Looking for an alternative to save tax but unable to decide where to invest? Here are the top eight investment alternatives that can be considered by salaried persons to fulfill different life objectives.
Salaried persons are required to invest differently from self-employed or other experts. They set monthly cash inflows to satisfy their costs and save for different life objectives. While most salaried people are covered by post-retirement safety in the form of employee provident fund or other compulsory retirement schemes, the produced corpus is often insufficient to satisfy post-retirement requirements.
Below are the few investment options that salaried persons can consider based on their risk appetite and time horizon to meet different life objectives:
Equity Mutual Fund for salaried persons
Equity mutual funds (MFs) invest in equities at least 65% of their corpus. These funds, being invested in equities, surpass fixed income instruments and long-term inflation by a wide margin. These funds are best suited for retail investors wanting to invest in stocks but lacking the knowledge or time needed to do so. Equity funds also include a unique fund category called Equity Linked Savings Schemes (ELSS), which qualifies under Section 80C of the Income Tax Act for a tax deduction. These funds also have the shortest3-year lock-in period among all the alternatives in Section 80C.
Debt Mutual Fund for salaried persons
Debt mutual funds, among others, invest in instruments of fixed income such as corporate debt securities, corporate bonds, public securities, and capital market instruments. Whereas debt funds are susceptible to minimal danger, they are less volatile than higher yields generated by equities than fixed deposits. Also, debt funds do not impose a premature withdrawal penalty, unlike fixed deposits. Even so, before a pre-determined period, a few debt funds may charge exit loads of up to 3 percent to redeem your investment.
National Pension System
NPS is a retirement planning product connected to the market. Under the’ All Citizens of India ‘ model, wage investors not falling under the’ Government or Corporate’ model may join NPS. The investments stay locked-in until you meet the age of 60, which can last up to 70 years. A minimum of 40% of the accumulated corpus must be invested to take advantage of the annuity, while the remaining tax-exempt amount must be withdrawn at maturity. Under Section 80C, you can use tax deduction of up to Rs 1.5 lakh and a further deduction of up to Rs 50,000 under Section 80 CCD 1(B).
National Savings Certificate
National Savings Certificate is a fixed income investment plan with a 5-year lock-in period providing an 8 percent compounded interest rate per year. The interest rates of the NSC are studied every quarter just like the PPF. You can submit a tax deduction of up to Rs 1.5 lakh under Section 80C with a minimum deposit of Rs 100 and no maximum deposit limit.
Voluntary Provident Fund
VPF is an EPF extension that yields the same rate of interest. In addition to your compulsory contribution to the EPF, you can willingly choose to raise your contribution to up to 100% of your basic wage and loan allowance in the VPF. The interest rate is analyzed annually by the government and the amount of the investment qualifies for tax deduction under Section 80C. The interest earned is tax-exempt as long as the employee remains in service for 5 years or more.
