Sunday, November 18, 2012

Fixed Income Options

Owing to rise in interest rates in India, there are very good fixed income options available today. Few are discussed below:

Bank Term Deposits:
Few Banks are offering very good interest rates for deposits of more than a year duration. You can get more than 8.5% to 9% return on such investments.
  • For Senior Citizens, it is 0.25% to 0.5% higher
  • Some Banks don't even charge penalty in case of premature withdrawl.
  • Some Banks provide monthly, quaterly, half yearly, yearly compoundedly, so the return can differ.
  • Now, that there is tax benefit for 5 yrs+ Fixed Deposits under Section 80C gives lot of advantage to Fixed Deposits.
  • Much safer option compared to Equities. Regular return with peace of mind.
Click here to check interest rates offered by various banks!
Post Office MIS:
This is another good option for those who are interested in regular monthly income. This is very good and safe investment for senior citizens.
  • Interest rate of 8.5% per annum payable monthly.
  • Maturity period is 5 years.
  • Minimum investment amount is Rs.1000/- or in multiple thereof.
  • Maximum amount is Rs. 4.5 lakhs in a single account and Rs. 9 lakhs in a joint account.
  • Premature encashment facility after one year at some penalty.
  • Interest income is taxable, but no TDS.
  • The Only Post Office scheme where monthly interest is payable.
Personal Provident Fund (PPF):
Popular investment and tax saving option. This scheme is a statutory scheme of the Central Government of India. This is for 15 years.
  • The rate of interest is 8.8% compounded annually.
  • Interest is totally tax free.
  • Tax saving instrument under section 80C.
  • Loan facility available from third year.
  • Withdrawl after 7th year.
National Savings Certificate (NSC):
Another popular investment and tax saving option.
  • Rate of Interest of 8.6% compounded half yearly for 5 year maturity and 8.9% for 10 year maturity.
  • Lock-in of 5 years or 10 years.
  • A Tax saving instrument under Section 80C
  • Interest is taxable but no TDS.
Infrastructure Bonds:
The returns for such bonds are low ~7-8%. But they are the safest. But there are few which are for 10 year period and give good returns of >9%.

Company Deposits:
There are bonds which are issued by private and public companies. The return may be >10% but the investors should carefully invest in such issues as there is a higher risk associated compared to the above options.


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