In India, many of believe that is alright for us to make mistakes, after all, “to err is human”. When it comes to investments; however, you cannot let any mistakes play spoilsport and limit your returns. hence, it is crucial for you to start taking financial planning and your investments more seriously and leverage them to earn maximal wealth appreciation and tax benefits.
To start off with your journey to ensure financial sustenance, you need to first assess and if needed, revisit your goals and all the ancillary benefits of your investments. Subsequently, proceed to invest in instruments that can help you earn long-term wealth creation opportunities along with comprehensive tax saving benefits as ancillary benefits. Here are a few investment options that can help you earn maximal tax benefits and long-term financial security.
Unit-linked Insurance Plans (ULIPs)
For most salaried and self-employed investors, primary life goals include wealth creation and financial sustenance throughout the working years and retirement. Unit Linked Insurance Plans or ULIPs are perfect instruments to help achieve these primary goals and much more.
Unit Linked Insurance Plans essentially provide both investment and insurance benefits under a single policy undertaking. The premium invested under ULIPs is allocated into a variety of fund options to create wealth in the long-run. Meanwhile the plan offers life insurance protection throughout the policy tenure.
Moreover, ULIPs provide a variety of investment fund options including equity and debt funds, so that you can diversify your investment portfolio to earn maximal returns. Thus, some of the best ULIP plans from reputable insurers such as Max Life Insurance help you create an adequate amount of savings to achieve your goals, while keeping in mind your risk tolerance and investment horizon.
Additionally, there are comprehensive ULIP tax benefits involved with these investments as well. The premium paid under ULIP plans, up to Rs. 1.5 lakh is tax deductible under Section 80C of the Income Tax Act, while the maturity benefits/insurance death benefit payable under the plans is entirely tax-free under Section 10 (10D) of the Act. Overall, ULIPs offer comprehensive tax benefits, which makes them one of the best investment options for tax saving available today.
Equity-linked Savings Scheme (ELSS)
The advantage of investing in an equity-linked saving scheme or ELSS is that the instrument has a potential to deliver higher returns because the plan is essentially an equity-oriented investment. To avail maximal investment returns from the scheme; therefore, it is crucial that you invest in it for a longer duration so as to mitigate the risks.
While ELSS have a shorter lock-in period of 3 years (ULIPs have a five-year lock-in period), they also offer comprehensive tax benefits up to Rs. 1.5 lakh, under Section 80C on a year-on-year basis throughout the investment period. Thus, you can leverage ELSS to achieve your goals of long-term wealth creation, income security during retirement, and supporting your child’s higher education.
Public Provident Fund (PPF)
PPF or public provident funds are one of the most popular long term investment options in the country. The popularity behind these traditional investment options is due to two reasons – first, this plan is annual compounding and second, you can earn tax-free interest on your investments on year-on-year basis.
Essentially, PPF investments have a long tenure of 15 years; thus, the effect of compounding is tremendous, especially in the later years.
Moreover, the interest earned on PPF is also tax-free, similar to ULIPs, while the maturity benefit too is tax exempt. Thus, PPF is an ideal investment option to fulfil long-term goals, especially for risk averse investors.
Investing Long Term in ULIPs Offers Tremendous Tax Saving Benefits
When it comes to long-term investments, even a little sum of money can earn significant returns, especially when you choose to invest the sum in an instrument such as ULIPS. ULIPs allow you to invest small amounts regularly under the plan, instead of a large corpus at once. Hence you have the necessary liquidity to take care of present day expenses without feeling the brunt of life’s uncertainties on your shoulders.