Five savings and endowment plans to invest in, in 2018

It’s that time of the year again, where everyone is in a hurry to get their finances in order. The fiscal year is coming to an end and investing in savings plans and endowment plans is the best way to save on some income tax.

A savings plan is a scheme, where the investor puts away a part of his income, over period of time and then at the end of the term, receives are lump sum payment. An endowment policy is a form of life insurance plan where in the policy holder receives a lump sum payment on maturity or he or she dies before the term is up.

These plans are great tax savings tools because in some cases, the pay-out you receive from these policies is tax free. If you’re wondering where you should put your money this year, then here are 5 schemes you should consider.

1.  Unit Linked Investment Plan (ULIP): ULIPs and endowment plan and are a great way to invest your money. They provide insurance cover as well as give you returns through equity. This plan provides life risk coverage. It can provide between 5-11% returns, but they are not guaranteed. The ULIP should be held for a minimum duration of 10-12 years to seen maximum returns.

2.  Life Insurance Plan: Life insurance plans are an investment everyone should make. It is the first step to your financial planning. It should be treated more as an investment than an insurance policy. When choosing life insurance one should opt for term insurance as it comes with low risk and high coverage. A life insurance premium is something you should add to your monthly saving plan. The life insurance claim that you receive on maturity of the policy is tax free.

3.   ELSS Tax Saving Mutual Fund: They offer the highest returns compared to any other tax saving investment plan in the country. The returns are not guaranteed but if you can afford to take some risk, your earnings can range between 12 – 15%. You can even opt for the dividend scheme and earn regular income from your investment.

4.  Public Provident Fund: This fund provides maximum tax saving benefit for the people. The interest rates are updated by the government on a yearly basis. Most banks offer a PPF facility for its customers. This scheme ensures maximum tax saving benefit for its users. At the moment the government allows around 8% interest in PPF.

5.  Five- Year Fixed Deposits: FDs are great savings plans. Banks offer fixed deposits that provide tax benefits. These deposits are exempted under Section 80C and they have a lock in period of five years.

Four ways to invest your money for a safe future for your Child

Parents invest money for their children for major events such a higher education, marriage and for a better lifestyle. Every parent wants to give the best to their child and secure their future even before they’re born. Most parents start saving for the future of their children immediately after their birth and some even start before that.

Saving for your child is a very crucial step in childcare. It should be done precisely after studying the market, the risks, the benefits and all other aspects related to a savings plan. Every option has some pros and cons and should be taken into consideration before starting investing in savings plan.

Here are some of the options to look at for securing your child’s future:

1.      Child’s Saving Plan: A child insurance plan gives a lump-sum amount to the child in-case of the death of the policyholder. This also results in waiving off all the future payments of the premiums. The insurance company continues investing money on behalf of the policyholder. The child is given parts of the investment from time to time according to the terms of the policy. There are also plans that concentrate specifically on education in-case of the death of the parents.

2.      Endowment Plans: An endowment plan is a life insurance policy that provides life coverage along with an opportunity to save regularly over a specific period of time so that your nominee can receive a lump-sum amount on the maturity of the policy. Subsequently, one can use this maturity benefit to fulfill their various financial needs like funding their children’s education, saving for retirement, buying a house, children’s wedding etc. An endowment plan not only provides maturity benefit, but in-case of death of the policy holder, the child also receives the full sum assured amount.

3.      Public Provident Fund (PPF)/ Fixed Deposit (FD): PPF is the most popular tax-saving and long term investment plan. The interest rates are dependent upon the market now. One can even invest up to Rs.1 Lakhs in a year. It matures in a period of 5 years but you can extend it every 5 years after its maturity date. Fixed deposits can give you regular income by the interests on the amount that are made every month or every quarter.

4.      Stocks and EFT’s: Stocks are risky assets but they have many advantages over other investment options so if you are willing to take the risk stocks give the highest return over the long term. It's a liquid investment. ETF’s are much like stocks. Through ETF’s, you can invest in entire countries or sectors. These are transparent and cost effective investments.

These are some of the option which you can opt for securing your child’s future.

Tax Benefit on Life Insurance Policies

The first investment one should make when they start earning is to buy life insurance. Not only is it an ultimate savings tool, but you can also reap a number of tax benefits off it as well. The right life insurance policies are life a safe deposit, where put in your premium over the term of the policy and save for you long term goals. They are also a great tool for tax planning, something that is extremely important for everyone.

How can your life insurance policies help you save tax, you ask? The benefit of tax deduction is available for Premium paid on life insurance policies under Section 80C of the Income Tax Act.

What is this section all about? As per this section of the Income Tax Act, an individual can claim up to Rs.1, 50,000 from his or her taxable income as a deduction. Deductions are provisions created by the government to help taxpaying citizens save their money. However, these deductions have to be put to good use, which means, this amount must be invested in tax savings plans, life insurance policies or endowment policies. Under this section, you can also claim deductions for tuition fees for education, for medical expenses incurred or even for the payment of the principle amount of your home loan or the stamp duty and registration charges incurred while buying a new home. In the case of life insurance, you can claim a part of your income, that you pay as your life insurance premium, as a deduction.

To be eligible for this deduction though, you need to fulfil certain criteria. You can only claim this deduction if you are the purchaser of the life insurance policy. It can be either for you or for your spouse. You cannot claim this deduction if you’re simple paying the life insurance premium for anyone else. You can benefit from health insurance for parents. So keep in mind, for whom you are buying and what type of insurance are you buying, speak your life insurance company and clear any doubts you might have about this.

Life insurance policies are an investment everyone should make. It is the first step to your financial planning. It should be treated more as an investment than an insurance policy. At the end of the term the pay out that you received from your life insurance company and the premium that you pay them is completely tax free.