Best Investment Plans in India for Middle Class 2020

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India has a population of over 1.35 billion (Over 135 crore). And, Indian middle class population is the size of the entire US population with over 350 million (35 crore) in numbers. With income inequality on the rise, the middle class population will bear most of the tax and other financial burden to befall. This covid based pandemic has created much more financial stress on each and every individual in the middle class and lower segment of our economy. 

To overcome the issue, An individual has to have multiple sources of income. One that provides an increased standard of living. One that provides wealth over a period of time. To have a best investment that’s well diversified into various assets and the same has to provide better return that’s over and above average inflation rate. 

Warren Buffett quote

Factors to be considered before investing: 

  • Financial Literacy.
  • Investment Time Horizon.
  • Risk-Return Analysis.
  • Wealth Goals.
  • Investing Strategy.

As said, Investment into well diversified assets will provide better return over time. One has to seriously consider investing into a major tax free investment pool. Below mentioned table provides a complete list of various assets one can invest, the time horizon for investment and its risk return analysis. 

Zerodha

Top 20 Best Investment Plans for Indian Middle Class Population:

Sl.no Investment asset Return (Expected) Risk (Expected) Time Horizon Tax Implications
1 Direct Equity Investment Relative. High Risk Relative. Exempt upto Rs.1 lakh; Excess of which is taxable at 10%.
2 Public Provident Fund (PPF) 7.90% No Risk 15 Years Deductions upto Rs. 1.5 lakh u/s 80C; Fully exempt from Tax.
3 National Pension Scheme (NPS) 10% – 12% Low to Moderate 18 – 65 Years Deductions upto Rs. 1.5 lakh u/s 80C; Additional deduction Rs. 50k u/s 80 CCD(1B).
4 Senior Citizens Saving Scheme (SCSS) 7.40% No Risk 5 Years Deductions upto Rs. 1.5 lakh u/s 80C; Interest is fully taxable.
5 Mutual Fund Investing Relative. Moderate Risk Relative. Deductions upto Rs. 1.5 lakh u/s 80C. Qualifies Capital Gains tax.
6 Sovereign Gold Bond (SGB) 2.5% (+) Relative. Low Risk 8 Years Only Interest is taxable.
7 Index Investing Relative. Moderate Risk Relative. Qualifies Capital Gains tax.
8 ETF Investing Relative. Moderate Risk Relative. Qualifies Capital Gains tax.
9 Fixed Deposit Schemes 6% – 7% No Risk 7 Days Deductions upto Rs. 1.5 lakh u/s 80C.
10 Government Securities 6% – 8% Low Risk 5 – 40 Years Deductions upto Rs. 1.5 lakh u/s 80C.
11 Unit Linked Insurance Plan (ULIP) Relative. Moderate Risk 5 Years Deductions upto Rs. 1.5 lakh u/s 80C; Additionally, the returns are exempt u/s 10(10D).
12 Pradhan Manthri Vaya Vandana Yojana (PMVVY) 8% Low Risk Relative. Not eligible for Deduction. Taxable based on slab rates.
13 Hybrid Funds Relative. Moderate Risk Relative. Deductions upto Rs. 1.5 lakh u/s 80C. Qualifies Capital Gains tax.
14 RBI Bonds 7.75% Low Risk 7 Years Qualifies Capital Gains tax; Interest on bonds is fully taxable.
15 Real Estate Investing Relative. Moderate Risk Relative. Qualifies Capital Gains tax.
16 Post Office Monthly Income Scheme (POMIS) 7% – 8.5% Low Risk 5 Years Not eligible for Deduction. Taxable based on slab rates.
17 Bullion Investing Relative. Moderate Risk Relative. Qualifies Capital Gains tax.
18 Savings Account 3% – 4% No Risk Relative. Deductions upto Rs. 10,000 u/s 80TTA. Taxable based on slab rates.
19 Recurring Deposit Account 6% – 7% No Risk 6 Months Deductions upto Rs. 10,000 u/s 80TTA. Taxable based on slab rates.
20 Crypto Investment Relative. High Risk Relative. May not be treated under Capital Gain. But, it is taxable.

Please note: The list is non-exhaustive, rates & returns and the tax implications may change over time. 

Conclusion:

We invest for various reason. The investment made has to provide for a sense of relief and satisfaction. We invest for Children’s education, Marriage expenses, Family tour, Own a house and much more. It’s a step closer for the fulfillment of our dreams. A goal that we seek to achieve, one that gives a right amount of safety & satisfaction. 

Disclaimer: All the information on this website is published in good faith and for general information purpose only.

 

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Rakshith Pai
Rakshith is a CA aspirant with half a decade of investing experience. He manages a private fund management service, AUG Funds. Wherein, AU denotes Gold and AG denotes Silver, the two most precious metals on Earth.
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