The Different Types of Savings and Investment Plans in India

A simple savings account or FD is usually not enough to save enough funds to meet major long-term goals like a child's education, marriage, retirement and more. If you don't start saving early, you may end up taking too many loans as the last resort and have trouble repaying them. Instead, consider starting long-term investments well in advance and remaining consistent to aim at good returns for significant wealth accumulation. Here are the top types of savings and investment plans in India.

Unit Linked Insurance Plan (ULIP)

A part of it is used to provide life insurance while the other is to invest in debt and equity funds to reap returns. So, you get dual benefits of insurance and investment for savings in this plan. Besides, you can claim up to ₹1,50,000 yearly on your investment under Income Tax Act, Section 80C. The returns received when the plan matures and the death benefit for the nominee are exempt from tax as per Section 10D.

The investment options are flexible. You can invest more in equities to take a higher risk for more returns. When your risk appetite is low, you can switch to debt funds. Else you can invest in balanced funds. You can also redirect your premium into various funds and top-up your investments.

Public Provident Fund (PPF)

It's a long-term investment plan offering a good interest rate and returns on your investment. The returns and interest earned are exempt from taxation. Deposits made up to ₹1,50,000 in a year are deductible according to Section 80C. PPF, being a government-backed scheme, is suitable for investors with a low-risk appetite. The investment isn't market-linked. Therefore, you can get guaranteed risk-free returns.

Sukanya Samridhi Yojana

This government savings plan aims to secure the future of a girl child in India. You can open an account with ₹250 only and must deposit for 15 years. It has a high interest rate. Once your daughter turns 18, you can withdraw 50% of the balance to meet educational costs. Annual deposits of up to ₹1,50,000 made and the amount received on maturity are not taxed.

Mutual Funds

This financial instrument is created with a pool of funds from different investors. Asset management companies collect your money to invest in securities like debts, stocks, bonds, shares and other assets. As such, you can get returns depending on the performance of securities based on market conditions.

Diversification of mutual funds helps reduce the overall volatility of your portfolio. When the value of a security falls and another rises, any losses are balanced by the returns from the latter. Through a systematic investment plan, you can contribute in small amounts and enjoy rupee cost averaging to help beat inflation. Certain funds like ELSS offers a tax exemption of ₹1,50,000 annually under Section 80C.

Senior Citizens Savings Scheme (SCSS)

This government-sponsored investment plan is especially for people over 60 years of age. It offers a regular income stream with maximum safety. Under Section 80C, an eligible candidate can claim a tax deduction of up to ₹1,50,000. The interest rate offered is high. A nomination facility is available.

Choose a suitable investment and savings plan based on your goals, risk appetite and the plan's potential to offer high returns.