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Weigh the safe options to invest in India before investing

Author: Team Finapolis/Wednesday, January 31, 2018/Categories: Invest

Weigh the safe options to invest in India before investing

Safe investments are those where the element of risk is almost zero. These types of investments are opted for by individuals who are not up for taking risk, such as elderly and retired people. Many people also are not in favour of putting their hard earned money to risk and therefore choose to invest in safe investments.

Public Provident Fund

The PPF is the most favoured investment instrument for the salaried individual. PPF offers several advantages. The interest income of PPR is a non-taxable amount. Secondly, under Section 80C of the Income Tax Act, it states that PPF is eligible for a tax saving benefit. Thus it makes it an ideal saving instrument for retirement.

A few years ago, the interest rate was 9% but has been dropped to 7.6% recently. There is also a possibility of the rates being slashed further. But it won’t make a big difference if you are investing the money long-term in this fund.

Investors can invest minimum Rs 500 to maximum Rs 1,50,000 in one financial year and can get the facilities such as loan, withdrawal and extension of account. The only disadvantage is that it has a lock-in period of 6 years. Partial withdrawal facility can be availed only in the 7th year. The duration of this fund is 15 years but can be extended by 5 years at every renewal.

Post Office Monthly Income Scheme

Post office monthly income scheme or POMIS gives lower interest rate than the PPF and is also fully taxable. It doesn’t offer benefits either. Due to these factors, the returns turn out to be low.

The POMIS is a five-year investment plan with the cap of Rs 9 lakh for a joint ownership and Rs 4.5 lakh for a single ownership. The minimum amount that must be deposited is Rs 1500. The interest rate is set each quarter and is currently at 7.8% per annum, which is payable monthly. One can prematurely close the account one year after it is opened, at a 1% or 2% deduction of deposit.

This scheme, guaranteed by the Government of India, is considered one of the safest investments in India, albeit being devoid of many benefits.

Senior Citizen Savings Scheme

This scheme is the government’s scheme to offer more benefits to senior citizens. It can only to be opened by an individual of more than 60 years of age or 55 years or more of he/she has taken VRS. A few months back, government adjusted the investment age to 50 years. A single as well as joint account can be opened.

The maturity period of this scheme is 5 years. The interest rate is decided by the government and set every quarter. The rates currently stand at 8.4%, having fallen from nearly 10% in the past. This scheme can be opened in certain banks as well, along with the post office.

Given that the scheme is for senior citizens, it is not taxable, but it does not have any tax benefits. The only disadvantage of this scheme is that it is under the scrutiny of the government and they keep changing the interest rate at regular intervals.

Sukanya Samriddhi Account

Sukanya Samriddhi Account can be opened any time before the girl child turns 10 years old. Under this scheme, a minimum of Rs. 1,000 and a maximum of Rs. 1,50,000 can be deposited in a year. It can be opened in commercial banks as well as the post office.

It offers a high interest rate of 8.6% and the interest is compounded yearly. This scheme is exempt from tax, even at the time of withdrawal.

This account is locked-in till the time the girl child reaches 21 years of age or during the marriage of the girl, whichever is earlier. The account cannot be operated once she is married. However, 50% of the money can be prematurely withdrawn at 18 if the money is required for higher education.

A unique feature of this account is that the interest is continued to be paid to the policy holder in spite of the account maturing. And this will continue till the account is closed.

Investing in this scheme will be the best gift you can give your girl child.

Post Office Recurring Deposits

Post office recurring deposit accounts are generally opened by those living in rural and semi-urban areas. One reason for their immense popularity is their high interest rate which provides a healthy profit on maturity.

The interest rates are revised periodically and they currently stand at 7.1%. The minimum tenure of this account is five years. It can be extended to an additional 5 years the end of tenure. If one requires money urgently, up to 50% of the amount can be withdrawn upon the completion of 1 year. A minimum deposit if Rs10 must be made every month; there is no upper limit on the amount. These deposits, however, are taxable.

This kind of account is considered ideal for salaried individuals.

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rajyashree guha

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