header Investment Plans

Best Long-term Investments as Per the Returns

By Admin
11 January 2022, 1:21 PM
best long-term investments as per the returns

When it comes to investments, you need a long-term perspective to get attractive returns and build a substantial corpus. This corpus can then be used to meet your financial goals and be financially independent. 

To build a substantial corpus you need to invest in different investment avenues which give attractive returns. There are multiple investment avenues and choosing one might prove to be a challenge. 

So, here are some of the best long-term investment instruments which give attractive returns –

1. Direct equity 

Direct equity means investing in the stocks of different companies that are listed on the stock exchange. Equity offers attractive returns and yet it is quite volatile as the share market fluctuates with time. However, if you have a long term perspective, you can get very good returns by investing in equity stocks. Pick the stocks of established and reputed companies and you can watch your holdings grow as the company grows. 

Returns – Returns from equity range from 12% to 15%

Taxation – No tax benefit is available on investments in direct equity. Long-term returns, however, are tax-free up to INR 1 lakh. If the returns exceed INR 1 lakh, 10% tax is applied on the excess. Short-term returns, when you redeem your investment within 12 months, are taxed @15%.

2. Mutual funds

If investing in direct equity is too risky for you, you can always choose mutual funds and get the benefit of a professionally managed diversified portfolio. 

Mutual funds are also market-linked investment avenues wherein your investment is directed into a common pool and the pool is then invested into securities of the capital market. Mutual funds come in different variants choosing both equity-loving and debt loving investors. 

You can invest in mutual funds either in a lump sum or in instalments through SIPs and when you remain invested for a long-term period, you can reap attractive returns.

Returns Returns from equity mutual funds range between 12% and 15% while, for debt funds, the range is between 6% and 10%. If you choose hybrid funds which combine both equity and debt, you can get returns ranging from 8% to 12%.

Taxation – Investment into ELSS mutual fund schemes is eligible for deduction under Section 80C up to INR 1.5 lakhs. Any other mutual fund scheme, however, does not offer tax benefits on investment.

Returns earned from equity mutual funds are taxed @15% if you redeem the fund within 12 months. However, long-term equity returns are tax-free up to INR 1 lakh beyond which they are taxed @10%. For debt funds, short-term gains (redeemed within 36 months) are taxed at your income tax slab rate and long-term gains (redeemed after 36 months) are taxed @20% with indexation benefit.

3. Fixed deposits 

If fixed returns are more to your liking, you can opt for fixed deposits offered by banks, post-office, or non-banking financial companies (NBFCs). Under fixed deposits, you deposit a lump sum amount of money for a specific period at a guaranteed rate of interest. Fixed deposits, therefore, promise guaranteed returns and keep your investments safe from market volatility.

Returns returns from fixed deposit schemes depend on the tenure of deposit and the age of the depositor. It ranges from 2.5% to up to 9% across different deposit terms

Taxation investment into 5-year fixed deposits offered by banks and post-offices allows you a deduction from your taxable income. Such deposits up to INR 1.5 lakhs are tax-free under Section 80C. All other deposits are taxable at your income tax slab rates. Interest income earned is also taxable at your tax slab rates. However, for senior citizens, interest income earned up to INR 50,000 from bank and post office deposit schemes is allowed as a tax-free income.

4. National Pension System (NPS)

The NPS scheme is a retirement-oriented scheme that helps you accumulate a tax-efficient corpus for your golden years. Moreover, the scheme is market-linked allowing attractive returns. You can invest in the scheme if you are more than 18 years of age and the scheme continues till you reach 60 years of age. After maturity, you are allowed to avail a part of the accumulated corpus as a tax-free income. The remaining corpus is then used to pay lifelong annuities at a guaranteed rate.

Returns – returns from the NPS scheme depend on the type of investment fund that you choose. Debt funds give a return of 6% to 8% while equity funds can offer returns of 10% to 15%.

Taxation – Investment into the NPS scheme is allowed as a deduction from taxable income. You can claim a deduction of up to INR 1.5 lakhs under Section 80C. Moreover, an additional deduction of up to INR 50,000 is available under Section 80CCD (1B). If your employer also contributes to the NPS scheme, such a contribution would be allowed as a deduction under Section 80 CCD (2) in addition to the deduction on your own investment. The employer’s contribution is allowed even in the new tax regime where other deductions are disallowed. 

On maturity, 60% of the corpus which you can withdraw would be tax-free in your hands while annuity payments would be taxed at your income tax slab rates.

5. Gold

Many investors prefer gold for its traditional as well as ornamental value. You can invest in gold in different formats like physical gold, gold bullion, gold ETFs, gold mutual funds, gold sovereign bonds, etc. Gold acts as a good hedge against inflation as well as against volatility in the financial markets.

Returns – returns offered by gold investments are cyclical in nature. It ranges between 5% and 8% and can even go up to 10% in some cases.

Taxation – investment into gold has no tax benefits. For gold investments sold after 3 years, you incur long-term capital gains (LTCG) tax which is 20% with indexation benefit. For sovereign gold bonds, however, no LTCG is applicable after maturity. 

6. Real estate

Real estate is also an attractive investment avenue. If you already have a self-owned property, you can invest in real estate for generating supplemental income or to add to your assets. You can let out your property for regular income in the form of rent. Moreover, selling off your property can also help you book returns when real estate prices rise.

Returns average returns of 12% to 15% can be expected on real estate investments. If, however, you can earn rental income, you can generate regular returns on your investment.

Taxation there is a particular manner in which income from house property is taxed. The taxability would depend on the type of capital gains that you incur – long-term or short-term capital gains.

7. Public Provident Fund (PPF)

PPF is another fixed-income investment avenue that you can consider for guaranteed returns. The maximum amount which you can invest in the PPF scheme is INR 1.5 lakhs and the minimum is INR 500 annually. You need to make a minimum deposit in a year to keep your PPF account active. The duration of the scheme is 15 years which can be extended by 5 years after maturity.

Returns – PPF offers a guaranteed rate of interest which is fixed by the Government. The current rate of interest, with effect from 1st October 2020 is 7.1%.

Taxation – PPF is an EEE scheme which means that the amount invested, interest earned and the maturity proceeds are all tax-free. Investment into the PPF scheme is available as a deduction under Section 80C up to INR 1.5 lakhs.

So, these are some of the best long-term investment avenues which also offer good returns. Choose these avenues based on your financial goals, investment strategy, and risk appetite and create a balanced portfolio.