Many parents are often concerned about the future of their children. In fact, there are many options for parents of a newborn kid. Here are a few of them that you should consider as good investment. We have kept in mind the tax advantage as well as the returns that these investments fetch over the long run.
Public Provident Fund
You can build a decent corpus for your child, since the tenure of this investment is 15 years. Now, this is the best investment option for a new born kid for many reasons. The first and the fore most is that each year, if you invest Rs 1.5 lakhs, you can get a tax break under Sec 80C of the Income Tax Act.
PPF can be opened in the name of a minor.
On the other hand, the interest income is also exempt from tax. So, it is two benefits that you receive.
Now, since the tenure is 15 years, you can build a good tax free corpus. The interest rate at the moment is 8 per cent, which is much better than bank deposits. Go for this investment for your new born child.
Equity mutual funds
Equity mutual funds are also good options to consider. However, unlike the PPF returns are now assured and hence one is not sure, what amount you would get after the selected period of say 15 to 20 years.
The past track record of equity mutual funds over the longer term has been excellent. However, past track record, cannot be an indication of future performance. These days equity mutual funds are also taxed. This means, unlike a few years ago, your returns would now diminish on account of the tax factor. Also, you might need professional help to choose the right kind of fund. Remember, there is always an element of risk here.
Sukanya Samriddhi Account
One can also opt for the Sukanya Samriddhi Account, which can offer decent returns to investors. However, this is only for the girl child.
So, if you have a newborn kid, who is a girl, go for this scheme. The current interest rate on the Sukanya Samriddhi is 8.1 per cent for 2018-19. However, the interest rates would keep changing.
This scheme also offers two income tax benefits. The first is that the interest is exempt from tax and the second is that there are tax benefits under SEC 80C of the Income Tax Act.
Debt mutual funds
One can also look at debt mutual funds with a long term perspective. However, here again the returns are not assured. In fact, the returns could tend to be around 6 to 9 per cent. It is unlikely that you will get stupendous returns here. So, temper your expectations.