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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