1. Insurance policies are one of the most popular investments because of the tax-free income offered by them.
2. However, the buyer ends up sacrificing too
much, as the annual returns from a traditional endowment or money-back plan barely take care of inflation itself.
3. Instead,
it is better to invest in PPF, which also offers tax-free income, but whose interest rate is able to surpass inflation.
4. Even debt
funds offer tax efficiency, as well as higher returns, where the income is
treated as long-term capital gain after 3 years and taxed at 20% after indexation benefits.
5. A
tax-efficient option will always yield higher returns than a tax-free one.