The budget is not a yearly exercise on taxation and reforms. It impacts the way you invest and the criteria you should use to choose investment avenues depends on your financial requirement for the coming year. A smart investor is he who fine-tunes his investment as per the Budget announcements to make the best possible use of tax deductions and other offerings. So take a look at some investment instruments you can adopt to make the most of your money in 2016-17.
Mutual Funds: Mutual funds are preferably best ranked as they give better returns when compared to other investment instruments. Investing through Systematic Investment Plans (SIP) is the most preferred method if you are unaware of what to invest directly. Then there are tax-saving mutual funds,also known as equity-linked savings scheme (ELSS) that qualify for tax benefits. Tax-saving MFs invest in stock markets, among other assets, and are suited for investors with medium to high-risk appetite. Investments towards tax-saving MFs are covered under Section 80C of the Income Tax Act up to a maximum of INR 1.5 lakhs.
Company Fixed Deposits: Since interest rates are expected to fall in 2016, company fixed deposit can be a fruitful choice of investment.Company fixed deposits fetch higher returns than bank fixed deposits. The best-rated company fixed deposits tend to provide low-interest rates as compared to low-rated company fixed deposits due to the risk profile.
IPOs: 2016 is slated to be the year of many Initial Public Offers (IPO). You can consider investing in them, as the time required to make money using them is quite less. High-risk investors may consider investing after analysing the IPO depending on the tenure.
Life Insurance: Yes, a life insurance policy is not only a means for securing financial stability of your loved ones in the future, but also a viable investment option that fetches favourable returns. Life insurance, whether it’s traditional or market-linked (ULIP), offers tax benefits to policy holders on the premiums paid. Some of the most commonly availed plans are term plans,endowment plans, ULIPs, and money back plans. Premiums paid towards life insurance are covered under Section 80Cof the Income Tax Act up to a maximum of INR 1.5 lakhs.
Invest in gold using new methods: You will be elated to know that Prime Minister Narendra Modi launched various gold schemes in 2015. What makes gold a perfect diversification investment tool is that if there is a global market meltdown or geo-political tensions, gold will only flare and not diminish in value. Also, gold helps conserve losses from other investment instruments, thus serving as a hedge.
NPS: The New Pension Scheme regulated by the Pension Funds Regulatory and Development Authority is extremely cost effective as fund management charges are low. Fund managers put the money in separate accounts having distinct asset profiles –Equity (E), Corporate Bonds (C) and Government securities (G). Contributions made to the NPS are covered under Section 80CCD of the Income Tax Act. What’s more - any Indian citizen falling the age bracket of 18-60 yrs can participate in it. NPS is useful for individuals with varying risk appetites, looking to set aside money towards retirement.
To conclude, investment is always based on your risk profile and financial goals. So spend a little time figuring both, or seek expert financial advice to help you make the most of your money in this financial year.