For those who missed out in FY18, the time is ripe to undo the mistakes of the past year and put some money in some financial products to ensure a safe financial future.
It is likely that while some of you took appropriate measures to maximize your tax saving in the financial year gone by, many of you might have still missed out. For those who missed out in the Financial Year 2018, the time is ripe to undo the mistakes of the past year, because a few extra pennies in the bank never hurt anyone and financial discipline can go a long way in helping you realize your life goals.
Here are 5 must-have financial instruments that you may put your money in for ensuring a secured financial future for your family:
1) Health is wealth
Healthcare costs are ballooning and inflation at an average 6% per annum is a reality. In such a scenario, it becomes even more imperative to secure your health and of your loved ones with a health cover to mitigate the risk of unforeseen medical bills, which may crop up in future. Adding the cherry on the cake are the tax benefits, which you can claim under section 80D on purchasing a health insurance product. As per new provisions of the law, you can claim a maximum deduction up to Rs 75,000 (Rs 25,000 + Rs 50,000) on purchasing a health insurance policy for yourself and dependents, including parents, either or both who are senior citizens. If you are a senior citizen and also a proposer, then the maximum limit of deduction will go up to Rs.1,00,000 (Rs 50,000+ Rs 50,000).
2) A 4G plan here too!
During the course of life, you may require a lump sum amount to fund the purchase of your house, education of your children, their marriage or for your post-retirement expenditure. The answer to building a corpus for these life events is to purchase a 4th generation Unit Linked Investment Plan and stay invested for a minimum period of 10 years to optimize your returns. What further augments the return on ULIPs is the fact that they have been given the treatment of Exempt-Exempt-Exempt under the taxation category. Once considered a bad investment option, ULIPs have undergone a major overhaul and today offer the best return possible on the long-term investment made by you.
As a 30-year-old, if you plan to invest Rs 1,000 per month for a 10-year duration, you will get an amount of Rs 1.65 lakh as sum assured calculated 8% interest annually. However, the final pay-out can be higher and is governed by market conditions. Below is an example of past five year returns generated by equity funds.
Name of the Fund (Equity)
Returns over the past five years
Accelerator Mid-Cap Fund II
Equity Top 250 Fund
Data as on 13th August, 2018
3) The Rainbow plan
Are you the primary breadwinner for your family? Do you have unpaid loans? Or do you have children who are studying or continue to be unmarried? If the answer to any one of the above questions is ‘yes’, then you need to purchase a term cover for yourself sooner than later and what better time than now. A pure term plan gives you exemption under sections 80C &10D with no tax liability attached to it at any stage.
A pure term plan product for a 30-year-old, offering Rs 1-crore coverage until the age of 75 years is available online in the range of Rs 785 – Rs 1250 only.
4) Girl Child Advantage
If you are fortunate to be a parent of a girl, Sukanya Samriddhi Yojana (SSY) is one of the best financial products to put your money into. The scheme launched by the government is dedicated to promoting the welfare of girl child in our country and gives an interest of 8.1% compounded annually on the investment made. The government has exempted the deposits and the proceeds from any liability under this scheme, therefore categorizing it as an Exempt-Exempt-Exempt provision. The account can be opened by depositing a minimum amount of Rs 250 and the deposit may be made for a maximum duration of fourteen years, from the date of opening of the account. If you pay a yearly premium of Rs 10,000 for a 14-year duration, you will get Rs 470,000 approximately on maturity at current interest rate.
5) Old is Gold!
Traditional products like Public Provident Fund (PPF) and Employee Provident Fund (EPF) are good low-risk options to consider when planning your investment portfolio. These plans are covered by the government and provide good value for small investors in the short-term as these also fall under the Exempt-Exempt-Exempt category.
(By Manoj Sharma, Co-Founder and Head Finance, Policybazaar.com)