PPF:
-- 9% interest
-- 15 yrs lock-in (However you can withdraw some portion after 7 years).
-- Interest earned is tax free (No TDS).
Recurring Deposit:
-- 8.5% (vary bank to bank, but interest rate is closer to FD)
-- Ideal for small amount periodically
-- Interest is not tax free. Even though bank will not deduct TDS
Individuals are required to show them in ITR and pay tax based in tax bracket
FD:
-- 9% (vary bank to bank and also based on tenure)
-- Ideal for lumpsum investment
-- Interest is taxable based on tax bracket (Bank will deduct TDS unless 15G form is submitted)
Insurance/Pension plans
-- These are not investement plans in the first place. These plans should only be used to buy protection.
Buy pure term insurance plans as insurance. Buy insurance for the earning member of the family only.
Non-earning members are the nominees or beneficiaies.
With reference to investment, if the intention is to avoid tax, please use PPF/VPF (Voluntary
provident fund). VPF is even better than PPF in terms of return (0.5% extra) with no tax on interest.
Once tax related investments are done, think of following as long term investment options
1. Buy equity/Mutual Fund. Return on this is tax free after one year. One can invest in SIP (fixed amount
monthly) for pension corpus. In long term, equity return is better than FD return and also tax effective
2. Try investing in Bonds/NCDs (Non convertible debenture) which are traded in stock market. Once RBI starts
reducing interest rate the value of Bonds/yield will go up.
3. Real estate. Minimum holding must be 3 years to avoid tax in case one makes profit by selling off.
4. Also, one can look at stocks directly. Dividends received from shares are completely tax free apart from
long term capital gains. Many good stocks are available at resonable prices today with 5-6% dividend payout.
-- 9% interest
-- 15 yrs lock-in (However you can withdraw some portion after 7 years).
-- Interest earned is tax free (No TDS).
Recurring Deposit:
-- 8.5% (vary bank to bank, but interest rate is closer to FD)
-- Ideal for small amount periodically
-- Interest is not tax free. Even though bank will not deduct TDS
Individuals are required to show them in ITR and pay tax based in tax bracket
FD:
-- 9% (vary bank to bank and also based on tenure)
-- Ideal for lumpsum investment
-- Interest is taxable based on tax bracket (Bank will deduct TDS unless 15G form is submitted)
Insurance/Pension plans
-- These are not investement plans in the first place. These plans should only be used to buy protection.
Buy pure term insurance plans as insurance. Buy insurance for the earning member of the family only.
Non-earning members are the nominees or beneficiaies.
With reference to investment, if the intention is to avoid tax, please use PPF/VPF (Voluntary
provident fund). VPF is even better than PPF in terms of return (0.5% extra) with no tax on interest.
Once tax related investments are done, think of following as long term investment options
1. Buy equity/Mutual Fund. Return on this is tax free after one year. One can invest in SIP (fixed amount
monthly) for pension corpus. In long term, equity return is better than FD return and also tax effective
2. Try investing in Bonds/NCDs (Non convertible debenture) which are traded in stock market. Once RBI starts
reducing interest rate the value of Bonds/yield will go up.
3. Real estate. Minimum holding must be 3 years to avoid tax in case one makes profit by selling off.
4. Also, one can look at stocks directly. Dividends received from shares are completely tax free apart from
long term capital gains. Many good stocks are available at resonable prices today with 5-6% dividend payout.
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