If you are searching to park your savings away from the stock marketplace, there are numerous fixed-earnings investment solutions to pick out from. However, not all of them could be accessible to absolutely everyone as some of them are exclusive for senior citizens or retired investors. Still, there are a handful of secure economic instruments that come with an assured interest earnings and in some of these, there is government assure as nicely.
The choice of the ideal alternative that suits you will rely on numerous elements as a lot of investments provide a frequent earnings when other individuals may possibly not. Similarly, some are for pension wants, when other individuals may possibly come with tax-saving and could be more appropriate for meeting extended-term targets.
Moving cash from your bank savings account into one or more of these will yield comparatively higher returns and will support you meet your extended-term targets as nicely. Conservative investors do not want to take dangers with their capital and are fine with earning a fixed return.
Here’s a rundown of some of them and their essential features.
1. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana has been modified and in the Modified PMVVY, the interest price will retain varying based on the economic year in which the investment is made.
- The PMVVY is a ten-year pension scheme backed by the government and suits retired men and women who are aged 60 years or more and want a frequent earnings on their investment.
- For Financial Year 2021-22, PMVVY shall provide an assured pension of 7.40 per cent per annum payable month-to-month. This assured price of pension shall be payable for the complete policy term of 10 years for all the policies bought till 31st March, 2022.
- The quantity of investment made in the scheme is named the ‘purchase price’.
- Depending on the pension alternative (month-to-month, quarterly, yearly), a fixed and assured pension starts as arrears i.e. start out from the finish of the selected period.
- The maximum investment that can be made in PMVVY is restricted to Rs 15 lakh per senior citizen and the maximum month-to-month pension in PMVVY is Rs 9,250 per senior citizen.
- So, if each spouses are above age 60, the maximum month-to-month pension can be Rs 18,500 in the family on an investment of Rs 30 lakh. The pension in PMVVY is not dependant on the age of the investor.
- The scheme can be bought offline as nicely as on the web from the LIC web site only and is only accessible with LIC till 31st March 2023.
2. Floating Rate Savings Bonds 2020 (Taxable)
Floating Rate Savings Bonds 2020 (Taxable) comes with one hundred per cent assure as they are government-backed investments. One can invest by means of branches of State Bank of India, Nationalised Banks and 4 specified private sector banks.
- They have a tenure of 7 years and the interest price will retain varying throughout the tenure of the scheme.
- The price of interest was set at 7.15 per cent per annum payable half-yearly.
- The interest on the bonds will be payable at half-yearly intervals on Jan 1st and July 1st every single year. There is no alternative to spend interest on a cumulative basis.
- The minimum investment quantity is Rs 1000, when there will be no maximum limit for investments made in the Bonds. The maximum investment in money can be made up to Rs 20,000.
- The interest price is linked with the prevailing National Saving Certificate (NSC) price with a spread of 35 basis points more than the respective NSC price.
- Premature redemption shall be permitted for specified categories of senior citizens
3. Senior Citizen Savings Scheme (SCSS)
- SCSS is a well-known investment alternative for these who are 60 years and above.
- An person of the age of 55 years or more but much less than 60 years who has retired on superannuation or below VRS can also open an account topic to the situation that the account is opened inside one month of receipt of retirement rewards and the quantity need to not exceed the quantity of retirement rewards.
- SCSS is for a period of 5 years. More than one account may possibly be opened, but the combined limit is capped at Rs 15 lakh.
- Interest earned is totally taxable and to be added to one’s ‘Income from other sources’.
- SCSS suits senior citizens searching for a higher fixed price of return and a frequent earnings.
- After maturity, the account can be extended for additional 3 years inside one year of the maturity.
- Currently, (April 1, to June 30, 2021) the interest price on SCSS is 7.4 per cent per annum, payable quarterly.
4. Sukanya Samriddhi Yojana (SSY)
- Sukanya Samriddhi Yojana (SSY) is a extended term 21-year scheme aimed at saving for girl kid.
- SSY can be opened only in the name of a girl kid under 10 years. If the kid is 7 years, the maturity of SSY will occur when the kid attains 28 years.
- As a parent, one has to deposit only for the initial 15 years and throughout the last six years even even though the scheme continues, no deposit wants to be made.
- Only on healthcare grounds, one is permitted to prematurely exit from the scheme. After the girl attains the age of 18, a maximum of 50 per cent of the funds of the preceding year may possibly be withdrawn for the girl’s larger education.
- In case of marriage, the SSY is permitted to be closed offered she has turned 18.
- SSY is a tax-friendly investment as it qualifies for tax advantage below Section 80C and even the interest earned is tax-cost-free.
- Being a government-sponsored scheme, SSY carries the highest security of principal and interest earnings.
- Currently, (April 1, to June 30, 2021) the interest price is 7.6 per cent per cent per annum, compounded annually and paid on maturity.
5. Atal Pension Yojna (APY)
- APY is an assured pension strategy, the administration of which is carried out by the Pension Fund Regulatory and Development Authority (PFRDA) below the NPS architecture.
- APY is open for any Indian citizen in between 18-40 years.
- Under the APY, the subscribers would get the fixed minimum pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month
- Pension starts at the age of 60 years, based on their contributions, which itself would be based on the age of joining the APY.
- Under APY, the month-to-month pension would be accessible to the subscriber, and then to spouse and following their death, the pension corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of the subscriber.
6. Public Provident Fund (PPF)
- PPF is a extended term investment and needs a frequent contribution to be paid for 15 years.
- One may possibly, on the other hand, exit following 5 years ( topic to circumstances), avail a loan from 4th year and make partial withdrawals following 7th year.
- As per the guidelines, one is permitted to open only one account in personal name when an additional can be opened in a minor child’s name.
- A minimum of Rs 500 and maximum of Rs 1.5 lakh ( self plus minor account) in each and every economic year can be place into the PPF scheme.
- While the investment qualifies for tax advantage below Section 80C, the interest earned is tax-exempt.
- Post maturity, the PPF account can be extended indefinitely in a block of 5 years.
- Currently, (April 1, to June 30, 2021) the PPF account carries an interest price of 7.1 per cent per cent per annum, compounded annually and is paid on maturity.
7. Kisan Vikas Patra (KVP)
- Available only at post offices, the KVP certificate can be bought by an adult for himself or on behalf of a minor or by two adults.
- The minimum quantity of KVP is Rs 1,000 when there is no maximum limit.
- There is a provision to transfer KVP from one particular person to an additional and from one post workplace to an additional.
- At the time of want, the KVP certificates may possibly be encashed anytime following 2 and half years from the date of buying it.
- Currently, (April 1, to June 30, 2021) the KVP carries a return of 6.9 per cent compounded annually.
- The quantity invested doubles in 124 months and interest along with capital is paid only on maturity.
8. Post Office Time Deposit Account (TD)
- The time deposit (TD) in a post workplace is somewhat related to a bank fixed deposit.
- While the time deposits in a post workplace are for 1, 2 , 3 and 5 years, its only the 5-year TD that comes with section 80C tax advantage.
- There is no maximum limit but tax advantage is restricted to Rs 1.5 lakh each and every year on investment made in 5-year deposit.
- Interest earned is totally taxable and to be added to one’s ‘Income from other sources’.
- There’s only the annual interest alternative as it does not let month-to-month or cumulative solutions.
- Currently, (April 1, to June 30, 2021) the interest price on 5 year TD is 6.7 per cent per annum, payable annually but calculated quarterly.
9. National Savings Certificate (NSC)
- NSC needs only a lump sum payment for a period of 5 years and there is no want to spend additional contributions.
- On maturity, a fixed quantity is received which is identified appropriate at the time of investment.
- NSC is issued in denominations of Rs. one hundred, Rs. 500, Rs.1000, Rs.5000, Rs.10,000.
- The interest is totally taxable but importantly interest is reinvested for the initial 4 years and also qualifies for Section 80C advantage.
- Currently, (April 1, to June 30, 2021) the interest price on NSC is 6.8 per cent per cent per annum, compounded annually and paid on maturity.
10. Government Securities
11. Bank fixed deposit
Bank fixed deposits have constantly been a well-known supply of frequent earnings. Depending on the bank and tenure, at present, the interest price is about 6 per cent per annum across most tenure.
Deposits are insured up to a maximum of Rs.5 lakh for all bank deposits, such as saving, fixed, present, recurring deposits below the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
12. Immediate Annuities
- Immediate Annuity schemes suit these who want to have a frequent supply of earnings till lifetime no matter which way the interest price moves.
- Immediate Annuity scheme can provide a frequent base-level earnings and, for that reason, one may possibly think about investing some portion of the savings into it.
- There are about 7-10 unique pension solutions, like pension for a lifetime for self, following death to spouse and post that the return of corpus to heirs.
- Currently, the pension or the annuity is about 5-6 per cent per annum and is completely taxable as per one’s earnings slab.
What to do
The interest earned on most of these fixed-earnings investments is taxable. Therefore, post-tax returns and following adjusting for inflation, the true returns are low in them. They are at ideal suited for capital preservation and not excellent for wealth creation. One need to invest in them by linking to their targets, maintaining their asset allocation strategy in context.