You get a salary each month and within a couple of weeks, most of it is spent. This trend continues and after years of work, you will be left with almost no savings. This means you must invest some money, come what may, if you and your family must enjoy a bright future.
What is meant by investing money? You set aside money today and put it in a financial instrument, with the hope of getting high returns in the future.
Let’s take a look at some of the best investment options for salaried people. Want to know more on ELSS, NPS or PPF? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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If you are salaried, choose the investment option depending on your risk profile. Sounds difficult….Risk profile is nothing but the ability and willingness to bear risk….If you want high returns, then you must be willing and also have the ability to take risk.
This makes you a risk taker. If you are willing to settle for lower returns, taking less risks, you are a conservative investor.
1. Salaried citizens must invest in PPF
Public Provident Fund also called PPF, is a very popular investment in India. PPF is a fixed-income investment. The money invested is safe and you earn interest on it. PPF has a 15 year lock-in. PPF offers 7.6% interest for January-March 2018.
If you are salaried, an investment in PPF saves a lot in tax. You can invest in PPF, a minimum amount of just Rs 500. The maximum amount is Rs 1.5 Lakhs in a financial year.
PPF enjoys the EEE benefit. The money invested enjoys the Section 80C benefit, up to a maximum of Rs 1.5 Lakhs. The returns and amount withdrawn at maturity are tax free.
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2. FDs are great for the salaried person
If you have a lot of money to invest, try investing in FDs. The investment is secure and you earn interest. The interest is around 6.5-7% a year.
Unfortunately, the interest is added to taxable salary and taxed depending on your tax bracket. You could invest in a tax saving FD.
Tax saving FD has a 5 year lock-in. Interest is payable on monthly/quarterly basis or can be reinvested.
An investment in FDs is very safe. Tax saving FD also helps the salaried save tax.
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National Pension Scheme also called NPS, helps you and the salaried, invest for a happy retirement. Citizens can invest in NPS if they are between 18-60 years. NPS invests in equity and debt. NPS gives the salaried two choices. The auto choice and the active choice.
Under active choice, you decide the investment. You can invest in equity up to a maximum of 50%. The rest of the amount is in Government Securities and Corporate Bonds. If you don't select the active choice, you are under the auto choice. Investment is made in a mix of equity, Corporate bonds and Government Securities, depending on your age.
You can withdraw from the NPS at retirement. On withdrawal you have to compulsorily invest 40% of the Corpus (Accumulated Amount) in an annuity plan. Out of the remaining 60%, an amount of 40% is tax free and the remaining 20% is added to taxable salary and taxed as per tax bracket.
4. Salaried must invest in ELSS
Equity Linked Saving Schemes popularly called ELSS, invests most of your money in equity. This makes ELSS a very risky investment. But there’s a saving grace. ELSS has a 3 year lock-in. You have to compulsorily stay invested in ELSS for 3 years and equity generally does well, over 3 years.
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