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What are the best Long Term Investment Options in India? This is the basic question asked by lot of people in India looking either for tax saving, retirement benefits, insurance coverages or future goals like higher studies of children, girl marriage etc.
Lot of time my friends, colleagues and relatives do call me asking what long term investment options are available to them in India and where they can invest to meet future requirements.
There are plenty of long term investment choices available and each have different expected rate of return and features. There is nothing called as best investment option, because every investment option meets one or other different need and come with different risk and liquidity also.
However, one wrong decision could result frustration in future. Therefore, you should evaluate the following top 10 options in detail before you invest.
Here is the list of top 10 options available which we shall be discussing in detail one by one:-
1.Public Provident Fund
2.National Pension Scheme
3.Sukanya Samriddhi Scheme- for girls/daughters only
4.Mutual Funds- Debt or Equity
5.Direct Investment in equity shares of company
6.Real Estate
7.Government Bonds
8.Gold
9.SCSS –
10.Fixed Deposit in Bank account
Public Provident Fund (PPF)
This is the most commonly used name when it comes to long term investment. You must have heard about this name from your elders, parents and at the time of submitting tax proofs.
Q- Who should invest in PPF?
A- Usually this investment is good for long term investor, having low risk appetite and looking for reasonably safe investment returns and good for retirement benefits where you do not want to take any risk on financial needs.
Q- Why someone should invest in PPF?
A- This plan is created and mandated by government thus backed with guaranteed returns thereon. In my belief this investment should be done by high risk profile individuals also, to stabilize their portfolio.
Q- What is the Tenure of Investment?
A- The minimum lock-in period for this investment plan is 15 years, before which you may not be able to withdraw the complete money.
Q- Amount of Investment?
A-Minimum investment required is Rs. 500/- and a maximum of Rs. 1.50 lakhs can be invested annually in a year. You may decide the frequency of this investment also i.e. lumpsum or monthly or different intervals as may be suitable keeping the limit in mind. If you invest less than Rs. 500 a year – there could be some penalty applied on your account.
Q- What is the rate of return decided for PPF?
A- The rate of return decided for PPF by government is 7.1% as applicable from 1 July 20, earlier it use to be higher.
Q- Where I can go for investing into PPF and what are other benefits?
A- One may choose to go to any bank SBI, ICICI or post office and you may use this account to obtain loan also, for more procedural information forms and other formalities you may check with the bank. Now days with
Q- Is there any tax on investment or return of PPF?
A- Nil, exempted from tax, rather gives you a benefit under Income Tax Act. You can claim deduction if you have invested in PPF as per the running income tax provisions.
National Pension Scheme (NPS)
NPS is a defined contribution plan which means in this scheme a defined contribution is made to the fund. But it is not same as PPF where investment is made on a regular basis to earn interest to be withdrawn at later stage. NPS has two types – Tier I having pension option and Tier II with flexible withdrawal options along with pension.
This scheme is popular among individuals who are looking for extra tax saving at early life stage and for pension income post-retirement.
Q- Who should invest in NPS?
A- Any person looking for additional tax saving and pension income after retirement.
Q- Why someone should invest in NPS?
A- This investment gives is better than FD or PPF and less risky than share market stock
Q- What is the Tenure of Investment?
A- Here you start investing as soon as you become 18+ and remain invested till 60 years of life, after that you can withdraw 60% of corpus tax free and remaining stay there for pension income.
Q- Amount of Investment?
B-There is no maximum limit on investment in NPS but minimum Rs 1,000 investment per annum is required to keep the NPS account active.
Q- What is the rate of return decided for PPF?
A- In my understanding, the expected rate of return to be earned on NPS is 7.1%, because of the nature of investment done under NPS.
Q- Where I can go for investing into NPS and what are other benefits?
A- NPS account can be opened both online and offline process. Offline- Bank or Post office. For Online check
Q- Is there any tax on investment or return of NPS?
A- Tax depends on the event of withdrawal of NPS amount, for instance, at retirement (40% is exempt), pre-retirement (annuity taxed in the year of receipt) and at death of subscriber to NPS account holder (no tax). However partial withdrawal (as specified in the conditions) are exempt from tax.
Sukanya Samriddhi Yojana (SSY)
In India due to rising sex ratio gap, girl education and girl marriage, Sukanya Samriddhi Yojana was started by Indian government to support parents of girl child and give additional benefit to girl child who is an Indian resident.
Q- Who should invest in Sukanya Samriddhi Account (SSA)?
A-Parents of a girl child can open SSY account with SBI, post office or other bank as may be designated by government for this. Here parent of girl child has to share the documentary proof of girl child, and PAN, residence proof, Aadhar of parents to open this account or other document as may be requested by bank / PO.
B-Girl child who has not attained an age of 10 years, there guardian / parent / child anyone can contributed. After 18 years this account is necessarily be maintained by girl only.
Q- What is the Minimum and maximum amount has to be deposited.
A- Rs. 250 and maximum of Rs. 1,50,000 per annum upto 15 years.
Q- What is the % Return on deposit made to this account.
A-The rate of interest for the 1st quarter of FY 2020-2021 i.e. 1 April 2020 to 30 June 2020 is 7.6% p.a.
B-No interest is paid once tenure is completed of SSA, i.e after 21 years from account opening or girl child happens to become non-citizen / Non-resident of India.
Q- When and how the account gets closed ?
A-Account matures after 21 years and balance in SSA is withdrawn using bank/PO specified application and documents thereon.
B-Premature withdrawal is allowed only in specific cases –
a.marriage time of girl (18+)
b.death of girl on submission of document
c.deemed closure –like girl becomes NRI or non-citizen etc.
d.Specific hardship of parents in depositing money i.e. after 5 years.
C-Withdrawal in other cases is subjected to 50% and meeting education requirements only i.e. for 10
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