Protect the future for your loved ones!
Investment plans are those which help you grow your savings with returns. You can invest your savings in different types of investment plans and earn returns on the invested amount. This return, over time, can grow your savings and build them into a corpus that can help fulfil your financial goals..
Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.
Types of Investment Plans
| Type of plan | Brief description | Tax implication |
|---|---|---|
Equity shares | These are stocks issued by companies listed on the stock exchange. Buying a share means getting part ownership in the company | Selling within 12 months – 15% short-term capital gain tax Selling after 12 months – Returns up to ₹1 lakh are tax-free. Excess returns are taxed at 10%5 |
Equity mutual funds | Mutual funds that allocate at least 65% of their capital to equity are called equity mutual funds. These funds have a high-risk, high-return profile20 | Selling within 12 months – 15% short-term capital gain tax Selling after 12 months – Returns up to ₹1 lakh are tax-free. Excess returns are taxed at 10%5 |
ULIP equity funds | These funds are available under ULIPs, which invest primarily in equity. These funds have a high-risk, high-return profile. | Premiums paid qualify for tax deduction under Section 80C up to ₹1.5 lakhs, subject to specific terms and conditions6 The death benefit is tax-free7. On maturity, the benefit received is tax-free if the premium paid is up to 10% of the capital sum assured for policies bought on or after 1st April 20128 and 6. For policies bought before 1st April 2012, the premium should be up to 20% of the capital sum assured8 and 6 For policies bought on or after 1st April 2013 by individuals suffering from a disability or a disease specified under Section 80DDB or 80U, the premium should be up to 15% of the capital sum assured8 and 6 For policies issued on or after 1st February 2021, the annual aggregate premium should be up to ₹2.50 lakh. If the annual aggregate premium exceeds ₹2.50 lakh, ULIP/ULIPs would attract long-term capital gain taxation8 |
Equity funds in the National Pension System (NPS) | This is a market-linked retirement-oriented scheme which helps to build a retirement fund | Investment in the NPS scheme qualifies for income tax deduction under Section 80CCD (2). Additional deduction on investment is also allowed under Section 80CCD (1B) 17. On maturity, 60% of the commuted corpus is tax-free, from remaining 40% amount annuity policy needs to be purchased and annuity received is taxed at your applicable slab rates17 |
Low-risk investments
| Type of plan | Brief description | Tax implication |
|---|---|---|
Fixed deposits (FDs) | Fixed deposits offer guaranteed returns on your investment21. You can save a lump sum amount for a fixed tenure. | Investment in 5-year FDs qualifies for income tax deduction under Section 80C up to ₹1.5 lakhs9. Interest earned is taxable11. Senior citizens can enjoy tax deduction on interest income under Section 80TTB up to ₹50,00010 |
Public Provident Fund (PPF) | It is a government-backed small-saving scheme offering assured returns with a tenure of 15 years12 | The investment made is tax deductible under Section 80C up to ₹1.5 lakhs9 Interest earned and maturity proceeds are also tax-free12 |
National Savings Certificate (NSC) | NSC is also a government-backed fixed-income scheme offered by the post office22. | The investment made and interest earned in the first four years are allowed as a deduction under Section 80C. The interest earned in the fifth year are taxed at your income tax slab rates13 |
Kisan Vikas Patra | This is a small-saving scheme offered by the government with assured returns23. | Investments made are eligible for deduction under Section 80C14. However, the interest earned is taxable in your hands at your income tax slab rates14 |
Sukanya Samriddhi Yojana (SSY) | This scheme is a fixed-income scheme for the financial security of a girl child24. | The investment is eligible for deduction under Section 80C. The interest earned and the maturity benefit paid are also tax-free15 |
Employees’ Provident Fund (EPF) | A retirement-oriented, fixed-income avenue for salaried employees, EPF creates a corpus over the employee’s active working life25. | Investments made are allowed as a deduction under Section 80C up to Rs.1.5 lakhs subject to specific limits8. The interest earned is also tax-free, subject to specific conditions16 |
Debt funds under mutual funds and ULIPs | Debt mutual funds invest primarily in debt instruments and help you build a stable corpus. They have a low-risk, low-return profile26 as compared to equity funds31. | For ULIPs – Premiums paid qualify for tax deduction under Section 80C up to ₹1.5 lakhs, subject to specific terms and conditions6 The death benefit is tax-free7. On maturity, the benefit received is tax-free if the premium paid is up to 10% of the capital sum assured for policies bought on or after 1st April 20128and 6. For policies bought before 1st April 2012, the premium should be up to 20% of the capital sum assured8 and 6 For policies bought on or after 1st April 2013 by individuals suffering from a disability or a disease specified under Section 80DDB or 80U, the premium should be up to 15% of the capital sum assured8 and 6 For policies issued on or after 1st February 2021, the annual aggregate premium should be up to ₹2.50 lakh. If the annual aggregate premium exceeds ₹2.50 lahks, the returns earned would be taxed as long term capital gain @ 20% on gain amount. For debt mutual funds – No tax benefit on investment, and returns earned would be taxed at your income tax slab rates18 |