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Where To Invest Money With Your Salary Hike

Appraisal season has come to an end and it is most likely that by now you have got your salary hike and performance bonus. While you might be tempted to splurge the additional cash, judicious use of the surplus income can improve your financial well-being and help build wealth for the fulfilment of your life goals. This is the ideal time for you to analyse your financial portfolio and determine if you need to invest more towards your life goals.

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 ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Salary hike give you an opportunity to decrease your liabilities, increase investments and to plan new goals. Here’s how you can channelize these extra earnings systematically from the beginning of the financial year:

Lower your debt

It makes little sense to make investment plans when you have outstanding loans on your books. However, whether you should focus on debt repayments or not will entirely depend on the kind of debt you hold and its cost. For example, upfront payment for a home loan or an education loan can be prioritised later as you get tax benefits for such loans. On the other hand, high-cost debts, for instance, credit card dues and personal loans, where interest rates are significantly higher than the return on investment you can earn, should be cleared as soon as possible. As a rule of thumb, start paying off your liabilities in the order of interest rates.

Lower your tax-outgo

If prudently invested, you can use your increment to reduce your overall income tax outgo. Does it not sound wonderful? If you invest your money wisely you can claim certain deductions under the sections 80C, 80CCC, and 80D of the Income Tax Act, 1961, the life insurance, and pension plan premium payments, up to a maximum limit of Rs. 1.5 Lakh, is allowed for deduction under section 80C/80CCC. You can invest in Unit Linked Insurance Plans (ULIP) to claim this benefit as they also offer life cover and pension along with value appreciation and strategic flexibility for your investments. Additionally, ULIP premium paid by you for your spouse or your child's life insurance policy also qualifies for a deduction under Section 80C of the Income Tax Act 1961. Moreover, if the ULIP premium paid does not exceed 10% of the sum assured, the amount received on partial withdrawal or maturity is exempt from tax under section 10(10D) of the Income Tax Act 1961. Also, under the section 80D of the Income Tax Act 1961, you can claim a deduction on the premium paid towards your health insurance plan for up to Rs. 50,000. All the above mentioned deductions and exemption under Income Tax Act 1961 are subject to provisions stated therein.

Life goals and investment continuity

Salary hike give you an opportunity to examine the compatibility of your current investment profile with your future life goals. You can use this additional windfall to design your investment plan while keeping in mind your various short-term and long-term goals and by adding new goals. For example, if you just had a child, you may want to add more investment goals to existing ones for the child’s upbringing and education. At the same time, you also need to ensure that the dreams and aspirations of your loved ones are fulfilled under any circumstances. As a result, you may invest your money in a life insurance plan to make sure that investments towards life goals are not disrupted. One of the preferred ways to cover all the bases is to put your money in combined products like new age ULIPs. With ULIPs, you can invest across different sectors, through various predefined investment strategies, and for various time horizons. It enables you to minimize risk and maximize the returns while safeguarding your investment options from vagaries of life.

A salary increment brings a sense of achievement and allows you to inch closer to your life goals. By using your increased salary wisely, you can establish financial soundness for yourself and your loved ones for a long time to come. However, it is necessary to select your investment options in a prudent manner as it is crucial to achieving the desired results.

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

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

In this policy, the investment risk in investment portfolio is borne by the policyholder. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs. The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*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.

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

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