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Investment plans

Investment plans are those which help you grow your savings with returns. You can invest your savings in different types of investment plans and earn returns on the invested amount. This return, over time, can grow your savings and build them into a corpus that can help fulfil your financial goals..Read more

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings. Read less

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Written ByShruti Gujarathi
AboutShruti Gujarathi
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Shruti Gujarathi has 5 years of experience in the BFSI sector, and as Manager- Digital Marketing at Bajaj Allianz Life Insurance, manages digital and content marketing. She has had hands-on experience in content strategy, performance marketing and Strategic Alliances over a career spanning 10 years.
Reviewed By Rosy Pathak
About Rosy Pathak
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Rosy Pathak, AVP- Product and Brand Marketing at Bajaj Allianz Life Insurance carries over 17 years of experience in Marketing and a demonstrated history of working in the insurance industry. She is skilled in Product Management, Planning and Strategy, Project Management, Marketing and Communication.

What is an Investment Plan?

An investment plan helps you grow your savings in a disciplined and systematic manner, in line with your financial goals, according to your risk profile, and according to your asset allocation requirements. The financial goals could be either long, mid, or short-term, and an investment plan can be aligned to achieve each specific goal. An investment plan¹⁹ could be in a single asset class or a mixture of multiple asset classes, i.e. equity, debt, gold, money market instruments, fixed income, real estate, etc., which needs to be picked based on your financial situation, risk appetite and investment goals.

However, each type of investment plan has its underlying risks, which need to be understood carefully before investing and then monitored from time to time to track the progress and assess its effectiveness towards fulfilling your financial goals!

Types of Investment Plans

Here's a table containing types of investment plans, their brief descriptions, and their tax implications. The plans have been divided into high-risk and low-risk categories to facilitate understanding.

High-risk investment plans

Type of plan

Brief description

Tax implication

Equity shares

These are stocks issued by companies listed on the stock exchange. Buying a share means getting part ownership in the company

Selling within 12 months – 15% short-term capital gain tax

Selling after 12 months – Returns up to ₹1 lakh are tax-free. Excess returns are taxed at 10%5

Equity mutual funds

Mutual funds that allocate at least 65% of their capital to equity are called equity mutual funds. These funds have a high-risk, high-return profile20

Selling within 12 months – 15% short-term capital gain tax

Selling after 12 months – Returns up to ₹1 lakh are tax-free. Excess returns are taxed at 10%5

ULIP equity funds

These funds are available under ULIPs, which invest primarily in equity. These funds have a high-risk, high-return profile.

Premiums paid qualify for tax deduction under Section 80C up to ₹1.5 lakhs, subject to specific terms and conditions6

The death benefit is tax-free7.

On maturity, the benefit received is tax-free if the premium paid is up to 10% of the capital sum assured for policies bought on or after 1st April 20128 and 6.

For policies bought before 1st April 2012, the premium should be up to 20% of the capital sum assured8 and 6

For policies bought on or after 1st April 2013 by individuals suffering from a disability or a disease specified under Section 80DDB or 80U, the premium should be up to 15% of the capital sum assured8 and 6

For policies issued on or after 1st February 2021, the annual aggregate premium should be up to ₹2.50 lakh. If the annual aggregate premium exceeds ₹2.50 lakh, ULIP/ULIPs would attract long-term capital gain taxation8

Equity funds in the National Pension System (NPS)

This is a market-linked retirement-oriented scheme which helps to build a retirement fund

Investment in the NPS scheme qualifies for income tax deduction under Section 80CCD (2). Additional deduction on investment is also allowed under Section 80CCD (1B) 17. On maturity, 60% of the commuted corpus is tax-free, from remaining 40% amount annuity policy needs to be purchased and annuity received is taxed at your applicable slab rates17

Low-risk investments

Type of plan

Brief description

Tax implication

Fixed deposits (FDs)

Fixed deposits offer guaranteed returns on your investment21. You can save a lump sum amount for a fixed tenure.

Investment in 5-year FDs qualifies for income tax deduction under Section 80C up to ₹1.5 lakhs9.

Interest earned is taxable11. Senior citizens can enjoy tax deduction on interest income under Section 80TTB up to ₹50,00010

Public Provident Fund (PPF)

It is a government-backed small-saving scheme offering assured returns with a tenure of 15 years12

The investment made is tax deductible under Section 80C up to ₹1.5 lakhs9

Interest earned and maturity proceeds are also tax-free12

National Savings Certificate (NSC)

NSC is also a government-backed fixed-income scheme offered by the post office22.

The investment made and interest earned in the first four years are allowed as a deduction under Section 80C. The interest earned in the fifth year are taxed at your income tax slab rates13

Kisan Vikas Patra

This is a small-saving scheme offered by the government with assured returns23.

Investments made are eligible for deduction under Section 80C14. However, the interest earned is taxable in your hands at your income tax slab rates14

Sukanya Samriddhi Yojana (SSY)

This scheme is a fixed-income scheme for the financial security of a girl child24.

The investment is eligible for deduction under Section 80C. The interest earned and the maturity benefit paid are also tax-free15

Employees’ Provident Fund (EPF)

A retirement-oriented, fixed-income avenue for salaried employees, EPF creates a corpus over the employee’s active working life25.

Investments made are allowed as a deduction under Section 80C up to Rs.1.5 lakhs subject to specific limits8. The interest earned is also tax-free, subject to specific conditions16

Debt funds under mutual funds and ULIPs

Debt mutual funds invest primarily in debt instruments and help you build a stable corpus. They have a low-risk, low-return profile26 as compared to equity funds31.
In ULIPs, the policyholder can choose the type of investment based on his risk appetite and investment goals27.

For ULIPs –

Premiums paid qualify for tax deduction under Section 80C up to ₹1.5 lakhs, subject to specific terms and conditions6

The death benefit is tax-free7.

On maturity, the benefit received is tax-free if the premium paid is up to 10% of the capital sum assured for policies bought on or after 1st April 20128and 6.

For policies bought before 1st April 2012, the premium should be up to 20% of the capital sum assured8 and 6

For policies bought on or after 1st April 2013 by individuals suffering from a disability or a disease specified under Section 80DDB or 80U, the premium should be up to 15% of the capital sum assured8 and 6

For policies issued on or after 1st February 2021, the annual aggregate premium should be up to ₹2.50 lakh. If the annual aggregate premium exceeds ₹2.50 lahks, the returns earned would be taxed as long term capital gain @ 20% on gain amount.

For debt mutual funds –

No tax benefit on investment, and returns earned would be taxed at your income tax slab rates18

Risks & returns in investment

Different types of risks are associated with investment plans. Some of them include the following1

  1. Volatility risk

    – This is the risk of fluctuating market prices which might incur a loss. For instance, if you invest in equity shares and their value falls, you incur a loss.
  2. Credit risk

    – This is the risk that the issuer of the investment avenue would not be able to repay the invested amount on maturity. Also called default risk, this might happen in the case of debt investments like fixed deposits, bonds, etc., wherein the issuer might not repay the deposited amount on maturity.
  3. Liquidity risk

    – This risk is the inability to convert your investment into cash at a fair price. Investments which have a fixed investment duration usually have this type of risk.
  4. Reinvestment risk

    – This is the risk that when you reinvest your investment, the rate of return might be lower than it was before

      The returns from investments are related to the risks that the investments face2. Usually, the riskier the investment avenue is, the higher would be its return potential2. So, when investing, understand the risk-return potential of the investment avenue and align it with your investment preference.

Benefits of investment plan

Some of the benefits of investment plans are as follows –

Saving habit

Inculcates saving habit

When you start investing in different types of investment plans, you might try to save a part of your income for your investment. For instance, if you choose a unit-linked insurance plan and choose a tenure of 20 years with a regular premium payment option, you can build a habit of paying the premium towards the policy and growing the fund value. This habit inculcates a saving habit and allows you to save from your income.

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Financial planning

Helps in financial planning

Saving and investing are essential to creating a corpus for your financial goals. As such, investment plans give you an avenue to save, with the possibility of returns that can grow your savings. This helps create a corpus that can give you financial independence to meet your goals. Plus, different investment avenues have different tenures. You can, thus, choose an investment plan that matches your investment horizon and gives a corpus when you need it the most.

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Read Less

Tax Saving

Helps saving tax

As mentioned earlier, some investment plans help save taxes. For instance, section 80C of the Income Tax Act of 1961 lists various investment avenues that can help in saving tax3. These include life insurance savings and investments plans (premiums paid for the same), Public Provident Fund, Equity Linked Saving Scheme (ELSS), etc3. Moreover, some investment avenues also give tax-free benefits on maturity. For instance, the maturity benefit received from life insurance plans qualifies for tax exemption under Section 10(10D) subject to specific conditions4. Thus, you save taxes not only on investments but on redemptions, too.

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Emergency planning

You can set aside funds for unforeseen emergencies and build an emergency corpus. You can invest this corpus in liquid investment avenues, like a savings account, to get returns over the investment tenure. Thus, investment avenues may also help you invest in emergencies. Moreover, with life insurance plans, you can plan ahead for life’s uncertainties and give your family financial assistance in your absence.

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Read Less

Estate Planning

Helps in estate planning

Investment plans also allow you to plan a legacy by leaving behind a corpus for your loved ones. You can nominate your loved ones to receive the benefits after your demise so that they can redeem the investment and receive financial benefits.

Read More

Read Less

How to choose the best investment plan?

As mentioned earlier, there are various investment plans available in the market. To choose the right plan, here are some factors that can be considered –

  1. The risk involved

  2. Check the risk involved in the investment plan and assess whether you have the appetite to tolerate the involved risk.

    For instance, equity-oriented investment plans, like equity shares, mutual funds and equity funds in ULIPs, have a high-risk profile. Choose these investment avenues only if you have a healthy risk appetite. Otherwise, you can consider less risky avenues like a fixed deposit or endowment insurance plans.

  3. Return potential

  4. Understand the return potential of the investment avenue that you are considering. An avenue that offers good returns is a good choice since it allows you to grow your savings effectively.

    However, the return potential vis-à-vis the risks involved must be assessed. High-risk investments can give higher returns but might not suit your risk appetite. So, choose investments based on their risks and returns.

  5. Investment horizon

  6. Check the investment horizon of the investment avenue. Ensure that it aligns with your investment horizon. For instance, if you want to save for the short term, choose liquid avenues, like savings accounts, liquid mutual funds, etc. On the other hand, if you have a long-term investment outlook, you can choose avenues with a long-term horizon.

  7. Financial needs

  8. Choose investments that are suitable for fulfilling your financial goals. Try to earmark investment avenues for particular goals so that you can easily create a corpus for them.

  9. Investment amount

  10. There might be a minimum investment amount in some avenues. Check the amount and ensure that it aligns with your savings.

  11. Tax benefits

  12. Lastly, assess the tax benefits of investment avenues. Choose avenues that can help you save the maximum amount of tax so that you can invest and reduce your taxes, too.

When should one start investing?

When it comes to investing, the earlier, the better. This is because when you start early, you can save over a long-term horizon. With compounding returns, a long-term horizon allows your savings to grow considerably, yielding a good corpus.

For instance, say you want to invest ₹10,000 every month till you are 60 years old. You have two options – start investing at 25 years of age or start investing at 30.

Here’s what the corpus would be under both instances –

Case 1

Case 2

Invested amount - ₹10,000 per month

Invested amount - ₹10,000 per month

The assumed rate of return – 12% p.a.

The assumed rate of return – 12% p.a.

Current age – 25 years

Current age – 30 years

Maturity age – 60 years

Maturity age – 60 years

Investment tenure – 35 years

Investment tenure – 30 years

Corpus at maturity - ₹6.43 crore (approx.)

Corpus at maturity - ₹3.49 crore (approx.)

A delay of just 5 years and see the difference it has made to the corpus.

As such, starting early is beneficial to allow your savings to accumulate and grow into a good corpus

Documents required for investing

When you invest in an avenue, you might need to submit some of your documents to establish your identity and comply with the KYC (Know Your Customer) guidelines. The exact list of documents depends on the type of investment plan you choose. However, some of the primary documents include the following –

Identity proof

Identity proof

Address proof

KYC documents

KYC documents like your Aadhaar card and PAN Card

Why Bajaj Allianz Life Insurance ?

Bajaj Allianz Life, one of India's leading Private Insurer, committed to offer value packed and innovative products to meet you Life Goals

99.23%

Claim Settlement Ratio~

1 Day

Claim Approval%

AAA

CARE Stable Rating$

₹1,09,829Cr

Assets Under Management (AUM)**

4.19 Cr

Number of Lives Covered#

432%

Solvency Ratio^

Disclaimer:~Individual Death Claim Settlement Ratio for FY 2023-2024, %96.70% of non-investigative individual claims approved in one working day for FY 2023-24. 1 day is counted from date of intimation of claim before 3 PM on a working day (excluding Non-NAV days for ULIP) at Bajaj Allianz Life offices, $For details refer to press release published by CARE**All figures as on 31 March, 2024, ^Solvency ratio 432% as at 31 March 2024 against IRDAI mandated 150%, #Individual Group.1 Source: Bajaj Allianz Life Public Disclosure

Conclusion

Given the wide variety of investment plans available in the market, you can choose one that matches your investment needs and creates a corpus for your financial goals. Life insurance plans, like ULIPs, can be a good choice since they combine the dual benefits of investment returns and insurance protection.

So, assess your goals, the corpus needed to fulfil the financial goals, risk appetite, investment horizon and other factors to choose the right insurance / investment plan.

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Reference

  1. https://www.getsmarteraboutmoney.ca/learning-path/understanding-risk/types-of-investment-risk/
  2. https://www.investopedia.com/terms/r/riskreturntradeoff.asp"
  3. https://economictimes.indiatimes.com/wealth/tax/list-of-income-tax-deductions-available-under-section-80c-in-india/articleshow/107137339.cms?from=mdr
  4. https://indiankanoon.org/doc/894351/"
  5. https://economictimes.indiatimes.com/wealth/tax/how-selling-equities-before-march-31-can-help-you-save-income-tax-for-fy-2023-24/articleshow/107752535.cms?from=mdr
  6. https://incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf?from=companyhomepages.com
  7. https://www.livemint.com/money/personal-finance/how-life-insurance-policies-are-taxed-11665145664260.html
  8. https://cleartax.in/s/unit-linked-insurance-plan-taxation-rules
  9. https://cleartax.in/s/80c-80-deductions
  10. https://economictimes.indiatimes.com/wealth/tax/senior-citizens-want-tax-deduction-on-income-from-fd-savings-account-post-office-schemes-check-this/what-is-section-80ttb-of-the-income-tax-act/slideshow/108272400.cms?from=mdr
  11. https://cleartax.in/s/income-tax-on-fixed-deposit-interest
  12. https://www.nsiindia.gov.in/(S(mtrf12251xkm24fqls1foe45))/InternalPage.aspx?Id_Pk=55
  13. https://cleartax.in/s/nsc-national-savings-certificate
  14. https://www.nsiindia.gov.in/(S(nzhd0m55j4ey012rc4s4hu2m))/InternalPage.aspx?Id_Pk=56
  15. https://www.nsiindia.gov.in/(S(jb1nnoicxopk1liou2i1tk55))/InternalPage.aspx?Id_Pk=89
  16. https://www.livemint.com/money/personal-finance/employee-provident-fund-epf-what-are-the-new-tax-rules-you-need-to-know-11674221215381.html
  17. https://www.npstrust.org.in/benefits-of-nps#:~:text=Employees%20contributing%20to%20NPS%20are,lakh%20under%20Sec%2080%20CCE"
  18. https://www.businesstoday.in/personal-finance/tax/story/i-earn-rs-75-lakh-annually-and-have-invested-rs-50000-in-debt-mutual-funds-how-will-it-be-taxed-400835-2023-10-05
  19. https://www.fortpittcapital.com/blog/what-is-an-investment-plan/
  20. https://cleartax.in/s/different-mutual-funds-taxed
  21. https://www.livemint.com/money/personal-finance/with-guaranteed-returns-do-fixed-deposits-offer-a-good-investment-bet-to-investors-experts-answer-11716378054969.html
  22. https://cleartax.in/s/post-office-saving-schemes
  23. https://cleartax.in/s/kisan-vikas-patra
  24. https://cleartax.in/s/sukanya-samriddhi-yojana
  25. https://www.livemint.com/money/personal-finance/epf-vs-vpf-vs-ppf-taxation-and-withdrawal-rules-explained-11684056735774.html
  26. https://www.amfiindia.com/investor-corner/knowledge-center/debt-fund.html
  27. https://cleartax.in/s/unit-linked-insurance-plan-taxation-rules
  28. https://cleartax.in/s/house-property
  29. https://www.financialexpress.com/money/mutual-funds-redeeming-mutual-fund-units-key-points-you-need-to-know-about-mf-redemption-3445227/
  30. https://economictimes.indiatimes.com/wealth/invest/5-right-reasons-to-invest-in-gold/articleshow/104038035.cms?from=mdr
  31. https://www.zeebiz.com/personal-finance/news-what-are-debt-funds-key-benefits-and-market-risks-of-investment-you-need-to-know-275455
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IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility

*The Guaranteed benefits are dependant on the policy terms, sum assured, premium and age along with other variable factors . For more details please refer to sales brochure.

 

 

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Disclaimer

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and Bajaj Allianz Life Goal Assure II- A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN No.: 116L180V02) is only the name of the unit linked insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

^Minimum premium mentioned is applicable for Bajaj Allianz Life Goal Assure II - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L180V02)

1Loyalty Additions are payable only for premium of  ₹ 5 Lakhs & above and wherein the Policy term is 10 years & above.


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

 

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

#Choice of paying premiums for 5, 6, 7, 8, 9, 10 and 12 years

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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