Investment options in FY 2019-20 that can add zing to your portfolio

Learn how these investment vehicles can maximise your financial goals.

Investment options to consider in the new financial year 2019-20

The Interim Budget for 2019-20 has been the toast of the season. Taxpayers, especially in the middle-income group, have been the biggest beneficiary of the tax reforms that will directly benefit approximately three crore nationals.

Individuals with net taxable income of up to Rs 5 lakh can avail a full tax rebate under Section 87A and an additional Rs 1.5 lakh can be claimed as a deduction for specific investments made under Section 80C. This directly translates into higher disposable income, which should be effectively channelised. 

Related: Why investing early is important 

Here are some investment products that you should consider for your portfolio:

Bank deposits

The ‘old faithful’ bank deposits just got a tad more lucrative this season. While the threshold for tax-free income from interest-bearing instruments still stands at Rs 10,000; tax at source will not be deducted for income up to Rs 40,000 and Rs 50,000 for taxpayer below and above the age of 60, respectively.

This not only saves the investors from the tedious process of claiming refunds but also risk-averse investors who are biased towards bank deposits can increase their deposits. Those below the Rs 6.5 lakh income threshold can leverage further towards such investments through regular and tax saving deposits.

The choppy returns on equity investments and Reserve Bank of India’s (RBI) forecast of medium-term inflation at 4% do make the good old bank deposit seem like an investment you can bank on.

Related: FAQs about fixed deposits

Real estate

Investments in real estate could be an attractive choice on three counts for both, first-time buyers and investors alike.

Firstly, real estate developers have been granted an extension on tax benefits under Section 80-IBA (Affordable Housing Scheme) until March 2020. While this directly doesn’t benefit the common man, the tax benefit to developers may incentivise them to increase the inventory and affordability of homes, allowing millions to realise their dream of buying a home.

Secondly, the GST rate on real estate has been reduced from 12% to 5% for under construction flats and from 8% to 1% for affordable housing, effective April 1, 2019. This move would translate into lakhs being saved on tax. 

Thirdly, the amendment to Section 54 now allows investors to deploy capital gains from the sale of house property up to Rs 2 crore in two separate real estate assets instead of just one that could be done earlier.

Not only does this translate to a tax saving potential of up to Rs 40 lakh (calculated at 20% without indexation) but also allows investors to explore real estate investment options purely from the point of view of capital appreciation. Investors can diversify their real estate investments across states and cities that will allow them to balance out real estate price risk across both investments and maximise return on investment (ROI) based on potential growth.

This could potentially result in more investments being made in smaller towns and cities, fuelling growth in market value of properties in such areas.

Related: Planning to invest in real estate? Here are few things you must know 

Pension schemes

Pension plans are a great way to make consistent contributions towards a financially secure future post-retirement. An array of annuity plans from the public and private sector operators allows investors to choose a product that best suits their needs. Investors can select traditional plans that guarantee a steady income or customise equity participation through unit-linked plans.

These investments offer tax benefits under Section 80C and 10 (10A). If the limit of Rs 1.5 lakh for investments under Section 80C has been exhausted, investors could still make an additional Rs 50,000 investment in the National Pension Scheme under subsection 1B of 80CCD, which is eligible for deduction from the total taxable income.

Insurance

Both life and health insurance are a must buy for everyone. The rising cost of healthcare mandates that we safeguard our finances and minimise liabilities so that our finances don’t jeopardise in the event of an illness or death.

A laundry list of insurance products is available across service providers that cater to every budget and every need. While investment in a life insurance offers tax benefits under Section 80C up to Rs 1.5 lakh, premium towards health insurance are deductible (over and above Section 80C) under Section 80D, benefit of which ranges from Rs 25,000 to Rs 1 lakh, depending on the number of dependent members/ senior citizens in the family.

Related: Life insurance 101-Everything you want to know about life insurance 

This allows investors to take precautionary measures towards health and life, while simultaneously saving tax and making returns (on annuity, ULIP, money back policies, etc.)

Choose investment options basis your applicable tax brackets and long-term goals. Be patient and you will reap huge benefits.
 

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