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POSTED BY ON November 5, 2011 2:44 pm COMMENTS (5)
Hello Sir,
I have 1 yr old daughter. I wanted to put some money for her future on yearly basis of Rs. 1 lac.
Initially I thought of KVP which doubles money in 8 years & 7 months (8.40 % interest). So I can get 4 lacs every year when she turn 17-18.
But as of now the FD rates are at good interest rate 9-9.5% so thought about investing for 1-2 years in FD and then put that amount in KVP.
Please provide your input on best strategy. I want to do safe investment.
Regards,
Amit
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Dear Justgrowmymoney, Please update yourself. There is no provision now in DTC (version 2) to tax PF, PPF interest.
Regarding your suggestion of investing 30K in Eq. funds, for remaining 30K limit in 80C for tax benefit, it can’t be any diversified Eq. fund. It’s ELSS or better known as tax saver MFs.
Thanks
Ashal
Ashal – I was not aware about the PF/PPF taxation being dropped. Thanks for it.
Again on the remaining 30k I intentionally meant diversified MFs and not ELSS because there is no explicit discussion on Section 80C here at all. Amit just said he wanted to invest 100,000 for his kid’s education so after exhausting PPF limit I recommended that he pumps the remaining in diversified MFs.
Consider a PPF account that pays 8% (or EPF that pays 8.5%). If you can part with your money for that long [15 years for PPF] then it will turn out to be best investment as it is tax free. DTC coming into effect has provisions to tax PF interest but political agenda will never allow the FM to tax PF proceeds. So PF wins hands down. Since you can contribute only 70,000 max every year invest the remaining 30,000 as a SIP in a Diversified equity fund. Even better put that 30,000 in a short term debt fund and do a STP to the equity fund.
Dear Amit, I’ll twist the answer given by dear Manish slightly. Instead of investing one lump sum (a part meant for bank FDs or PF or PPF), please open a 10Y RD in the bank of your choice. Invest on mly basis. that ‘ll be light on your pocket. Current RD interest rates are very good & one should lock these rates.
Similarly in case of amount meant for MFs, again invest on mly basis.
Thanks
Ashal
Amit
What is safe ? Is getting back the “investment amount” safe for you ? because that is risky ! , and the risk is loosing the purchasing power of the money .
Goal like children education should not be planned with debt products 100% . there can be some part , but putting 100% money in SECURE Things is risky ! .. you should look at balanced funds with SIP route , atleast 50% amount , rest 50% put in PPF or KVP , thats ok
Manish