TAX IMPLICATION

 The recent budget has one provision regarding the volunteer contribution, which states that above 

Rs. 2.5 L of contribution is now taxable.

Until now it was a tax-free investment with a Sovern guarantee. As PF is handled by the Government or Trust which follows the strict rules of the Government.

It was one avenue that was used by High Networth individuals to get risk-free returns without any locking period or where redemption and investment are not fixed, in comparison to other products. In simple words, it was a lifetime product or a whole life product for them.

Now after the budget provision, the tax-free return is over. 

Here there are other options which one can think of.

One is NPS, here one can choose the secure or balance option out of the six options available. One will get a tax deduction under 80CCD(1B). Here one will not get maturity or redemption tax-free. Also, the annuity is taxable.

Another option is a Fixed deposit of any Bank or Corporate deposit. It is taxable at the time of maturity as well as at the time of investment.

One of the most recommended options is life insurance where maturity is guaranteed plus there is no limit that one can take cover depending upon the tax break.

Here we can take both non-guaranteed as well as guaranteed plans as per our appetite.

 But if take a guaranteed plan we get an assured return which is predetermined, which means we know how much money we will get at the time of maturity.

We know that maturity of life insurance is an "EEE" product, where we get exemption at each step of the life cycle of one policy. The maturity of life insurance is exempted under section 10(10D) of the IT act.

Here we have one other  choice that we can take either Indian jurisdiction policy or Foreign jurisdiction policy, which enjoys the same benefit as our Indian policy

Both have the option of guaranteed return plus foreign policy has one advantage of having the upper hand over Indian is that currency fluctuation in the upper side(historically and in future government want the currency to be a free float). Means our returns in Rs. the term is more than that of an Indian policy. In investment, one can use the secured option which has some risk but the indexation benefit is there.

We can secure the returns with diversification.