Different investment tools have varied relevance depending on the risk profile and need of the investor. However, for middle class investor the first aim to invest is to save tax.
As we can save upto one lakh under 80C, I am sure that the first aim of all middl class investors is to save this one lakh so that a maximum of Rs 30000/- can be saved in tax (if you are in 30% tax bracket)
For 80C purpose I feel that PPF is the best method. This is mainly for following reasons :-
a) You can save upto Rs 70000/- in PPF per year. After accounting the PF deductions this is enough to cover rs 100000/- limit in section 80C.
b) If is convenient to operate as it can be opened with Post Offices, SBI Branches which are available every where.
c) The interest rates are good 8% and tax free. This makes the post tax return a neat 8%. Looking at 5% inflation in country we end up with 3% real rate of return. This is best compared to other avenues as NSC, Bnk FDs etc.
d) The security is highest as this scheme is backed by Government and hence fully secure.
e) The scheme is valid for 15 years. Once it enters into its last 5 years then it gived 8% non taxable return with maturity of less that 6 year. This the best we can hope. henec I recommend that we must open the PPF for our child as soon as he goes to college. So that his account enters into the best phase when he turn 28, right on time to give him best returns.
As in order to balance our investment, investing some amount in secure options is must, we can use PPF as the first option for the purpose.
Also it seems that Govt may soon replace the EEE module with EET module in which the proceeds will be taxed on maturity. As it is unlikely that this will be applied from retrospective effect, we must use this option to the fullest as least till the time EET regine comes.
HOPE THE ABOVE WILL BE USEFUL.