lived two sisters named Shabnam and Shabana. In their late 40s, they found themselves pondering over the importance of securing their financial future. As they sipped chai on their cosy balcony, Shabnam sighed and said, “Shabana, we need to invest wisely to ensure a steady monthly income and also take advantage of 80C benefits. It’s time to explore our options.”
And so, the sisters started a financial journey, researching, and discussing various investment avenues that could provide them with a monthly income while offering tax benefits under Section 80C of the Income Tax Act. Here are the top twenty investment options they discovered –
National savings certificate (NSC)
National Savings Certificate (NSC) presents a secure investment avenue with a fixed return. Ideal for risk-averse investors, NSC’s interest rate is predetermined, providing predictability in returns. Moreover, investments in NSC qualify for deductions under Section 80C, contributing to tax efficiency. With a moderate lock-in period, NSC strikes a balance between fixed returns and liquidity, making it a safe bet for Shabnam and Shabana’s financial portfolio.
Public provident fund (PPF)
Public Provident Fund (PPF) stands as a time-tested investment option, known for its stability and tax benefits. With a maturity period of 15 years, PPF offers a fixed interest rate compounded annually, ensuring a reliable return on investment. Contributions to PPF are eligible for deductions under Section 80C deduction, making it a tax-efficient choice. Its government-backed nature adds an extra layer of security, making PPF an ideal option for those seeking long-term financial stability.
Sukanya samriddhi yojana
Sukanya Samriddhi Yojana is a specialised scheme tailored for those with daughters, offering an attractive interest rate along with 80C benefits. This long-term savings plan ensures a secure future for the girl child. Contributions and the interest earned are exempt from taxation under Section 80C, providing dual advantages. For Shabnam and Shabana, this scheme serves as an excellent choice to financially plan for their daughters’ needs, combining growth potential and tax benefits.
Fixed deposits (FDs)
Fixed Deposits (FDs) remain a conventional and reliable investment option, providing a fixed interest rate and customisable tenures. Although the interest earned is taxable, FDs offer flexibility in choosing the investment period. While not directly eligible for 80C benefits, Shabnam and Shabana can explore tax-saving FDs with a 5-year lock-in period, balancing stability, and tax efficiency in their investment portfolio.
Senior citizens savings scheme (SCSS)
Senior Citizens Savings Scheme (SCSS) caters specifically to the financial needs of seniors, assuring them a regular income stream. With a fixed interest rate and tax benefits under Section 80C, SCSS ensures stability and tax efficiency for retirees. The relatively shorter lock-in period adds flexibility, allowing seniors to manage their finances effectively. SCSS becomes a cornerstone for Shabnam and Shabana in securing a comfortable and predictable retirement.
Post office monthly income scheme (POMIS)
Post Office Monthly Income Scheme (POMIS) is an ideal choice for those seeking a regular income. With its low-risk nature and eligibility for 80C deductions, POMIS provides stability and tax efficiency. The scheme’s lock-in period, coupled with the option for partial withdrawals, offers a balanced approach, ensuring both security and liquidity. For Shabnam and Shabana, POMIS becomes a cornerstone for building a dependable income stream.
National pension scheme (NPS)
National Pension Scheme (NPS) is designed for building a retirement corpus, offering tax benefits under Section 80C and an additional benefit under Section 80CCD(1B). With a mix of equity and debt investments, NPS strikes a balance between risk and return. The option to purchase an annuity at maturity ensures a regular income stream, making NPS a comprehensive solution for Shabnam and Shabana’s long-term financial security.
Mutual funds with ELSS
Equity Linked Saving Schemes (ELSS) in Mutual Funds offer a unique combination of growth potential and tax benefits. ELSS provides exposure to the equity market, potentially yielding higher returns. With a three-year lock-in period and eligibility for 80C deductions, ELSS becomes an attractive option for Shabnam and Shabana. The professional management of mutual funds adds an element of expertise, making ELSS a dynamic addition to their investment strategy.
Tax-saving fixed deposits
Tax-Saving Fixed Deposits, with a mandatory lock-in period of five years, offer both safety and tax benefits. Investments in these FDs qualify for deductions under Section 80C, making them tax-efficient. While providing a fixed interest rate, tax-saving FDs ensure the safety of the invested principal. Shabnam and Shabana can consider these as part of their diversified portfolio, contributing to both stability and tax efficiency.
5-year tax-saving fixed deposit
Similar to regular FDs, 5-year tax-saving Fixed Deposits come with a specific lock-in period and qualify for 80C deductions. Offering a predetermined interest rate, these FDs provide clarity on returns. The safety of the invested principal makes them a reliable option for risk-averse investors like Shabnam and Shabana, striking a balance between fixed returns and tax efficiency in their investment portfolio.
Employee provident fund (EPF)
Employee Provident Fund (EPF) is a mandatory contribution-based provident fund that accumulates over the working years, creating a substantial retirement corpus. With contributions eligible for Section 80C deductions, EPF becomes a crucial component for Shabnam and Shabana in securing a financially sound retirement. The matching contributions by employers further enhance the overall retirement savings, making EPF a cornerstone of their financial plan.
Unit-linked insurance plan (ULIP)
Unit-Linked Insurance Plans (ULIPs) offer a unique combination of insurance and investment, providing dual benefits. With market-linked returns, ULIPs expose investors to the performance of financial markets. Tax benefits under Section 80C and tax-free maturity amount under Section 10(10D) enhance the overall tax efficiency. Shabnam and Shabana can leverage the flexibility of ULIPs, allowing them to switch between different funds based on market conditions and risk tolerance.
Investing in government-approved Infrastructure Bonds presents an opportunity for tax-saving benefits. These bonds contribute to the development of the country’s infrastructure while offering tax efficiency to investors. While not as popular as some other options, Infrastructure Bonds can be a strategic addition for Shabnam and Shabana, aligning their investments with the nation’s development goals while enjoying tax advantages.
Atal pension yojana (APY)
Atal Pension Yojana (APY) caters to individuals in the unorganised sector, providing a fixed pension amount based on contributions and age at entry. With tax benefits under Section 80CCD, APY addresses the pension needs of those without a formal pension structure. The focus on retirement security makes APY a valuable addition to Shabnam and Shabana’s investment portfolio, ensuring a stable income during their retirement years.
Rajiv Gandhi equity savings scheme (RGESS)
Rajiv Gandhi Equity Savings Scheme (RGESS) encourages investments in equity markets, promoting financial market participation. Investments in RGESS qualify for deductions under Section 80C, making them tax efficient. With a three-year lock-in period, RGESS encourages a longer-term investment horizon. The market-linked returns provide growth potential, making it an attractive option for Shabnam and Shabana seeking both tax benefits and equity exposure in their portfolio.
After careful consideration, Shabnam and Shabana decided to diversify their investments by combining options like PPF, NSC, and a balanced mutual fund portfolio. This not only ensured a steady monthly income plan but also maximised their 80C benefits.
As the years passed, the sisters watched their investments grow, providing financial security and a comfortable lifestyle. They had not only secured their future but also inspired others in their community to start on a similar journey towards financial freedom. And so, Shabnam and Shabana’s story became a beacon of financial wisdom for generations to come.