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Safe Investment Options in India: Securing Your Financial Future

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Safe Investment Options in India
December 04, 2023

Table of Content

 

In this policy, the investment risks in the investment portfolio is borne by the policyholder

We have all heard the saying, “The best time to plant a tree was 20 years ago, and the second best time is now.” When it comes to investing, you must keep this adage in mind. Regardless of your current phase in life, you cannot overestimate the importance of carefully planning your finances. Most people in India work hard to build a corpus that allows them to enjoy financial security in their later years. Let’s better understand how sound investments help you achieve your long-term goals.

Safe Investment Options in India for Risk-Averse Investors

While investing, most people remain cautious in an attempt to safeguard their initial corpus. If you are looking for low-risk investment options, here are some safe investment options in India to consider:

  • Tax Saving Fixed Deposit (FDs)

    Fixed Deposit (FD) by Banks or Post offices is a traditional and secure investment option. It allows you to deposit a lump sum amount with a bank for a fixed period. In return, you earn a fixed interest rate. Bank FDs offer capital protection and a predictable return, making them a preferred choice for risk-averse investors. However, interest rates may vary, and inflation could affect the value of your returns. FDs enjoys tax benefits under Section 80C of the Income Tax Act up to Rs.1.5 lakh annually. These tax saving FDs have a lock in period of 5 years and are notifed by the Central Government of India. However, the interest is taxable and subject to Tax Deducted at Source (TDS).

  • Public Provident Fund

    The Public Provident Fund (PPF) is a government-backed savings scheme that offers attractive interest rates while providing tax benefits upto Rs.1,50,000 under Section 80C# of the Income Tax Act. PPF has a minimum tenure of 15 years, but partial withdrawals are allowed after the seventh year. It is an excellent option for those looking to build a tax-efficient, long-term corpus while enjoying the security of government backing.

  • National Pension System

    The National Pension System (NPS) is a voluntary, long-term retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It provides market-linked returns, giving investors exposure to equity and debt instruments. However, since the main objective is to build a corpus for retirement, it automatically caps your exposure to high-risk equity instruments. NPS offers tax benefits under Section 80CCD (1B)# up to Rs. 50,000, along with deduction up to Rs.1,50,000 under Section 80C, making it a popular choice for retirement planning among salaried individuals and self-employed professionals.

  • Gold

    Gold has been considered a safe investment for centuries. It holds cultural significance in India and has become a symbol of wealth and prosperity. You can invest in physical gold, sovereign gold bonds, or gold ETFs (Exchange-Traded Funds). Gold safeguards you against inflation and economic uncertainties, making it a valuable addition to a diversified investment portfolio.

  • 7.75% Government of India Bonds

    Issued by the Government of India, the 7.75% GoI Savings Bond is a low-risk investment option with a tenure of seven years. It offers a fixed interest rate, paid semi-annually, providing investors with a steady income stream.  Interest on the Bonds will be taxable under the Income-tax Act, 1961 as applicable according to the relevant tax status of the bond holder.

  • Recurring Deposits

    A Recurring Deposit (RD) allows you to invest a fixed amount monthly for a predetermined period. You can select a tenure between six months to ten years. RDs offer a fixed interest rate and ensure disciplined savings. It is a suitable investment option for those who want to cultivate a regular savings habit and prefer low-risk investment avenues. Interest on the RDs will be taxable under the Income-tax Act, 1961.

  • Debt Unit-Linked Insurance Plans

    A Debt Unit-Linked Insurance Plan (ULIP) is an insurance-cum-investment product that invests primarily in debt instruments like government securities and bonds. It offers the dual benefit of life insurance coverage and potential returns from debt market investments. Debt ULIPs are less volatile than equity-oriented ULIPs, making them a safer option for risk-averse investors.

    These plans come with the advantage of tax deduction under Section 80C of the Income Tax Act. The maximum deduction available for premium paid is Rs. 1,50,000 per year.

    Proceeds received on surrender/partial withdrawals/maturity of ULIP plan are exempt from tax subject to provisions mentioned in Section 10(10D) i.e if the premium payable for any of the years during the policy term does not exceed 10% of the death sum assured.

    In addition to the above, for policies issued after 1st Feb 2021 tax exemption on maturity proceeds will be available only if premium paid in any of the years towards such matured polices does not exceed Rs.2,50,000. Out of the total matured policies in a financial year, exemption u/s 10(10D) will be available only towards those policies who’s aggregate premium in any years does not exceed Rs. 2,50,000/.
    Rest policies exceeding the mentioned limit will be chargeable as capital gains.

    Death proceeds shall be exempt from tax for all ULIP plans.

The Importance of Diversifying Your Investment Portfolio

While exploring various investment options, you must understand the significance of diversification. When you spread your money across various asset classes, you diversify your investment portfolio. The primary goal of diversification is to reduce the overall risk and enhance the potential for higher returns.

When you distribute your investments across multiple instruments, a downturn in one sector will not impact your overall portfolio. Different asset classes have distinct risk-return profiles and tend to perform differently under various economic conditions. A diverse portfolio will safeguard your investments and maximise opportunities for growth.

The key to successful investing is to start early, stay disciplined, and maintain a well-diversified portfolio. Seek advice from financial experts and be open to reviewing and adjusting your investment strategy as your financial circumstances change. Take the first step towards a better financial future today. Invest wisely, and watch your money grow as you build a strong foundation for a better tomorrow.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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#Tax benefits & exemptions are subject to conditions under Sections 80C, Section 80CCD, Section 10(10D) and other provisions of the Income Tax Act, 1961.

#Tax Laws are subject to change from time to time.

#The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law

#The customer is requested to be informed about the applicable interest rates at the time of investing in any of the above mentioned instruments

The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. HDFC Life Insurance Company Limited is only the name of the Insurance Company, The name of the company, name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

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