Top & Best Investment Options for Salaried People in India 2023

An employee has two major concerns – tax rebate and saving money for future plans.

If you also have similar concerns, then you should go through the article as I am going to discuss 7 best investment options for salaried person in India.

I have categorised the investment schemes in 2 categories –

  • Best Tax-saving Investment Options
  • Best High-return Investment Options

 Without any further ado, let’s go through the best investment plans for salaried person.

Best Tax-saving Investment Options For Salaried Person in India

#1. Public Provident Fund

Annual Return – 7.1% (Fixed)

If you are a salaried person who wants to play safe, looking for better returns than FD and tax benefits, then you should invest in PPF.

Since your money is invested in government securities, there’s no risk of losing money if market crashes.

The government of India declares the rate of interest quarterly for PPF and the current rate of interest is 7.1%.

You get income tax rebate on your annual investing amount up to Rs. 1.50 lakh under section 80 C of Income Tax Act. Furthermore, the interest earned is also not taxable under income tax, giving you dual tax benefit.

You can start investing in PPF from your nearest bank with a minimum investment amount of Rs. 100. The lock-in period of PPF investment is 15 years which you can further extend in 5-years chunks.

Benefits of Public Provident Fund

  • Safer Investment Instrument – Your money is invested in government securities, corporate bonds, and similar safer investments, you don’t have to worry about your money loss.
  • Long term goals – Since you can’t withdraw your invested money before 15 years (some exceptions are there), the long time period results in exponential growth of invested money. 
  • Tax benefits – You can invest up to 1.50 lakh rupees every year to get tax benefits u/s 80 C of IT act. Your returns are also non-taxable so get complete tax rebate with PPF.

Drawbacks of Public Provident Fund

  • Lower returns – The government is reducing PPF interest rates every year. You get lower returns as compared to mutual funds or direct stock investment.
  • Huge lock-in period – You can’t withdraw your money before 15 years until you have a life-threatening disease treatment, and higher education.

Best for – Passive investors who want to play safe and keep invested for longer durations.

#2. ELSS Funds

Annual Return – 13% to 17% (Expected)

If you are salaried and you can take some risk on your surplus money, then go with ELSS mutual funds because you will get dual benefits of tax savings as well as wealth creation.

ELSS Funds have a lock-in period of 3 years which means you can’t withdraw money before the lock-in period is over.

If you invest in ELSS mutual funds, you can claim a tax rebate of up to Rs 1,50,000 u/s 80 C by investing in ELSS Funds. 

ELSS funds are among the high risk-oriented investment instruments because the majority of your money is invested in equities or equity related schemes and rest in fixed-income securities.

Benefits of ELSS Funds

  • Tax benefits – You can annually invest up to Rs. 1.50 lakh in ELSS funds to get tax benefits u/s 80 C of Income Tax Act of India. Secondly, your return is also tax free if it is below 1 lakh per year.
  • Short lock-in period – ELSS funds have the lowest lock-in period among other tax-savings investment methods such as PPF, NPS or FD.
  • Better returns – ELSS funds provide you much better returns as compared to other tax saving schemes and beat inflation rate easily.
  • Long term wealth generation – If you wish to keep the money invested for longer durations such as 7 or 10 years, you would benefit from compounding-effect to create wealth.

Drawbacks of ELSS Funds

  • High risk – Since the money is invested in equities or direct stocks, ELSS funds are highly susceptible to market volatility.
  • Return Taxable – If your interest earned is above 1 lakh per year, then your income earned from ELSS funds will come under Long Term Capital Gains that attract tax at the rate of 10% plus applicable cess and surcharge.

Best for – If you can take risk of losing money to get higher returns.

#3. National Pension Scheme (NPS)

Annual Return – 8% to 10% (Expected)

Whether you are a government employee or in the private sector, you can invest in the National pension scheme.

NPS is a must for all government employees but you can also voluntarily invest in NPS to build retirement corpus.

You have to invest a fixed amount every month till the age of 60, and then you get the maturity amount in two parts – Lump Sum amount and monthly pension.

You get 60% of your accumulated wealth as a lump sum amount, and the remaining 40% of your money is reserved for a monthly pension for the rest of your life.

The NPS invests 50% money in the stock market and rests in government securities, so your return may vary as per the market behavior. 

Benefits of National Pension Scheme (NPS)

  • Less risky investment – Since your money is invested in stock market as well as government securities, and corporate bonds, you don’t get high volatility in your investment as compared to other risky investments.
  • Longest lock-in period – Since the lock-in period is 60 years or when you retire, you not only get benefit of compounding interest but also stay safer from day to day market fluctuations.
  • Tax benefits – You can invest up to 1.50 lakh rupees every year to get tax benefits u/s 80 C of IT act. 

Drawbacks of National Pension Scheme (NPS)

  • Below average returns – You get lower returns as compared to mutual funds or direct stock investment, as you have to invest a big chunk of money in government schemes.
  • Huge lock-in period – You can’t withdraw your money before 60 years until you have a serious problem like medical treatment, marriage and higher education. You get upto 25% of the saved corpus.

Best for – Passive investors who want to play safe and keep invested for longer durations.

#4. Tax Saving Fixed Deposits (FD)

Annual Return – 5% to 8% (Fixed)

If you are an FD lover, and don’t want to invest anywhere else,  then you can opt for Tax saving FDs.

You have to lock your invested amount for 5 years to save tax. You get tax rebate under section 80 c of Income Tax act of India. But the interest earned is taxable under income tax slab.

Premature withdrawal leads to penalty so always invest if your investment tenure is 5 years or so.

Benefits of Tax Saving Fixed Deposits (FD)

  • Safe to invest – Similar to regular FDs, tax saving fixed deposits also offer fixed interest rates and don’t depend on stock market movement.
  • Tax benefits – You can invest up to 1.50 lakh rupees every year to get tax benefits u/s 80 C of IT act. 

Drawbacks of Tax Saving Fixed Deposits (FD)

  • Poor returns – You get meager returns in fixed deposits which hamper the wealth creation goal. 
  • 5 year lock-in period – You can’t withdraw your money before 5 years or you have to pay the penalties of premature withdrawal.

Best for – If you don’t want to risk your money

#5. Voluntary Provident Fund (VPF)

Annual Return – 8.5% (Fixed)

Voluntary Provident Fund (VPF) is an extended version of Employees Provident Fund (EPF) where you can control your contributions to the account. 

In contrast to EPF, where you can contribute up to 12% of your basic salary and DA to the EPF account, in VPF you can contribute up to 100% of your basic salary and DA but your minimum contribution should be more than the default limit of 12%.

If you don’t have a standardized salary structure (basic salary + DA), then you can contribute up to your 100% salary. 

For example, if your salary is Rs. 30,000 and you are contributing Rs. 3,600 per month to your EPF account, then you can open a VPF account to contribute up to Rs. 30,000.

VPF has a lock-in period of 5 years. You get tax rebate under section 80 C up to Rs. 1.50 lakh in a financial year.

Benefits of Voluntary Provident Fund

  • Flexible contribution – There’s no restriction on your contribution, so you can invest as max as your salary amount.
  • Long term goals – Since you can’t withdraw your invested money before 5 years (under certain conditions only), the long period investment provides exponential growth of invested money. 
  • Tax benefits – You can invest up to 1.50 lakh rupees every year to get tax benefits u/s 80 C of IT act. 

Drawbacks of Voluntary Provident Fund

  • Fixed Employer’s Contribution – As you can invest whatever amount you want to contribute but that doesn’t apply to the employer, he has to follow the EPF rules.
  • Longer lock-in period – You can’t withdraw your money before 5 years (partial payments) or 1 year after you have resigned from your last job and are not interested in doing the next job. 

Best for – if you want to contribute more in your EPF account.

Best High-Return Investment Options in India

#6. International Funds

Annual Return – 15% to 25% (Expected)

International funds are similar to Indian mutual funds but you invest in the foreign companies. If you are a keen observer of international markets and international politics, you can enjoy the leverage of your knowledge about global events and invest accordingly. 

Because, international funds movements are highly dependent on various events happening in the world.

You can well diversify your portfolio as you invest in different countries’ economies that ensures  minimal loss. 

Secondly, Indian rupee depreciation increases the average ROI.

However, if you are a regular observer of international markets or you are an active investor, only then you should get your hands dirty in international funds as the international funds come under the “High Risk – High Returns” category as other country’s current market fluctuation can affect the overall return.

Benefits of International Funds

  • Portfolio Diversification – Since every country has its own economic cycle, by investing in international funds, you can stabilize your portfolio with small highs and lows in your returns if your fund is focused on multinational markets rather than investing in a single nation’s market.
  • Access to High Growth Companies – International funds allow you to invest in high growth companies located outside India such as Apple, Tesla.
  • Hedge Against Rupee Depreciation – International funds provide you a strong hedge against rupee depreciation because when the rupee falls, your international returns increase.

Drawbacks of International Funds

  • Foreign Exchange Rates Fluctuations – Since currency exchange rates are highly volatile, rupee appreciation may result in lower returns.
  • Foreign Markets Risk – You are exposing your money to the political, economic and market risks of foreign countries when you invest in an international fund.The risk is higher in case of investing in developing countries markets that lack in regulations and market efficiency.
  • Concentrated Investment Risk – Some international funds focus on concentrated investment portfolios that make you suffer from higher risk, and higher return fluctuations.
  • Taxable Income – International funds are taxed like other mutual funds, if you hold for 3 years or less, the returns are added to your income (short term capital gains) and then taxed as per the tax slab. If you hold for more than 3 years, then they come under long term capital gains and attract 20% taxes post indexation.

Best for – Active investors who wants to invest in high growth foreign companies

#7. Cryptocurrencies

Annual Return – above 50% (Expected)

You might be intrigued by the exponential growth of various cryptocurrencies such as bitcoins and ethereum. 

Bitcoins soar 204% in 2020 and if you see the last 3 months growth it was like this –

January 2021$40,000
February 2021$50,000
March 2021$55,000

Currently, it’s about to touch $60,000 in the month of April.

So if you have some surplus money that you can take risk of, then you can even invest on daily, weekly or monthly basis via SIP similar to investing in mutual funds.

Crypto companies like Unicorn, Bitdroplet offer SIP (Systematic Investment Plan) to invest in various cryptocurrencies.

But please understand the cryptocurrencies thoroughly and comple

Benefits of Cryptocurrencies

  • Massive returns – Cryptocurrencies may give you as much as 10x returns in a year which you can’t get in any other investment method.
  • Investing in futuristic technology- Blockchain is a futuristic technology which is going to handle various regular tasks such as logistics, data management, so investing in blockchain backed currencies is like staying ahead of the time.
  • Gaining trust – With the entrance of Big business tycoons like Elon Musk in the cryptocurrency industry has built a trust factor that the cryptocurrencies is not a fake.
  • Beat Inflation – With such huge returns, your investment can easily beat the inflation and you can achieve your investment goal is less time.

Drawbacks of Cryptocurrencies

  • Highly Risky – Cryptocurrencies are highly risky investments. In 2017, the bitcoin bubble burst that lead to fall of bitcoin prices to 70% low wiping almost all the money of investors 3 years back.
  • Uncertain Indian government move – Indian government hasn’t cleared his stand on the regulation of cryptocurrencies in the country that makes it a little doubtful to invest your hard earned money.

Best for – Passive investors who want to play safe and keep invested for longer durations.

Final Thoughts

So guys you have now come to know about 7 best investment options for a salaried person. 

I would suggest you to finalize your investment goal, create a plan and diversify your portfolio for a balanced output without putting too much risk on your hard earned money.

Let me know your thoughts in the comments section.

About Rajan Dhawan

Rajan has covered personal finance and investing for over 5 years. Previously, he was in the IT field for 8 years after completing his MCA but his deep interest in personal finance led him to become an investing expert. He is passionate about investing, stocks, startups, and cryptos.

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