Ramesh dreads looking at his bank statement every January. His annual income was ₹15 lakh last year, but around ₹2 lakh went in taxes. His neighbour Sunil, with the same salary, managed to save about ₹60,000 more. The difference? Sunil invested in smart savings plans — not just during the March rush but consistently throughout the year.
The best investment plan can achieve two important goals:
- Help you save on taxes today (subject to eligibility)
- Grow your wealth for the future
Stop the Last-Minute Rush
Common mistakes people make when choosing savings plans include:
- Waiting until March to invest
- Opting for the first product offered by their bank
- Failing to check if their money is actually growing
The best investment plan starts early and grows steadily. Just like planting a tree, the sooner it’s planted, the taller it can grow.
Understanding Your Tax-Saving Choices
1. ELSS Funds (Best for Growth)
- Short 3-year lock-in period (shortest among Section 80C tax-saving options)
- Historically, long-term returns have averaged around 10–12% p.a., though this is not guaranteed
- Suited for investors comfortable with market-linked risks, especially young earners
2. PPF (Safe but Slow)
- 15-year commitment
- Government-backed returns — currently 7.1% p.a. (subject to quarterly revision)
- May not always keep pace with inflation, impacting long-term purchasing power
3. NPS (For Retirement)
- Additional tax deduction of up to ₹50,000 under Section 80CCD(1B)
- Historical returns range from 8–10% p.a., depending on asset allocation
- Withdrawals restricted until retirement, with partial access in specific cases
The Power of Small, Regular Investments
Many believe they need a large sum to start a savings plan — this is untrue. Even ₹500 a month, invested wisely, can grow into a sizeable amount over time.
Take Priya, a teacher in Pune, who contributed ₹2,000 monthly to ELSS. Over 5 years, her ₹1.2 lakh investment grew to ₹1.8 lakh — an annualised growth rate of about 8.5% p.a. While this was possible in her case, returns are market-linked and can vary widely.
Why Consistency Wins
- Rupee Cost Averaging: In market-linked investments, a fixed amount buys more units during market dips.
- Less Pressure: Contributing ₹5,000 a month feels easier than ₹60,000 at once.
- Instils Discipline: Automatic contributions work like paying your phone bill — regular and hassle-free.
How to Pick What’s Right for You
Ask yourself:
- When will I need this money?
- Am I comfortable with some level of risk?
- Which tax regime am I under and what’s my tax bracket?
A balanced investment plan can mix different products based on your needs. Like a thali, more of what suits your taste, less of what doesn’t.
Common Questions Answered
What if I need money suddenly?
- Keep an emergency fund in liquid funds, savings accounts, or short-term deposits
- Avoid withdrawing from long-term investments unless absolutely necessary
How to track performance?
- Review at least once a year (many do it during Diwali)
- Don’t panic over short-term market fluctuations
Smart Tips Most People Miss
- Start investing in April, not March
- Set up automatic transfers or SIPs
- Review your portfolio every year
- Maintain health insurance alongside savings. It is not a savings plan but offers tax benefits under Section 80D and protects against unexpected expenses
The Golden Rules
- For those in the 30% tax slab under the old regime, ₹1 saved in tax is equivalent to ₹1.30 earned
- Start with whatever amount you can, even ₹500/month
- Increase contributions as your salary grows
Conclusion
Good savings plans work quietly in the background. They help you pay less tax (where applicable), grow your wealth, and give you peace of mind year after year. That’s the real power of the best investment plan.
Start small today. You will thank yourself later.
