Investing is an important aspect of financial planning. With numerous investment options available in the market, it is important to understand each one of them to make the right investment decision. One such investment scheme that has gained immense popularity in recent years is the Guaranteed Investment Scheme (GIS). In this article, we will explore the GIS full form, its meaning, benefits, and how it works.
What is GIS?
GIS is an investment scheme that provides guaranteed returns to the investor. It is a type of annuity plan that is offered by insurance companies. The main objective of GIS is to provide financial security and stability to the investor. The returns on GIS are fixed and are not affected by market fluctuations. The investment amount is paid back to the investor in the form of periodic payments after a certain period.
GIS Full Form and Meaning
GIS stands for Guaranteed Investment Scheme. As the name suggests, it is a scheme that guarantees a fixed return on investment to the investor. The investment amount is paid back to the investor in the form of periodic payments after a certain period. The duration of the investment and the periodic payments are predetermined at the time of investment.
Types of GIS
There are different types of GIS that cater to the varying needs of investors. Some of the popular types of GIS are:
Deferred Annuity GIS
In a deferred annuity GIS, the investor invests a lump sum amount for a certain period. The periodic payments begin after the completion of the investment period.
Immediate Annuity GIS
In an immediate annuity GIS, the investor starts receiving periodic payments immediately after investing a lump sum amount.
Market Value-Adjusted GIS
In a market value-adjusted GIS, the returns on investment are adjusted based on the market conditions.
Single Premium GIS
In a single premium GIS, the investor invests a lump sum amount at the beginning of the investment period.
How GIS Works?
GIS works on the principle of annuity. The investor invests a lump sum amount in the scheme for a certain period. The insurance company then invests this amount in safe and secure investment options. After the completion of the investment period, the investor starts receiving periodic payments. The amount of periodic payments is predetermined at the time of investment and depends on the duration of the investment and the amount invested.
Benefits of GIS
GIS offers several benefits to the investors, such as:
- Guaranteed Returns: GIS provides guaranteed returns to the investor, which makes it a safe investment option.
- Fixed Periodic Payments: The investor receives fixed periodic payments after the completion of the investment period, which provides financial stability and security.
- Tax Benefits: GIS offers tax benefits to the investor under Section 80C of the Income Tax Act.
- No Market Risk: The returns on GIS are not affected by market fluctuations, which makes it a safe investment option.
Eligibility Criteria for GIS
To invest in GIS, the investor must fulfill the following eligibility criteria:
- The investor must be a citizen of India or a non-resident Indian.
- The minimum age of the investor must be 18 years.
- The investor must have a valid identity proof and address proof.
- The investor must have a bank account.
Taxation of GIS
GIS offers tax benefits to the investor under Section 80C of the Income Tax Act. The amount invested in GIS is eligible for tax deduction up to a maximum of Rs. 1.5 lakh per annum. However, the periodic payments received by the investor are taxable as per the income tax slab rate applicable to the investor.
Alternatives to GIS
There are several alternatives to GIS, such as:
- Fixed Deposits: Fixed deposits provide a fixed rate of return on investment and are a safe investment option.
- Public Provident Fund: Public Provident Fund (PPF) is a long-term investment option that offers a fixed rate of return and tax benefits.
- National Savings Certificate: National Savings Certificate (NSC) is a government-backed investment option that provides a fixed rate of return and tax benefits.
- Mutual Funds: Mutual funds offer a higher rate of return than GIS but come with market risk.
Risks Associated with GIS
Though GIS is a safe investment option, it has some risks associated with it, such as:
- Inflation Risk: The returns on GIS are fixed and may not keep up with the inflation rate.
- Interest Rate Risk: The returns on GIS are affected by changes in the interest rate.
- Liquidity Risk: GIS is a long-term investment option, and the investor may face liquidity issues if they need the money urgently.
FAQs on GIS
Yes, GIS is a safe investment option as it provides guaranteed returns to the investor.
To invest in GIS, the investor must be a citizen of India or a non-resident Indian, have a minimum age of 18 years, have a valid identity proof and address proof, and have a bank account.
The types of GIS include deferred annuity GIS, immediate annuity GIS, market value-adjusted GIS, and single premium GIS.
The alternatives to GIS include fixed deposits, public provident fund, national savings certificate, and mutual funds.
The risks associated with GIS include inflation risk, interest rate risk, and liquidity risk.
Conclusion
GIS is a popular investment option that provides guaranteed returns to the investor. It is a safe investment option that provides financial stability and security.
GIS offers tax benefits and is a good investment option for individuals looking for a safe investment option. However, it has some risks associated with it, and individuals must consider them before investing.