The Times of India

Title : Options for investment

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Article Date : 08/11/2014

PPF Returns: Linked to govt bond yield, so will vary every year. 8.7% for 2014-15.
Safety: Very safe Liquidity: Low. Locked in for 15 years.
Partial withdrawals after 5th year.
Taxation: Interest and maturity amount completely tax-free.
Best for: Conservative investors looking for assured returns.
Smart Tip: Invest before 5th of the month to get interest for that month also. EPF and VPF Returns:
8.5% for 2014-15.
Safety: Very safe.
Liquidity: Low. Withdrawals after five years for specific purposes.
Taxation: Interest and corpus tax-free, if withdrawn after five years.
Best for: Salaried individuals.
Smart Tip: Transfer EPF when you change jobs. Dormant accounts stop earning interest after three
years.
ELSS funds Returns: Market linked (14.2% in past 3 years) Safety: Carry market risk associated with
stocks Liquidity: Locked in for three years, after which full withdrawal permitted.
Taxation: No tax because long-term capital gains are tax-free. Best for: Investors with high risk appetite
hoping beat inflation.
Smart Tip: Invest small amounts at monthly intervals in ELSS funds. SIPs reduce the risk of investing in
equities.
NSCs Returns: Linked to govt bond yield.
8.5% for 5-year, 8.8% for 10-year NSC.
Safety: Very safe.
Liquidity: Moderate. Premature exit permissible. Can be used as collateral.
Taxation: Interest fully taxable as income at applicable rate.
Best for: Conservative investors in lowest tax bracket.
Smart Tip: Create a ladder by timing the investments and maturities of NSCs.
Tax-saving FDs Returns: 9-9.5%. Safety: Fairly safe. Principal amount up to `1 lakh per bank insured.
Liquidity: Moderate. No premature exits allowed, unlike regular bank FD.
Taxation: Interest fully taxable.
Best for: Conservative investors in the lowest tax bracket.
Smart Tip: Opt for the interest payout option if you need regular income.
Senior Citizens' Savings Scheme Returns: Linked to government bond yield and paid out quarterly.
9.2% for 2014-15.
Safety: Very safe, backed by government Liquidity: Moderate. Minimum holding period is five years.
Premature closure allowed but invites penalty.
Taxation: Interest is fully taxable as income at applicable tax rate.
Best for: Retirees looking for regular income stream.
Smart Tip: Remain invested for five years to ensure that the tax benefits claimed in earlier years are not
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reversed.
Ulips Returns: Market-linked.
Safety: Carry market risk associated with stocks and bonds.
Liquidity: Early withdrawals attract surrender charges. No surrender charges after five years.
Taxation: Gains are tax-free.
Best for: Investors with high risk appetite who want tax free corpus.
Smart Tip: Use switching facility to move from debt to equity, or vice versa.
NPS, pension plans Returns: Market-linked.
Safety: Carry same market risks associated with stocks and bonds.
Liquidity: Low. Withdrawals at vesting age. At least 40-60% to buy annuity.
Taxation: Annuity income is taxable.
Best for: Savvy investors saving for retirement.
Smart Tip: Opt for the Lifestage fund that changes asset allocation with age.
Life insurance Returns: Vary according to tenure but don't exceed 6-7%.
Safety: Returns are guaranteed.
Liquidity: Low. Premiums must be paid for the entire term or policy will lapse.
Taxation: Maturity amount and periodic payments are tax free.
Best for: Investors content with low returns as long as maturity is tax-free.
Smart Tip: Take a policy for at least 20-25 years. Short-term plans yield 5-6%.


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