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Investing is critical to achieving your financial goals. Sound investments have the potential to make your future more financially secure. When you invest your funds, you save, generate returns and accumulate a corpus for the days ahead. Moreover, investing can help you become more financially disciplined in the long run. Irrespective of the type of risk profile, it is advisable for a person with a stable source of income to make wise investments early in life. Many such investment options come with minimal risk but competitive returns and attractive features. Some of the common saving schemes in India include fixed deposits (FDs), single-pay guaranteed1 returns plans and annuity plans. These -choices function as single-pay savings instruments, where you pay your money once, and the interest is accumulated for a defined period.
And now, which instrument saves taxes? Then, the answer is most of these investment options are also significant tax*-saving choices. But since you can't invest across all types of options, it is wiser to understand each in detail, their pros and cons, and pick which option is suitable for me - them against each other to make the right choice ultimately.
What are the single-pay savings instruments?
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Single-pay savings instruments are those where the investor pays the entire money once, whereas the interest is accumulated for a specific period under the concerned plan. The rate of return/interest is pre-determined and specifically mentioned in the policy.
These plans offer more convenience to the investor, freeing them from the constant hassle of paying investment instalments. Investors do not need to worry about remembering and keeping up with their instalments. Moreover, it is a suitable option for those that do not have a steady cash flow. Single-pay savings instruments also benefit people who frequently travel or do not have a stable job or income source. For instance, people who rely on commissions, brokerage, etc. Such plans are also recommended for investors presently in their most productive years and can afford to make investments for the future in a one-time payment.
Regarding tax* benefits, each single-pay savings instrument offers different tax* advantages. Options like fixed deposits offer considerable security and returns but no tax* benefits on ordinary FDs. The tax* advantages are available only for tax-saver FDs with a minimum lock-in period of five years. Alternatively, policies like the single-pay guaranteed1 returns plans give you a secure life cover, competitive returns to meet your financial targets, and tax* benefits under Section 80C and Section 10(10D). On the other hand, annuities provide periodic payouts in return for your investment and allow your funds to grow tax*-free but only until withdrawn.
Different Single-Pay Savings Instruments
Single-pay guaranteed return plans
Single-pay guaranteed1 return plans need you to pay a single premium as a lump sum and are secure due to the guaranteed1 returns.
You can deposit all premiums at once and obtain life coverage and a guaranteed1 return on the investment at a defined interest rate.
These plans offer a single payment life insurance in addition to the returns on funds
You have the option to take guaranteed1 returns as a lump sum or regular income payments – monthly or annually, as per need.
Tax* benefits accrue on the premiums paid and the maturity/death benefit received by the nominee
Fixed Deposits
You need to deposit the sum at once and can get a pre-determined interest on the sum deposited for a fixed tenure.
Fixed deposits do not comprise a life insurance component.
Since fixed deposit accounts are opened with banks, the investment is secure.
You have the option to withdraw the fund before the expiry of the tenure
Tax* benefits only for tax*-saver FDs that have a five-year lock-in period.
Single-pay annuity plan
- You need to deposit a lump sum in the present to get regular payments for a lifetime or a specific period in the future.
- An annuity plan may or may not have a life cover. Some life insurance companies offer annuity plans with life cover.
- The security of the annuity plan depends on the type of annuity selected. Fixed annuities offer guaranteed1 returns, whereas variable annuities offer returns based on market fluctuations, etc.
- There is no option to withdraw a lump sum without paying penalties. Annuities give out a regular income as per a preferred frequency and time.
- Annuities offer tax-deferred growth of funds until withdrawn. Even at the time of withdrawal, the contributed amount is not taxed. Only the earnings on the funds are taxed at the regular income tax* rate.
How do single-pay guaranteed savings plans & FDs work?
TATA AIA Life plans – Safe returns, guaranteed1 income and insurance cover, all combined in one!
The TATA AIA plans offer guaranteed1 returns, enabling you to meet your financial goals. Besides this, the plan provides life insurance coverage to secure your family's financial future in your absence.
The top benefits of the plans include:
Assurance of utmost financial stability and well-being of your family, in the present and even in your absence.
Flexibility to choose between a regular income option or regular income with an in-built critical illness option.
Option to select an income period from 20 to 45 years per your requirements.
The choice to get the income either on a regular monthly basis or on an annual basis.
Freedom to opt for Joint Life under a single premium payment option.
Option to enhance your insurance coverage through additional life insurance riders#.
Privilege to select the premium payment frequency – annual, half-yearly, quarterly, monthly.
Liberty to pay premiums as per financial suitability – single, regular or limited pay option.
Insurance tax* benefits as applicable under Section 80C and Section 10(10D).
Life insurance with returns is a great choice for an investor who prefers more security and competitive returns and add-on advantages like a secure life cover.
L&C/Advt/2023/Mar/0977
