Six plans that will ensure best returns in 2018

Financial year 2017-18 is about to come to an end and now is the right time for you to begin tax planning for the coming financial year. It’s that time of year when you need to sit down and review all your term insurance, health insurance and other investment plans so that you can save on your income tax.

Investing in the right kind of plans can help you save income tax. Here are a few plans and policies which you should consider investing in this year to ensure you save tax next year.

1.      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.

2.  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.

3.      Health Insurance Plans: With the growing cost of healthcare in the country, there is really no other way to pay for medical expenses then to invest in health insurance. Even though this may not be an investment that gets you high returns, it is an essential investment that can save a lot of expenses. The Income Tax Act also has provisions to claim deductions on payments for your health plans. 

4.      Rajiv Gandhi Equity Saving Scheme: This scheme offers benefits for first time investors with income upto 12 lacs. The maximum investment allowed in this scheme is only Rs.50,000 this can be invested in stocks or mutual funds. This scheme gives you a tax exemption of upto Rs.25,000.

5.   Voluntary Provident Fund: This fund is the contribution of an employee to his provident fund, it is beyond the 12% EPF.  This fund carries the same rate of interest as the Employee Provident Fund. The current rate for EPF is 8.8% per annum. However, investment in VPF can only be withdrawn during retirement and not before.

6.  Unit Linked Investment Plan (ULIP): 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.

Consider these five factors when calculating your term plan amount

One of the most important questions you will face when you buy insurance or a term plan, is how much is sufficient insurance for you.  Many factors should be taken into account when you decide you insurance amount. The amount should be sufficient for your dependents to survive on if you’re not around to provide for them.

Sometimes, just a simple term plan is not enough to supplement income if the sole breadwinner of the family passes away. In such cases, one must also invest in an endowment plan to ensure that his or her dependants are taken care of financially, in their absence. An endowment plan is an investment as well as an insurance. Unlike term plans where the beneficiary will only receive a lump sum payment in case of the death of the policyholder, in an endowment plan you will receive the entire corpus of your investment at the end of your term. Along with being a good insurance plan it is also a great way to save for your future.

There are certain thumb rules to follow when deciding your life insurance cover. These are the major things that you should always consider when you’re buying any kind of life insurance. Take careful note of these when you make insurance purchases.

1.  Income: This is the first and foremost factor you should take into account while choosing the amount for your term or endowment policy. Your insurance cover should be sufficient for your dependents to sustain themselves if something unfortunate were to happen to you. Your insurance cover should be atleast 15-20 times your annual income.

2.  Debt: This is the second thing you need to consider. You don’t want your family worrying about loan payments when their grieving. Ensure that you term plan amount is sufficient to pay off any debt or outstanding loans you may have taken.

3.  Standard of living: Your term or endowment plan should be enough so that your family can maintain the same standard of living even when you can’t provide of them. Your standard of living means your monthly expenses such and maintenance charges, school or college fees and other expenses such as food, travel etc.

4.  Inflation: You need to consider the amount of inflation because your insurance will be used at a later date. Prices as they are today will change according to inflation. So what might be sufficient cover today may not be sufficient tomorrow.

5.  Future expenses: If you’re providing for your family you need to take into account any foreseeable expenses like higher education, medical expenses, business expenses or even wedding expenses to ensure that your insurance cover is sufficient.