I am 28 years old and my monthly take home salary after provident fund (PF) deduction is Rs35,000. I have ICICI Prudential’s Life Stage Pension Plan with an annual premium of Rs20,000. In addition to my PF contribution, I plan to put around Rs5,300 per month in National Savings Certificate (NSC). Including my PF and pension plan, the above investments will net the maximum threshold of Rs1 lakh for tax saving purpose. I have a company health insurance plan. I am contributing Rs5,000 towards family expenses. My personal expenses are Rs5,000 per month. I contribute Rs1,000 per month under health insurance plan provided by my company to cover my dependent parents. I will now be left with Rs20,000 per month as savings. Are my income-tax saving investments fine? Where to invest my monthly savings of Rs20,000?

Anjana Viswanathan

You have a very healthy savings rate.

Starting with your tax savings, NSC may not be the right investment for you. At present it will not even cover the inflation rate and you do have a long-term horizon (NSC has a lock-in period of seven-and-a half years). And considering your age and long-term horizon, you should take some risk. For tax savings it will be prudent if you invest in an equity-linked saving scheme with the same monthly contribution.

You have also provided for yours as well as your dependent parents’ health claim. However, what you need is to check from your company whether you can transfer the said health insurance in your personal name when you leave the organization. In case you cannot, then consider buying health insurance independently. In addition to that, you should also have a term plan for yourself. Ideally look at around five years of your earning as the term cover.

Your regular monthly saving will go a long way in helping you build a long-term portfolio. The monthly investment can be done by a combination of funds—diversified, large-cap, mid-cap and hybrid—equity, and for debt exposure your existing PF and dynamic debt (also to provide some liquidity to the portfolio) through mutual funds. All these investments need to be made through a systematic investment plan.

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