With so many insurance plans available in the market today, it can be challenging to find the best saving plan that meets all your financial as well as investment needs. Saving plans, also known as endowment plans, are insurance policies that you can add to your portfolio if you are looking for risk-free investments.
When you invest in a savings plan, you inadvertently cultivate the habit of saving a predetermined amount every month for a stipulated time interval. The key benefit of investing in the best saving plans in India is the guaranteed returns. Since these instruments are not subject to market risk, they are virtually stress-free!
There is no need to be anxious about last-minute investments or guessing the HRA full form to know its role in tax savings. Just invest in the best saving planportfolio and get tax benefits under section 80C of the Income Tax Act.
Not many people know this, but your saving plans are so secure that you can also avail a loan against these policies in your hour of emergency! What’s more? As a loyal customer of the best saving plan, you are entitled to an additional bonus that is offered to you by your policy provider depending upon your policy tenure and sum assured.
Apart from all these benefits, you also get a term plan cover that helps you secure the financial future of your loved ones in case something happens to you!
Savings plans are different in the sense that they accumulate over time and is paid when the policy matures.
If you are interested in building your portfolio of best saving plans in India, then here we discuss some of the most common investment options.
Unit Linked Investment Plan (ULIP)
ULIPs are added to the investment portfolio because they give you the best of both worlds – insurance and investment.
Here are some of its features that you should know before investing.
1. Insurance and investment component:
A small portion of your premium goes towards a life cover that secures your family’s financial wellbeing in your absence. At the same time, the remaining portion of your premium is invested in market-linked products, such as equity and debt, that give you long-term returns.
2. Tax exemptions:
You are eligible for tax exemptions at all the stages of your policy, that is an investment, earning, and withdrawal. They are called the best savings plan in India because even the interest earned at the time of withdrawal is tax-free!
Increase the investment amount and enjoy all the tax benefits on these top-ups as well.
4. Flexible investment option:
Switch between funds from equity to debt, or vice versa, as per your risk appetite and life stages.
Equity Linked Savings Scheme (ELSS)
No talk of best savings plan is complete without the mention of ELSS. This equity diversified mutual fund scheme is a tax-saving instrument that comes with a 3-year lock-in the period from the date of investment. After the lock-in ends, investors are allowed to withdraw the funds.
Here are some of its salient features.
1. Tax saving:
Save up to Rs. 1.5 lakhs in a current financial year under section 80C of the Income Tax Act. In this scheme, you not only save tax but also earn high returns from your equity-based funds.
2. Lock-in period:
ELSS have the lowest lock-in period of only three years, as opposed to a minimum five years in other schemes.
3. Lowest tax on gains:
As per the present law, gains above Rs. 1,00,000 are taxed at the rate of 10%, as opposed to the 15% rate that is applicable on short-term capital gains.
4. Power of compounding:
ELSS investments usually span 5-10 years, automatically making them a long-term investment. As a result, you can benefit from the power of compounding in the long run.
5. Higher returns:
These equity bases schemes can earn you a higher rate of interest between 15-20%, compared to other saving plans.
National Pension Scheme (NPS)
National Pension Scheme is called the best savings plan because it has all the essential elements to take care of your retirement phase. It not only allows you to fulfil your expenditure requirements but also creates a substantial corpus to help you breeze through post-retirement with ease. This scheme is introduced by the government of India to allow for the systemised accumulation of funds through your working years so that you can save for the future. The corpus growth is enabled through market-linked returns.
Some of its essential features are listed below:
This scheme is open for all citizens of India between the age group of 18-65 years working in any sector.
This scheme gives you the flexibility to select the fund manager to monitor the performance of your investment. You can start as low as Rs. 500 at a time.
You can operate this account from anywhere in India through the vast network of Point of Presence.
4. Secure investment:
This is a safe investment as it is managed by Pension Fund Regulatory & Development Authority.
5. Automated asset allocation:
The investment starts with higher distribution towards equities which is gradually shifted towards fixed income as you age.
Post Office Monthly Income Scheme
This government-backed investment scheme is one of the best savings plans in the country because it earns you the highest interest rate of 7.6%. The interest in this scheme is disbursed every month.
Here are some of its features.
1. Lock-in period:
The minimum lock-in period in this scheme is minimum five years after which you can withdraw the money deposited.
2. Secure transfer:
If you are moving to another city, you can quickly transfer your post office monthly income scheme account to a post office nearest to your place of residence.
3. Joint account:
No more than three people can open a joint account for this scheme. Each member of the account has an equal right over the account with a maximum limit of Rs. 9 Lakhs.
4. Tax benefits:
The interest earned through this scheme is not tax-deductible. However, it does not enjoy any tax benefits under section 80C of the income tax.
According to financial experts, starting your investments early will give you more time to plan your finances judiciously and inculcate the habit of saving at a young age. So start planning your savings plan at a young age so that you can meet your financial goals.