I am a newbie as far as investment decisions are concerned. I will put a more detailed question later. Right now, I need to declare my investments for this financial year in advance. I will certainly invest the entire Rs. 1 lac in some of the following -

  • Life Insurance Premium*
  • NSC / Accrued Interest / Postal Savings*
  • Public Provident Fund*
  • ULIP / Mutual Funds*
  • Pension Plan
  • Fixed Deposit for 5 years
  • Senior Citizen Saving Scheme 2004
  • Post Office Time Deposit Account and some more things not relevant to me...

Above are the options available where a maximum investment of Rs. 1 lac will be considered for tax deductions. Once, completely utilised this, a further Rs. 20000 can be invested in Infrastructure bonds.

Note - I have not yet decided what percentage exactly I will be investing in them. Regarding this I will ask a question later.

What I would like to know is whether infrastructure bonds would be a good choice, as compared to any of the above, considering my profile, as given below. If better, I may consider investing in them, instead of investing the complete Rs. 1 lac in the above.

About me
I am not sure how much of the following info is relevant here, but still -

  • I live in India. I am 24 and a Software Engineer, working since 3 years.
  • I am unmarried and have no dependents on my salary as such... I am the only son. My father has his pension and that has been so far enough for their general expenses (including my mother - a housewife). Currently I am not sending them any monthly sum for their expenses.
  • I don't have a habit of accounting my expenses, but over these last 3 years, since I got my first job, my annual salary has increased from around 1.2 lacs per annum to 7.5 lacs per annum (Cost to Company) and right now I have a balance of around Rs. 1 lac in my salary account. This is the same account I use to make investments (take money from). Hope that gives an idea about my expenses.
  • Over the last two years, I have invested on the following -

    Last year -

    Previous to last year -

    • National Savings Certificates - Around Rs. 30000
  • I would like to make sure I make the most out of the opportunities available to me, to grow my money, without taking bad paths :) ...


2 Answers 2


You can invest more that 20,000 in Infrastructure bonds, however the tax benefit is only on 20,000. Further the interest earned is taxable.

The best guaranteed post tax returns is on PPF. So invest a substantial sum in this. As your age group low you can afford to take risk and hence could also look at investing in ELSS [Mutual Fund].

A note on each of these investments:

LIC: If you have taken any of the endowment / Money Back plan, remember the returns are very low around 5-6%. It would make more sense to buy a pure term plan at fraction of the cost and invest the remaining premium into even PPF or FD that would give you more return.

NSC/Postal Savings: They are a good option, however the interest is taxable. There is a locking of 6 years.

PPF: The locking is large 15 years although one can do partial withdrawals after 7 years. The interest is not taxable.

ULIP: These are market linked plans with Insurance and balance invested into markets. The charges for initial few years is quite high, plus the returns are not comparable to the normal Mutual Funds. Invest in this only if one needs less paper and doesn't want to track things separately.

ELSS/Mutual Fund: These offer good market returns, but there is a risk of market. As you are young you can afford to take the risk. Most of the ELSS have given average results that are still higher than FD or PPF.

Pension Plan: This is a good way to accumulate for retirement. Invest some small amount in this and do not take any insurance on it. Go for pure equity as you can still take the risk. This ensures that you have a kit for retirement. Check out the terms and conditions as to how you need to purchase annuity at the term end etc.


re life insurance

Multi-purpose vehicles generally don't work as well as just going with single purpose, well except for the person/company selling them. 'whole life' plans are a great deal for the insurance company and agent, not so much for you.

The easiest way to prove this to yourself is to get the difference in price between a simple 'term life' product that would be appropriate to provide for your family in the event you die. Then get the price for a 'whole life' product with the same benefits, and what it would be worth after say 20 or 30 years.

Take the difference you would have to pay, figure what it would be worth if invested conservatively over the same period, figuring in some conservative figure for compound growth such as 6 percent (what you could get from a good long term savings bond or index based mutual fund). The last time I did this, the pure value of the money alone, without ANY interest was within something like 80 % of the value of the whole life policy.. adding in even a conservative amount of interest turned it into a no brainer. the whole life plan was terrible as in investment vehicle. I was far far better off using term life and investing the difference.

  • 1
    Agreed - this is not the OP's main question, but I don't think I've ever seen a case where Whole Life insurance actually made sense. Even under the guise of "Tax Benefits" (at least for the jurisdictions I've seen), there are often alternatives that give similar benefits without locking you into such a specific product. Aug 18, 2016 at 14:12

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