Investment

Published: Mar 09, 2023
Updated: Mar 09, 2023

Investment Avenues in India That Offer High Returns and Tax Benefits

Investing is an essential aspect of financial planning, and it is vital to choose the right investment options that offer high returns and tax benefits. India has various investment avenues, and here we discuss some of the best investment options that provide both high returns and tax deductions under Chapter VI A.

Public Provident Fund (PPF)

PPF is a popular investment avenue for long-term savings in India. It offers tax benefits under Section 80C of the Income Tax Act, which allows a maximum deduction of Rs 1.5 lakh. PPF has a tenure of 15 years, and the current interest rate is 7.1%, which is compounded annually. The interest earned is tax-free, making it an attractive investment option for individuals in the lower tax brackets.

National Pension System (NPS)

NPS is a government-sponsored pension scheme that offers both tax benefits and high returns. Under Section 80CCD(1B) of the Income Tax Act, an additional deduction of Rs 50,000 is available for contributions made to NPS. The returns on NPS are market-linked, making it a good investment option for individuals looking for higher returns in the long run.

Equity-Linked Savings Scheme (ELSS)

ELSS is a mutual fund that invests primarily in equity-related instruments and offers tax benefits under Section 80C of the Income Tax Act. It has a lock-in period of three years, and the returns are market-linked, making it a high-risk, high-return investment option. ELSS is an excellent investment option for individuals with a higher risk appetite and a long-term investment horizon.

Unit Linked Insurance Plans (ULIPs)

ULIPs are insurance-cum-investment plans that offer tax benefits under Section 80C of the Income Tax Act. They invest in a mix of equity and debt instruments, and the returns are market-linked. ULIPs have a lock-in period of five years, making it a good investment option for long-term financial planning.

Sukanya Samriddhi Yojana (SSY)

SSY is a government-backed savings scheme that aims to provide financial security to girl children. It offers tax benefits under Section 80C of the Income Tax Act, and the current interest rate is 7.6%. The scheme has a tenure of 21 years or until the girl child reaches the age of 18, whichever is earlier. SSY is an excellent investment option for parents who want to plan for their daughter's future expenses.

Decide according to your risk appetite and cost benefit analysis

Investing in the right avenues is crucial for financial planning. The investment options mentioned above offer both high returns and tax benefits, making them attractive investment options for individuals in India. However, it is important to consider one's risk appetite, investment horizon, and financial goals before choosing an investment avenue. Investors should also seek professional advice to make informed investment decisions.