Which products to invest in on the wake of reducing interest rates?


Managing finance today is a much more complex work than what it used to be. The ever rising inflation has made it difficult to fulfil even the basic minimum needs such as buying a flat or children’s education and you won’t get any pension either to take care of your golden years. And on top of it Finance ministry has been reducing rates for most of the fixed returns bearing investment options; more recent one is the 8.7 per cent interest on PF deposits which is lower than the 8.8 per cent decided by the Central Board of Trustees. So what are the other options for an investor to invest money either for tax savings or generating fixed returns? Let us discuss some of the available investment options as follows: –

Sukanya Samriddhi Account

This scheme is a part of the government’s Beti Bachao aur Beti Padhao movement. It was launched on January 22, 2015. By investing in this scheme, you will be eligible to annualised returns of 9.1%. The rate of returns has been since increased to 9.2% for the financial year 2015-16. The interest rate offered under the scheme is subject to revision and will be compounded every year.

Mutual Funds ELSS

Did you know that you can get tax benefits by investing in Mutual funds? Tax benefit under section 80C is allowed for an investment in specially-designed Mutual Funds schemes called ELSS (Equity-linked savings scheme). Under this, you can save up to Rs. 1.5 lakh under section 80C and also get a chance to earn potentially higher amount of returns on your investments with the lowest lock-in period of only three years, as compared to any other tax saving investment schemes.

Though the returns of Mutual funds will be market linked but if one is invested for a long term period then on an average around 15% to 20% returns can be made on an annual basis (based on the stock market historical data). But if tax saving is not the criteria then one can really optimise their investments and amass great returns specially at the time when India is set to grow rapidly in the next few years, I will share a detailed post on this in my next column.

National Pension Scheme

National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme designed to instil the habit of saving for retirement. Under the NPS, your savings will be invested in a pension fund by Pension Funds Regulatory and Development Authority (PFRDA) regulated professional fund managers with the approved investment guidelines. The portfolio will be diversified, comprising of government bonds, bills, corporate debentures and shares.

Your contribution towards NPS investment is eligible for a deduction under section 80C up to a maximum limit of Rs 1.5 lakh and your Employer’s contribution is allowed under Section 80CCD (2) and employer’s deduction is over and above the deduction under Section 80C.

Public Provident Fund (PPF)

PPF is one of the best government-backed long term small savings scheme which was introduced to help people save for retirement specially for those who are self-employed. One can invest up to Rs. 1.5 lakh per annum in their PPF account and also avail tax benefits under section 80C of Income Tax Act. One can also open PPF accounts in the name of their spouse and children and the best part is the tax-free returns on the maturity, which makes it a great investment tool.

Different government schemes offer different returns and caters to various strata of our society. So think wisely before investing in any of these schemes to optimise your returns as well as tax benefits.

Which Financial Products to invest in?

You need to plan your investments carefully amongst the numerous financial products available in the market ranging from Mutual Funds/Equities/ PPF/ FDs/ Bonds/Gold/Silver/Real Estate and a term insurance for securing your life. Always do a though audit of your finances and take a call, Happy Investing!

Wishing you all a great day ahead.

Author : CA Rishabh Parakh

( The Author is Founder & Director  of Money Plant Consulting. He has conducted 300+ seminars and has changed the lives of more than 300,000 people till now.)


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Sudarshan Ranganthan

Breaths Investments, Suggests Wealth Creation Ideas, Lives on Law Of Attraction

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