Best Investment Methods In India That Offer’s Tax Free Income // servicebloggers.com

Best Investment Methods In India That Offer’s Tax Free Income
Author: Pradeep   Date: Nov 2019

Best Investment Methods In India That Offer’s Tax Free Income

As inflation increases every year, value of money drops (i.e. purchasing power decreases). Interest rates fluctuation, yields after tax have a huge impact on purchasing power. The post tax returns on investments automatically get’s affected. There is now a need to look for a better investment, which offer’s tax free interest income in India. There are many investments that offer this kind of returns, but, in some cases, you may also get Section 80C benefits.

Here are a few methods that offer tax free income in India.

SBI Life - Saral Maha Anand

The returns and the amounts earned on the SBI Life  “Saral Maha Anand” is tax free. Being a Unit Linked Insurance Plan (ULIP), you get Section 80C tax benefit.

So, in short the returns are tax free, your life is insured and you get benefits of Section 80C, whereby if you invest an amount of up to Rs 1.5 lakhs, you get a tax exemption. This is one of the best tax free investments in the country and you should apply for the same.

However, ULIPs tend to give you lower returns, because of the initially high expenses, including administration costs. However, they do offer an insurance amount up to 10 times the amount paid by way of premium every year.

Sukanya Samridhi Account (Girl Child Scheme)

This scheme is a must if you have a girl child at home. There are a number of reasons why this is among the best tax free investments in India.

The first is that the interest rate at 8.5 % beats most fixed yielding instruments in the country. The second is that it offers tax free interest income and the third is that amounts of up to Rs 1.5 lakhs qualifies for tax exemption under Sec 80C of the Income tax Act. This makes it one of the best investments in the country for women empowerment.

Along with PPF, these are perhaps the two best schemes that offer a combination of tax free income and Sec 80C benefits.

PPF

Few reasons why you should invest in the PPF apart from the tax free income. The first and the foremost is that there is no other investment which was backed by the government that gives you more than the PPF at the moment with a sec. 80C benefit, apart from Sukanya Samridhi.

An interest rate of 8 % per annum is better than what most banks are offering. 

So, these two along with ULIP plans should be the best tax free income that one can get. If you are a long term investor who is looking to save money for a child's marriage, education or to boost retirement amounts this should be a good bet.

REC Tax Free Bonds

REC Tax Free Bonds offer you an interest rate ranges from 5.5 % to 7.0 %. The bonds are traded on the NSE and the interest earned is tax free. If you buy the bonds now you get tax free interest payment on Dec 1. This is tax free in the hands of investors. Now, how much these bonds yield would depend on the rate which you buy them from the market’s value. For example, the bonds have a face value of Rs 1,000. So, if you buy them at more value the yield would fall below the contracted coupon rate from 5.5 to 7.0 %.

Volumes on tax free bonds are low, so you may not get a huge quantity, if you want to buy.

REC N5 series Tax Free Bonds

Rural Electrification's Tax Free Bond (N5 series) is not a bad bet for tax free income than fixed deposits. These bonds are listed on the NSE and offer an 8.01 % coupon rate. Interest is paid every year in the month of Dec, which allows for tax free income. 

Now, your returns would really depend on the market price of this bond. If you purchase this bond around the price of Rs 1000 or less, your yields would improve dramatically.

Remember, you get an interest rate payment in the month of December, which improves the yield even further.

NHAI 2 Tax Free Bonds

You can buy the tax free bonds listed on the BSE. The NHAI 2 series tax free bonds come at a price of Rs 1100.

The tax free bonds offer an interest rate of 6.0 per cent. The bonds can be purchased from NSE and you will receive tax free interest every year.

It is more important to note that price of the bonds are way above the face value of Rs 1,000. What this means is that your yields would drop to around 4.5 to 5.0 per cent which is equivalent to fixed deposits after tax withdrawal.

Again, we wish to emphasize, higher the price, lower would be the yields. However, income is exempt from tax is the only advantage.

ICICI Prudential Wealth Builder II

Under this plan you get tax free income and also tax benefits under Sec 80C. You also get insurance up to 10 times the premium paid.

So, if you pay a premium of Rs 50,000, you get an insurance of up to Rs 5 lakhs. In short, the returns are tax free, there are sec 80C benefits and insurance component. However, the returns are low because service charges, administration charges and few other are involved with the ULIP product.

HDFC SL Pro Growth Flexi

Under this plan, you get insurance cover, as well the maturity amount is tax exempted. The income earned by way of returns is tax free.

You can get returns from investing in blue-chip funds, balanced funds or opportunity funds. A good fund for tax free returns.

Disclaimer: This article should not be interpreted as an endorsement for any of the reviews mentioned. You should never make an investment into any online program if you do not know what you are doing. Please do your own research before considering investing money .The above said schemes rules may change at any time as we posted this during financial year (2019-2020).