Okay, so you are risk averse and do not have a hefty pay package which gives you the courage to invest in risky options of stocks, bonds and mutual funds that can cause considerable loss in case your bet on the market or company’s performance goes wrong. Yet you want to park your hard earned money somewhere in order to grow it. What are the options that you have, now that fixed income deposits have fallen out of favour owing to their plummeting interest rates?
We help you take a judicious decision on this personal finance front by presenting a list of safe investment options that are bound to give you good returns. Read on…
Public Provident Fund (PPF)
Duration – 15 Years
Expected Returns – 7.9 percent
At 7.9 percent, it guarantees one of the best annual returns which are tax free too. However, the rate may fluctuate as the government resets it every quarter to align it with market rates. The minimum investment is Rs.500 and the maximum Rs.1.50.
It is highly safe, since it is backed by the government. This means there is absolutely no risk of default.
The amount invested is deducted from taxable income up to Re.1 lakh. That is another big advantage.
But the best part – the flexibility it accords. The entire amount can be invested either at once or in over 12 instalments in a year. This works best with those who do not have a fixed source of income. The minimum investment is Rs500 annually and the maximum is Rs.1.50 lakh.
One can open a PPF account at the State Bank of India, its branches and its associated banks. One can also can do so in certain nationalized banks, the post office and private sector banks, namely ICICI Bank, HDFC Bank, etc.
The only hitch – the long wait to see good returns on your investment.
Post Office Time Deposit Account (POTD)
Tenure – 1 to 5 years
Expected Returns – the highest return is 7.8 percent per annum for a five year deposit
The greater the number of years, the higher the rates of interest on the money you have parked. It also provides tax benefits under Sec 80C of the Income Tax Act. The minimum amount required to be deposited in the post office to open this account is as low as Rs.200. Even minors can open this account and there is no limit to the number of accounts one wishes to open.
The interest earned is fully taxable under this account.
Post Office Monthly Income Scheme (POMIS)
Tenure – 5 years
Expected Returns – 7.8 percent
The biggest unique perceived benefit of a POMIS is the monthly income it guarantees, which at present stands at 7.8 percent of the deposit amount. The interest is paid every month once you have made the deposit.
It is decidedly a safe investment option as it is guaranteed by the government of India.
The upper limit for the amount invested under joint ownership is Rs.9 lakh and under single ownership Rs.4.5 lakh.
The investment in POMIS doesn’t help in receiving any tax benefit and the interest is fully taxable.
8 Percent Savings (Taxable) Bonds 2003
Tenure – 6 years
Expected Returns – 8 percent
With interest rates on fixed incomes coming down, many rushed to invest in the government of India issued 8% savings bond a year back. Besides the interest rate, other big draws are sovereign guarantee and no investment ceiling. The minimum investment is Rs.1000, which is the face value of the bond. The lock in period is six years.
The rate is either paid half yearly or at the end of the tenure, depending upon the investor’s preference. These bonds can be bought from the State Bank of India or other nationalized banks and some private sector banks. The bonds can also be purchased from the offices of Stock Holding Corporation of India.
As the name indicates, the interest rate of eight percent is taxable. They are available in physical form only. Further they are not listed or tradable on stock exchanges – something that renders them illiquid.
Senior Citizen Savings Scheme
Tenure – 5 years
Interest Rate – 8.4 percent
Meant for those 60 years and above, it currently pays an interest rate of 8.4 per cent. Earlier it was 10 percent. The maturity period is five years, post which it can be extended for another three years. Minimum deposit is Rs.1000 and maximum deposit is Rs.15 lakhs.
The scheme can be opened in post office, in 24 public sector banks and one private sector bank, namely ICICI. Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act.
Interest amount in excess of Rs.10000 per year, taxed.