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Thursday, May 5, 2016

How to Invest your Bonus

Invest your Bonus Online

There are several productive ways to use it for a better financial life


Before you start investing your surplus, pay off your debt. It could be outstanding credit card payments, car loan, personal loan, etc.Not only will it bring psychological relief, you'll also save on the interest outgo. Start settling your debt in the order of interest rates. The ones with no tax benefits and higher interest cost should be paid off first. Make sure you know about the pre-payment charges. Loans that offer tax benefits--student loans and home loans--should be the last on your list.


Upto `50,000 invested in the NPS, under the new Section 80CCD (1b), can be claimed as deduction, over and above the `1.5 lakh investment deduction limit under Section 80C. At the highest tax bracket of 30%, this could mean a savings of `15,000 on your next tax bill. Under NPS, it is mandatory to buy an annuity plan with 40% of the corpus at maturity. The remaining 60% can be withdrawn. Until last financial year, this 60% was fully taxable at marginal rates. But this year onwards, the Finance Minister has made withdrawals up to 40% of the corpus tax exempt, adding to NPS' appeal.


The Sensex has fallen around 12% in the past one year, and this provides an opportunity for longterm buyers. You can invest your lump sum in a debt fund and use a systematic transfer plan to move the money gradually into equity funds.You could also earmark this corpus for a goal that is 5-10 years away. For instance, you can use the money towards increasing your down payment for an asset purchase and reduce your future loan burden. Even if the returns are in line with the index, the compounding effects of a 12-15% tax-free growth can really generate huge returns over time.


If your daughter is less than 10 years old, Sukanya Samriddhi Yojana (SSY) is the best debt option to invest in for her future. At 8.6% yearly compounded rate, this is among the highest paying small savings schemes. Investment in SSY is tax deductible under Section 80C, and you can invest up to `1.5 lakh per financial year (minimum is `1,000). Also, the principal invested, the interest accumulated and the payout are all tax-free. However, the scheme lacks liquidity. You have to stay invested in the SSY till your child turns 21. Premature withdrawals are only allowed after the girl turns 18 and you can withdraw only up to 50% of the corpus.


An extra `50,000 in tax break has been introduced for first-time home buyers where loan amount is less than `35 lakh and the property's worth is not more than `50 lakh. Use the bonus to increase the size of your down payment. It will bring down your loan requirement, which means lower EMIs and, if it falls below `35 lakh, there's the extra tax benefit as well. Put the bonus in an income fund if your purchase is less than a year away. For more than a year, invest in equity funds where the returns are tax-free after one year.



If you do not have an emergency fund, you should use your bonus to build one. Given that it is an emergency fund, you should invest the money in highly liquid options such as shortterm debt funds. The corpus will help you manage sudden, unplanned expenses--medical emergencies, for instance. It will help you avoid last-minute scrounging for money, fire sales or taking bridge loans to tide over the situation.



It's okay if you cannot decide on how to utilise the money right away. "Salt away the money in a liquid fund for a couple of months, while you think how best to utilise it. It will afford you some cooling-off period and also prevent you from frittering the money away in a hurry," advises Jayant Pai, CFP and Head, Marketing, PPFAS Mutual Fund.However, keep in mind that financial instruments are not the only investments that fetch returns."Spend on enhancing your skills, join a course that can improve your earning levels," says Bhuvana Shreeram, Head, Financial Freedom Golden Practices. Such an investment will not only help you get a fatter bonus package, but fetch you regular returns throughout your life.

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

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