10 Best Investment Options In 2023 in India how to grow fund

In the article, we are going to discuss the 10 best investment options in 2023 in India to grow your wealth

A new year means new beginnings. It could also be the right time to set some new fund goals that you would like to try to achieve this year. As we all know, new year resolutions are simple to make but difficult to follow, so here are the 10 best investment options that you can follow to make sure you can enhance your wealth.10 Best Investment Options

10 Best Investment Options in 2023

2023 is the year to fight inflation’s impact on everyday spending and saving, and as Indian citizens move their focus on investing in financial instruments that could likely help them beat inflation, here’s a list of the best 10 investment options ranked in decreasing order of the risk that they carry.

Investment trends such as an advantageous focus on well-being post covid, creating wealth to prepare individuals for a potential world recession, and hedging oneself from the impact of the uncertainty in everyday utility goods and services such as gas, crude oil, electricity bills, such as same as managing tax implications are set to rule decisions investors make in 2023.

1) Public Provident Fund (PPF) (10 Best Investment Options In 2023)

As you know this government-backed fixed-income scheme can consider a risk-free investment as its returns are guaranteed by the government.

The followings are Its important features:

• Availability ( ease of access)
  Available at almost all Indian banks and post offices.
  Individuals can open one account only.
  There is no restriction on the age limit to open an account. A minor’s account can be handled by their guardian till the age of 18.

• Minimum Investment Amount
  The minimum investment amount is INR 500 per annum.
  The maximum amount is INR 1.5 lakh per annum.
  Individuals can deposit anywhere between one to 12 times in one financial year.
  Return on Investment (ROI)
  The present interest rate is 7.10% per annum.
  PPF interest rates are floating in nature and imply they could change every quarter. The interest rate change is anywhere between 0.25% to 0.75% in general.

• Maturity Period
  A PPF fund matures in 15 years. It has a partial withdrawal option.
  Partial withdrawals are allowed after five years of the account opening.

• Taxation
  One can claim a deduction on Investment in PPF  under section 80C up to INR 1.50 Lakh from his taxable income.
  Interest on your investment is also exempted.

Risk Level: No risk or very low

2) National Savings Certificate (NSC)(10 Best Investment Options In 2023)

If you are looking for a risk-free investment, the NSC is a good option as it government-backed fixed-income investment scheme.

• Availability
  One can buy the certificate at Indian public banks, some private banks, and all post offices.

• Minimum Investment Amount
  A minimum investment amount of INR 1,000 is compulsory.
  Individuals can invest any amount in the multiple of 100 in 12 installments in one financial year or the desired deposit at once.
  There is no upper limit on investment.

• Return on Investment (ROI)
  Interest compounds annually at the rate declared/fixed by the Ministry of Finance every quarter.
  Interest is payable at the end of the maturity period.

• Maturity Period
  The lock-in period of NSC is five years.
  Premature withdrawal is only possible in cases of the death of the certificate holder.
• Taxation
  One can claim a deduction on Investment up to INR 1.5 lakh per annum from his taxable income under Section 80C of the Income Tax Act.
  Interest every year considers as reinvestment and not taxed, but the final chunk of interest will be taxed as per your regular tax slab.

Risk Level: very low to nil

3) Post Office Monthly Income Scheme

In India, the post office monthly income scheme is very famous in domestic households, especially among housewives and those individuals who are earning passive income and looking to invest to make some risk-free returns.

• Availability (Where you can open an account)
  The Indian postal service offers a single account, joint account (up to three adults), a guardian or parent of a minor and/or of a person of unsound mind; and even in the name of a minor above 10 years of age.

• Investment requirement
  A minimum investment of INR 1,000 is required to open an account and a maximum balance of up to INR 4.50 lakh and INR 9.0 lakh is allowed for single and joint accounts, respectively.

• Maturity Period
  You can close the account after five years from the date of opening. Though, premature closure before one year does not permit. Similarly, a 2%  deduction will be applicable from the principal amount if the account is closed between one year and three years, and 1% for three and five years.
  Nominees can file a claim in case of the death of the depositor before the maturity period.

• Return on Investment
  The scheme attracts an interest rate of 6.60% per annum which is payable monthly.
  The interest amount can be auto-credit into the depositor’s savings account or through an electronic clearance service.

• Taxation
  Interest earned on the deposit is taxable after INR 10,000

Risk Level: Nil to Low

4) Government Bonds(10 Best Investment Options In 2023)

A government bond is a debt instrument the Central and State Governments of India issue it. Issuance of such bonds requires when the issuing body (Central or State governments) faces a liquidity problem and needs funds for the purpose of infrastructure development.

A government bond in India means an agreement between the issuer party and the investor, wherein the issuer gives guaranteed interest earnings on the face value of bonds held by investors along with repayment of the principal value on a maturity date.

• Availability
  The government announces its bond offering before the date of the auction. Both the state governments and the Central government issue these bonds.
  The bonds issued by the State Government are known as State Development debts, and the ones issued by the Center Government are known as G-Secs or just government bonds. You must have a Demat bank account at a bank to purchase government bonds. You can keep government bonds in a Demat account.

• Investment Amount
  The price of the bond is also declared at the time of the bond issue by the government. The easiest way to invest in G-Secs is to use the e-Kuber App, the application of choice for the central banking authority, the Reserve Bank of India.
  The other way is to invest through a commercial bank listed by the government for that purpose or a primary dealer. For that, you will have to open a Demat account.

• Return on Investment and Types of Government Bonds in India
• Most government bonds are fixed-rate bonds, which means the interest rate is fixed throughout the tenure of the bond till maturity. Depending on the coupon rate quoted at the time of purchase of the bond, you buy a half-yearly interest for the stipulated bond holding period. Any capital gain (or capital loss) when the bond is sold or matures.Income from reinvestment of the interest payments that are interest-on-interest.

• Floating Rate Bonds (FRBs)

• As the per name, FRBs are subject to periodic changes in the rate of returns. The change in rates is undertaken at intervals that are announced beforehand during the issuance of such bonds. For example, an FRB could have a pre-declared interval of 6 months; which means interest rates on it would be re-fix every six months throughout the period.

• There is another variant to FRBs, wherein the rate of interest rate is divided into two parts: a base rate and a fixed spread. This spread is determined through auction and remains fixed throughout the maturity tenure.

• Maturity
  The maturity period of a government bond can be a year or more depending on the offering.
• Taxation
  Tax will be applicable as per a person’s income bracket from the income generated by the interest that one receives from these bonds. Any price increase in the value of the bond will also attract capital gains and be taxed accordingly.

Risk Level: Low to nil

5) National Pension Scheme (NPS)

The National Pension Scheme is beneficial for those who aim to build a strong retirement fund by investing their savings into a government-monitored pension fund that invests in diversified stock market portfolios including government bonds, corporate debentures, and shares. The returns or the accumulated pension wealth made on such investments are used to purchase a life annuity and a part is available for withdrawal at the end of the scheme cycle.

Two types of NPS accounts exist Tier I NPS Account and Tier II NPS Account.

Features of Tier I NPS Account

• Availability
  In this scheme, Indian citizens between the age of 18 and 65 can invest. An account can be opened in an authorized bank or any of its branches called a point of presence (POP) appointed by the Pension Fund Regulatory and Development Authority. Alternatively, you can open it by visiting the eNPS web portal. After a request for creating an account, you get a 12-digit number and a permanent retirement account is created.

• Investment Amount
  You can open this account by depositing INR 500. To keep the account live, you have to deposit at least INR 1,000 in a financial year.No upper limit on how much you can invest per year.
  You cannot allow withdraw your invested amount until age 60.

• Return on Investment
  Returns depend on the basis of the net asset value declared by the pension funds of various banks. They are not precalculated and depend on how your investment has grown through the years.

• Maturity
  After reaching the age of 60, you can withdraw a maximum of 60% of your total balance. The balance of 40% has to be essentially used to buy a pension plan of your choice.

• Taxation
  Investments of INR 2 lakh per annum are exempted from tax under Section 80 C and Section 80CCD.
  Returns from NPS tier I accounts are exempted from tax.

Tier II NPS Account

• Availability
  This is a voluntary account and can be opened only if you already have an NPS Tier I account. You can open an account physically at any authorized bank or its POP appointed by the PFRDA. An online account can be opened by visiting the eNPS portal.

• 
  A minimum investment amount of INR 1,000 at the time of opening the account. No annual contribution limit like in the case of an NPS Tier I account.No maximum limit on how much you want to invest. Each year, you can decide how much money you want to invest in the four asset classes available: government bonds, corporate bonds, equities, and alternative assets. Investment has no lock-in period.

• Return on Investment
  The return on your investment is not precalculated. It depends on the net asset value (NAV) announced by pension funds in each investment cycle.

• Maturity
  At the age of  60, you can withdraw a maximum of 60% of the total corpus. The balance of 40% is used to purchase a pension plan of your choice.

• Taxation
  There are no tax benefits and income from it is taxable as per your tax slab. Only government employees can get tax benefits if they keep their investments locked for three years.

Risk Level: Low

6) Sovereign Gold Bonds (SGBs)

SGBs are government securities announced by the Reserve Bank of India (RBI) and denominated in gram(s) of gold. They are issued in multiples of gram(s) of gold with a minimum investment of one gram.

• Availability
  SGBs are open for auction on dates declared by the central government. These bonds are issued by the RBI several times a year.
  You must have a PAN Card to purchase an SGB.
  You can purchase SGBs from banks, post offices, and stock brokerage companies both online and offline.

• Investment Amount
  Each bond unit you buy has the value of one gram of pure gold based on the gold’s average closing price of the previous three business days. You can buy a maximum of 4 kgs of SGBs for individuals and 20 kgs for trusts. You presently receive a discount of INR 50 on each gram purchased online.
• Return on Investment
  2.5% paid twice a year.
• Maturity
  Eight years. Early redemption after five years.
• Taxation
  Interest payments are taxable based on your tax slab. Any gains made at maturity are free from tax.

Risk Level: Low to medium

7) Equity Mutual Funds

An equity mutual fund is an investment way that pools investors’ fund and invests it in stocks to generate good returns.

• Availability
  You can readily invest via SEBI-authorized persons, agencies, and stock brokerage companies online or offline.
• Investment Amount
  A number of mutual funds require a minimum investment of INR 1,000; there is no cap on the maximum amount to invest.
  To invest in equity mutual funds, you require to have a Demat account and a trading account.
  There are mainly eight types of equity mutual funds for investors to choose from.
  Individuals can also invest in equity mutual funds known as growth funds. This can invest without opening a Demat account.
• Maturity
  Investors are free to redeem their investments at any time in open-ended equity mutual fund schemes.
  On the other hand in the case of equity-linked savings schemes under the equity mutual fund umbrella, a lock-in period of three years from the date of investment exists.
• Return on Investment
  Equity mutual funds are well known to deliver the best returns among other kinds of mutual fund investments. For example, some equity mutual funds have provided a 5-year annualized return of up to 35% and as high as 117% in a year of historic highs in 2021.
  The return depends on market uncertainties and the overall economic scenario.
• Taxation
  For a short-term capital gain, the applicable tax is 15% plus a 4% cess.
  For long-term capital gains, for profits up to INR 1 lakh or less in a financial year, the investment return is tax-free.
  If the long-term capital gains are more than INR 1 lakh, tax is applicable at 10% plus 4% cess.

Risk Level: Medium to High

8) Unit-linked Insurance Plans (ULIPs)

ULIPs are plans that give consumers the dual benefit of insurance and investment. The way ULIPs work is very simple: the policyholder can buy an insurance plan for which the premium paid is used to provide a cover and the remainder is invested between equity and debt funds.

• Availability
  You can buy ULIPs from any bank or insurance company operating in India.
  FIs expect you to provide your proof of income provided ULIP is a long-term investment product.
• Investment Amount
  The minimum investment in ULIP varies from one insurance company to another. Normally, a minimum of INR 1,500 is needed as a premium payment per month.
  Since ULIPs cover under Section 80 C of the Income-tax Act exemption category, an investment of up to INR 1.5 lakh per year can deduct to get a tax benefit.
  The maximum investment in a ULIP policy depends upon one’s paying capacity annually for the period of the policy.
  Ulip attracts some Charges for actions like premium allocation, fund management, fund switching, partial withdrawal, premium redirection, and discontinuance among others are an addition to and above the premium one pays annually for the ULIP.
• Maturity
  The lock-in period of ULIPs is five years, after which the policyholder can sell their funds without any charges and are also eligible to continue the policy depending on its terms and conditions.
  Payment of premiums can be discontinued after three years but the withdrawal of funds is possible only after the maturity period of 5 years. ULIPs should be long-term investment plans with up to 10 years of an average investment period.
  You can lose out on a percentage of your healthy returns upon partial withdrawals before the maturity date.
• Return on Investment
  The required annual rate of return can be determined by calculating the ULIP NAV using the simple formula:
  NAV = (Value of current assets + value of investments) – (value of current liabilities and provisions)/Total number of outstanding units on a specific date.
  To determine the rate of return upon maturity or at the end of the policy period, the method of compounding is deployed and it is recommendable to consult your financial services provider to know the rate of return of your ULIP for accuracy.
• Taxation
  ULIPs fall under the category of   EEE under Section 10 D; this implies ULIPs are exempt from the tax levied on the investment, the proceeds, and on the withdrawal of funds after the lock-in period of five years of a ULIP is complete.

Risk Level: Medium to High

9) Gold Exchange-Traded Funds (ETFs)

Gold ETFs are equivalent to purchasing gold in the physical form without the requirement of holding physical gold. They require investors to open a Demat account and keep gold units in a dematerialized form in the same way that an investor holds mutual fund units.

• Availability
  You can purchase units of gold by opening a Demat account, exactly in the same way that one invests in stocks from the stock brokerage companies and agencies registered with SEBI.
  If you do not have a Demat account, you can invest in gold funds through some of the banks or from several gold ETF funds.
• Investment Amount
  A minimum of one unit, of a gram of pure gold, is recommended to acquire. This physical gold is stored in depositories and it acts as an underlying via which the units of the ETFs create value.
  There are gold funds in the market where you can begin at as low as INR 500.
  There is no fixed limit to the number of gold ETF units that one can buy.
• Maturity
  When the price of gold increases, the value of your unit will also enhance, and vice versa. You can switch a gold ETF when you wish—there is no lock-in period.
• Return on Investment
  Same as an equity mutual fund, ETFs can also be traded on stock exchanges. Therefore, their earnings depend on the gold ETFs’ performance in the market.
• Taxation
  If you sell your gold ETF before 36 months of buying it, then you will attract a  tax as per your slab. After 36 months, a long-term capital gains tax of 20% plus 4% cess will be applicable.

Risk Level: Medium to High

10) REITs

REITs provide an investor an opportunity to invest in a portfolio of income-generating real estate assets by buying units of the REIT similar to units of a mutual fund. Any income created by the underlying real estate assets is then distributed by the REIT to its unitholders.

• Availability
  REITs are traded and listed on the stock market, just as equity shares. Therefore, a Demat account is essential for investing in REITs in India. Presently, there are 3 REITs that permit investors to invest in India. These include:
  • Embassy Business Park REIT
  • Mindspace Business Parks REIT
  • Brookfield India REIT
• Investment Amount
  The minimum investment limit of INR 10,000 to INR 15,000 is applicable for investment through initial public offerings (IPOs) and follow-on offers (FPOs) of those REITs that are listed on the stock exchanges.
• Maturity
  There is no maturity period in REITs.
• Return on Investment
  REITs are assigned to deliver 90% of their portfolio’s net rental revenue as dividends or interest to their shareholders. Hence, as a REIT investor, you can get dividends and an enhancement in the value of your stock.
  Hardly, commercial real estate offers returns between 8% and 10% per annum. However, grade-A office spaces and commercial spaces in prime locations have the potential to provide nice returns. The forecasted return on investment in REITs is anywhere between 8% and 14% in the short to medium-term (after adjusting for the fund management charge, which is chargeable before paying out to the unitholders), with minimum risks.
  But one may require to keep investing for longer periods—three to five years—as in any class of asset, one needs to hold a long-term horizon and be calm in riding out the real estate cycles that tend to last long.
• Taxation
  Income earned by the REITs in the form of a dividend, rent, and interest and distributed to its unit holders is in the same kind i.e., deemed as a dividend, rental, and interest-earning, respectively, in the hands of the unit holder. The following is a breakdown of the tax applicable to each of the categories of investment and return:

Type of Income	Taxability in the hands of unitholders
Dividend
1. If the special purpose vehicle (SPV) has opted for a concessional tax rate of 22% under Section 115BAA, which gives an option for certain domestic companies to pay tax at the rate of 22% rather than the regular rate of 25% or 30%, subject to specified conditions in under Section 115BAA.	Taxable at normal tax rates, as applicable for the unitholders.
2. If SPV has not opted for taxation under Section 115BAA.	No tax -Dividend income is exempt in the hands of unitholders.
Capital Gains
Listed Units
I. Long-term capital gains on the proceed of units held for more than 36 months.	Long-term capital gains only in addition to INR 1 lakh, the rate of tax 10% plus applicable surcharge and cess
II. Short-term capital gains on the sale of units held for up to 36 months.	Taxable at the rate of 15% plus applicable surcharge and cess
Others
Capital gains, arising out of the sale of units in SPV or the sale of property directly by REIT.	No tax -Exempt in the hands of unitholders
Interest Income
Received by the REIT from SPV and distributed to the unitholders.	Taxable at the normal tax rates, as applicable for the unitholders plus Applicable surcharge and cess.
Other Interest Income
Investment by REIT in mortgage-backed securities or debt securities of eligible Indian companies.	No Tax-Exempt in the hands of unitholders.
Rental Income from the property that is owned directly by the REITs.	Taxable at the normal tax rates, as applicable for the unitholders plus Applicable surcharge and cess.

Risk Level: Medium to High

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