Retirement Investment Options

Details

Category: Investments

PPF is a good fixed-income investment for high tax payers. PPF is a very attractive fixed income investment option for small investors primarily because it provides 8% post-tax return. It also provides a tax rebate of 20% of the amount invested from your tax liability for the year, subject to a maximum of Rs 70,000. Interest received is also totally tax free. The interest earned on the PPF subscription is compounded; that means you not only earn interest in the money you put in, but you earn interest on the interest earned too. All the balance that accumulates over time is exempt from wealth tax. Moreover, it has low risk – risk attached is Government risk. PPF is available at selected post offices and banks.

National Savings Certificate, also known as NSC, is a tax saving instrument that combines adequate returns with high safety. NSCs are an instrument for facilitating long-term savings. It provides an interest rate of 8 % per annum compounded half yearly. Period of maturity of a certificate is six years. Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledge and when ordered by a court of law. They not only save tax on their hard-earned income but also make an investment which is sure to give good and safe returns.

Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to reimburse the occurrence of the insured individual’s death or other event such as terminal illness or critical illness. The insured agrees to pay the cost in terms of insurance premium for the service. Specific exclusions are often written in the contract to limit the liability of the insurer, for example claims related to suicide, fraud, war, riot and civil commotion is not covered.

Whole life policy is effective until the policyholder is alive. Risk is covered for the entire life of the policyholder, therefore are known as whole life policies. In Permanent Life contract, a portion of the money paid as premiums is invested in a fund that earns interest on a tax-deferred basis.  Over a period of time, these investments are supposed to accumulate increased cash values which you will be able to get back either during the period of the policy or at the end of the policy or at intervals, depending on the policies.