We often wait for the last minute to invest in tax saving plans, but it is crucial to start investing at the start of the year. And with the onset of the financial year this is the time when one can start investing in different Short-Term Savings Plan. But choosing a savings plan that helps in tax benefits as well as capital growth would be an ideal investment plan.
Let’s check out a few short-term savings plans that can help in Tax benefit:
Debt Mutual funds: Debt funds are a short-term investment plans that involve lesser risk but gives significant returns. This mutual fund’s tenure is from 90 days to 3 years and the returns can be as high as 10%. The mutual funds can be categorised on basis of their tenure like Short Duration funds, low duration funds and liquid funds.
Treasury Securities: These investment schemes are backed by the Government and has a tenure of 91 days to 10 years. The returns on these investments are quite high while the risk is comparatively low.
National Savings Certificate: One can purchase NSC from any post office and gain tax benefits under Section 80 C. This is a government-backed short scheme offering tax-saving benefits.
Large Cap Mutual Funds: These are low-risk investment schemes where the money is invested in large companies for 3-5 years tenure. The risks are less because these companies are well-established and have a strong financial backing. This is a vital reason why investors choose large cap mutual funds for short term investments.
Recurring deposits: One can choose to invest in recurring deposit by paying a fixed amount every month. Unlike fixed deposit where a lump sum is paid, one can choose to invest a fixed amount every month. This is also a low risk, short term investment plan.
Post-office time deposits: These time deposits are popular among the rural population and are also a short-term scheme. One can invest for a period of one year, two year or three years and five years. It is similar to bank fixed deposit scheme in different ways.
Bank fixed deposit: Fixed deposits are considered to be the safest form of investment schemes with a tenure of 7 days to 10 years. These are comparatively low risk investment but comparatively lower returns as compared to mutual funds.
Investors can also choose to invest in long term schemes and avail tax benefits year on year. Few of the long-term investment schemes that provide significant returns and also helps in saving taxes are:
- Public provident Fund.
- Equity linked savings scheme.
- Unit linked insurance plans.
To choose any of the investment scheme one needs to understand the life goals and how much corpus he/she would need to meet the life goals. You should also estimate your risk appetite to be aware of the scheme that you are willing to invest in. Knowing your risk appetite and corpus that you would need will help you to meet your life goals on time.