In today’s uncertain times, individuals naturally strive to grow their savings, meet financial goals, and secure their future. As a result, they seek investment opportunities that offer high tax-free returns with minimal risk. Among the array of options available, Guaranteed Return Plans stand out for their exceptional benefits, providing a stable and assured income with minimal risk. To top that, the impressive guaranteed return of up to 7.5% definitely tips the scale in its favour. However, timing is crucial in capitalizing on this opportunity as the current favourable returns may not be around forever.

India, known as one of the world’s fastest-growing economies, is rapidly inching towards becoming a developed nation. In pursuit of this goal, the country has implemented strategic measures, gradually reducing tax exemptions across various asset classes. Some recent developments include long-term capital gains (LTCG) tax applicable on equity mutual funds in 2018, or the imposition of LTCG tax on Unit Linked Insurance Plans (ULIPs) for premiums more than Rs. 2.5 lakhs in 2021. This was followed by the introduction of the tax on maturity in debt mutual funds in 2023. Moreover, proceeds from traditional life insurance plans exceeding Rs 5 lakh annual premiums no longer qualify for tax exemption under section 10 (10D) in FY 23-24.

Given these developments, taking swift action and investing in guaranteed return plans that currently offer promising interest rates can help secure investors’ financial futures. Here’s highlighting why now is the ideal time to invest in guaranteed return plans:

● Unlocking High Returns with Tax-Free Benefits

High and tax-free returns are a sought-after combination for investors looking to maximize their investment for life’s milestones. In this regard, guaranteed return plans are a reliable choice, surpassing other popular alternatives like Fixed Deposits (FDs) and Public Provident Funds (PPF), where returns are not only fluctuating but also taxable, thereby resulting in an after-tax return of around 5 per cent. Guaranteed return plans fare much better here, providing assured and tax-free returns of up to 7.5 per cent. Additionally, the plan is a great long-term inclusion to your financial portfolio as it provides a lock-in period of as long as 45 years. These returns remain tax-free up to a yearly premium of Rs 5 lakh, maximizing the growth potential of your investment.

Also Read: Should you have more than one bank account?

● Unaffected by market situations

Guaranteed return plans offer a unique advantage for investors who prefer a risk-free and secure investment. The plan allows investors to lock in the interest rate for the entire policy tenure right at the time of purchase. This assures high, predictable returns upon maturity, even during economic turmoil. To better understand, suppose you have invested Rs. 40,000 per month in a guaranteed return plan for a five-year period. At the end of the premium payment term, your total invested amount would be Rs. 24 lakhs. By the end of 10 years, this would lead to a corpus of Rs. 41.7 lakhs, with a profit of nearly Rs. 17 lakhs. Since the annual premium would be under Rs 5 lakh, these assured returns would also be tax-free.

● Pay-out options that suit your needs

Guaranteed return plans are a good choice for short-term and long-term investments for investors who want to align their investments with changing priorities. These plans offer policyholders various pay-out options, including monthly, quarterly or annual frequency. This customization ensures a steady stream of income, which can be particularly useful for meeting recurring expenses or augmenting one’s regular income. Alternatively, lump-sum pay-out plans are also available. Furthermore, if the policyholder chooses to surrender the policy during the income period, they still receive the fund value at a discounted rate. This can still be advantageous considering the revenue already generated from the plan. However, a long-term lock-in of the money is always advisable for maximum benefits.

To recapitulate, Guaranteed Return Plans are a practical addition to your investment portfolio if you are looking for high, tax-free returns to attain important life goals. But, it’s important to note that the most suitable time to invest in the plan is ‘now’ to lock these high returns.

(By Vivek Jain, Head – Investments, Policybazaar.com)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment.