Beyond Fixed Deposits – Alternative investment plans for working professionals

Worried about tax savings and investments? Check out these great alternative investment options that are available for working professionals.

Created On: Jan 22, 2018 10:26 IST
Beyond Fixed Deposits
Beyond Fixed Deposits

For youngsters who have started working recently, investment and tax planning always remains a tricky topic. While many young office goers are unable to manage their personal finance and invest for future; those who do also only try the more tried and test options such as Bank Fixed Deposits. But in a growing economy like India, there are many other alternative investment options available for working professionals that can offer a much better and higher ROI as compared to FDs. Below, we will discuss a few of such interesting investment options that can prove to be a better than investing in a FD.

Why the obsession with Bank Fixed Deposits?

Bank FD (Fixed Deposits) is the safest way to save money for the future. There’s no market risk involved in FDs and your money is always in the safe hands of banks. It’s the basic reason why Fixed Deposits have become popular among young working professionals who don’t want to take risk in terms of wealth management. However, the interest rate in Fixed Deposit is going down at a rapid rate, and that’s a thing of concern. Meanwhile, there are many alternatives to FDs such as Mutual Funds and Stocks, however, there’s a risk involved in such investments.

So, if you are worried about the falling FD rates, and looking for some good fixed income options, then here’s a list of better options that will give you good returns and are tax efficient as well:

Voluntary Provident Fund (VPF)

Voluntary Provident Fund is a way to boost up your retirement savings by contributing more to your Employer’s Provident Fund (EPF) Account. VPF is Tax efficient as well. Actually, every employer deducts 12% of your basic salary towards EPF, however, if you wish, you can contribute much more in EPF (as much as 88% of your salary). Unlike Public Provident Fund, there’s no limit in the saving amount towards Voluntary Provident Fund. Some key features of VPF are as follows:

  • Interest rate – 8.65%

  • Investment period – As long as you are employed and continuing with EPF

  • Investment amount – Depends on salary

  • Age – No limit

  • Tax exemption –80C benefit available, and interest is tax free

Ideal Investment Option For: VPF is generally useful for long-term saving plan without any risk whatsoever.

PSU bonds

Though PSU Bonds are taxable, these bonds are good for anyone who falls under the lower income tax bracket. The interest rate in PSU Bonds is also appreciable. In order to raise funds, PSUs float bonds in the market. It borrows funds for their regular working capital expenditure by releasing bonds. The market for listed PSU Bonds has grown exponentially, and they are considered safe and secure investment option.

  • Interest rate - 8.55%

  • Investment period – 8 Years on an average

  • Age - No age limit

  • Investment amount: No limit

  • Taxation: Interest and capital gain is taxable

Ideal Investment Option For: PSU Bonds are useful for investors who fall inthe lowest income tax bracket

Senior Citizens’ Savings Scheme

The Senior Citizens’ Savings Scheme is an ideal investment policy for retired people who are looking for safe and monthly returns on a regular basis. This scheme has become popular among retired people over 60 years of age as it is safe and offers regular income.

  • Interest rates - 8.3%

  • Invest period - 5 years, which can be extended to 3 more years

  • Age limit: 60 years and above (55 for early retirees)

  • Investment amount: Rs 15 lakh

  • Tax benefits - 80C benefit available, however, interest is taxable

Ideal Investment Option For: This scheme is useful for retired people who want regular income and fall under lower income tax bracket.

Sukanya Samriddhi Yojana

Sukanya SamriddhiYojana (SSY) was launched as part of govt’s Beti Beti Padhao campaign. It is a small deposit scheme for the girl child; it currently fetches more than 8% interest rate. It provides income tax relief as well. The Sukanya Samriddhi account can be opened at any time after the birth of a girl until she turns 10, with a minimum deposit of Rs. 1,000, and a maximum deposit of Rs. 1.5 lakh.

  • Interest rate - 8.1%

  • Invest period - Deposits can be made till the age of 14, and the maturity is at the age of 21

  • Age limit - 10 years or less

  • Investment amount: Rs 1.5 lakh a year

  • Tax benefits – Interest rate is tax free

Ideal Investment Option For: It is useful for building a long-term wealth asset for a girl child

Savings Bonds 2018 (RBI Bonds)

Saving Bonds are not new. The Government of India withdrew 8% taxable bonds recently, and has come up with 7.75% taxable bonds, 2018 in its place. The new bonds will have a maturity period of 7 years while the earlier bonds used to have maturity period of 6 years.

  • Interest rate - 7.75%

  • Investment period - 7 years

  • Age: No limit

  • Investment amount: No limit

  • Taxation: No text benefit under Section 80C and the interest rates are also taxable

Ideal Investment Option For: This is an ideal investment policy for those who want regular income and fall under lower income tax bracket.

Public Provident Fund (PPF)

An initiative by Government of India, PPF Scheme is a-popular long-term investment plan, which is safe and secure by all means. It offers lucrative interest rates, and there’s no risk involved in PPF saving scheme, as it is backed by the govt. Moreover, the returns in PPF scheme are exempted from Income Tax. The minimum investment amount in PPF is Rs. 500, and the maximum amount is Rs. 1, 50,000 in one financial year.

  • Interest rate - 7.6%

  • Investment period: 15 years, this can be extended in blocks of 5 years

  • Age: No limit

  • Investment amount: Rs 1.5 lakh per year

  • Taxation: Benefits under Section 80C and interest rates are also tax free

Ideal Investment Option For: It is useful for those who are looking for long-term invest plan that involves no risk at all.

So, there you have it! Some less known investment options that are as good as Fixed Deposits. We hope that these investment options will help you look beyond Bank FDs and give you better returns.

In case, you have any doubts or have something to say, please feel free to write down your comments in the below-mentioned box. Further, you can also share this article across your circle to let your friends know about the various investment plans that give higher interest rates and are risk free as well.

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