NSC), Post office savings, Public Provident Fund (PPF) etc. Most of these provide you tax savings, even if enrolled in the name of your kids.

Things to Know When You Plan Your Child’s Investments

Before you head out to put your money in every option available, wait for a moment and consider planning your limited resources. Here are some things that help you to make the best out of your limited income.

• Start Early: Think about the future of your child very early. A good suggestion is to start investing in her future long before you get married. Now don’t get surprised. The earlier a person invests the more income the person gets. With limited income it would be foolish to wait for marriage and birth. Lots of precious time will be wasted if you wait for the right time to start investments. As they say the best time in the world is now. So start investing now and secure your child’s future.
• Set Goals: We all know that life is unpredictable but a little planning hasn’t hurt any one yet. Even if life turns out different than we expect it is worthwhile you plan ahead for the emergencies that can come later in life. Therefore, when you start investing in your child’s future set goals to build up a corpus within a stipulated time. Plan about your child’s education, and how much she needs at each point of her life. You must also plan and invest for the lifestyle you are planning for her. By setting goals you are actually disciplining yourself in financial matters and securing your child’s future.
• Compound Investing: Whatever plans you come up with, they are no good if you haven’t factored in the power of compounding. Make sure that most of your income from interests is pooled back into the investments itself. This way your income grows manifold than if you had used up all your interest income.
• Count Inflation: Every investment plans must factor in inflation. Your money will lose value in the long run because of this. Therefore manage your investments in such a way so as to receive maximum returns above the inflation rate but never compromising on risks.
• Tax Implication: When planning for your investments you must be aware about the tax laws and how it will affect your investments. There are investment options to by pass taxes. If you are not able to understand the complex world of taxes it is better you hire a tax consultant to get the picture.

When planning for your child’s future use funds that are not needed immediately. Otherwise, you may get tempted to liquidate your investments, thus spoiling all plans and putting your child at risk.

Your child looks up to you for her every need now. Years will pass and she will grow up to face world on her own. Yet she will look up to you at times of crisis for your support and love. Make sure that you are ready then, as you are ready now to pick her up when she starts crying.

upcoming posts;

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