People prefer a savings plan more than an investment plan in India because of its entry-level nature. Anyone can join a savings plan without much documentation or procedures. On the other hand, investment plans have plan specific documents, procedures, and particular gateways to invest money. And several high return investment plans cannot guarantee the invested capital. But there are several benefits to a savings plan which are the reasons for its popularity. Here, you will learn about those benefits and some of the best savings plans in India.
A savings plan with capital protection will ensure that you get back your entire invested capital even if the market conditions are bad at the time of plan maturity or withdrawal. Capital protection is the foremost and must-have feature of any savings plan, as the major goal of a savings plan is not to grow money but to save it.
Return on Investment
Return on investment or interest returns is the secondary benefit of a savings plan. The interest rate helps protect your invested capital from depreciation over the long retention duration. Best savings plans can provide interest rates as high as 8% or more, almost on par with that of an investment plan.
A good savings plan also comes under Section 80C of the Income Tax Act. The invested money has the maximum tax relaxations of INR 1,50,000 per annum through this section. Or it should be within the scope of some other sections of Income Tax with tax savings. But preference should be for Section 80C as it can provide maximum relaxation. However, tax laws are subject to change from time to time.
The liquidity of a savings plan allows easy and fast withdrawal of cash without any lengthy procedures. This helps you pay for an emergency using your savings plan rather than using funds meant for important day-to-day use.
All best savings plans in India have a nomination facility. So, in case of the unexpected demise of the investor, the funds won’t be in vain. The nominee can either change it to their own name or withdraw the funds invested to date, sometimes with extra benefits. The investor can provide financial protection to family or dependents through the nomination facility.
Discipline Financial Mentality
As savings plans have regular investments within a date range, the investor involuntarily develops discipline. They recognize the value of money and how to make arrangements in budget and income to accommodate the intermittent contributions.
Peace of Mind
People often use savings plans as emergency funds. So, they can enjoy peace of mind without worrying about any unexpected or expected monetary requirements in the future.
Currently, only a few saving plans in India can provide all these benefits to the investor. The major contenders in the category are life insurance, various Provident Funds, ELSS Mutual Funds, National Pension Schemes, Unit-Linked Insurance Plans, and National Savings Certificate. You can claim tax relaxations on all of these saving plans, which also have a guarantee on the invested money.
Investing in one of these best savings plans can provide good returns and a useful fund for future requirements. To further increase the benefits of the savings plan, you can invest in a savings plan from a reliable insurance company. It will add a major benefit of a life cover to the already valuable savings plan.