How to generate passive Income? We all want to earn Passive Income and invest in various assets to get good returns. What we may not consider that well is the…
- Public Provident Fund
The Public Provident Fund (PPF) currently (subject to change every three months) offers 7.1 percent per annum compounded annually. It is a 15-year scheme, which can be extended indefinitely in a block of 5 years. It can be opened at a designated post office or bank branch. Certain banks now allow you to open one online.
PPF suits those investors who do not want much volatility in returns. However, for long-term goals and especially when the inflation-adjusted target amount is high, it is better to take equity exposure, preferably through equity mutual funds, including tax-saving equity-linked savings schemes (ELSS), and not solely depend on PPF.
2. Voluntary Provident Fund
For an employee, it is mandatory to contribute 12 percent of one’s basic pay (employer contributes an equal amount) into one’s Employee’s Provident Fund (EPF). However, one may voluntarily increase one’s own contribution up to 100 percent of basic and dearness allowance into the Voluntary Provident Fund (VPF). The provident fund statement will show the breakup of contribution towards EPF as well as VPF. VPFVPF is a part of EPF and all the rules remain the same. Although one may opt-out from VPF by intimating one’s employer, the money contributed towards VPF, which represents additional savings towards retirement gets locked-in for a longer tenure, therefore, use the VPF route judiciously.
3. Senior Citizens’ Savings Scheme
Probably the first choice of most retirees, the Senior Citizens’ Saving Scheme (SCSS) is a must-have in their investment portfolios. As the name suggests, the scheme is available only to senior citizens and early retirees. SCSS can be availed from a post office or a bank by anyone above the age of 60. Early retirees (age between 55 and 60 years) can invest in SCSS, provided they do so within one month of receiving their retirement funds. SCSS comes with a five-year tenure, which can be further extended by three years once the scheme matures.
According to a notification from the Ministry of Finance dated October 3, 2017, the minimum age limit for investing in SCSS for retired defence personnel (excluding civilian defence employees) has now been fixed at 50 years. Earlier, they were allowed to invest in SCSS irrespective of when they retired.
4. Post Office Time Deposit Account (POTD)
Available for tenures of 1, 2, 3, and 5 years, it’s only the 5-year deposit that enjoys Section 80C tax benefit. Currently, it offers an interest rate of 6.7 percent per annum. It is payable annually, but compounded quarterly.
5. National Savings Certificates
Currently, the 5-year National Savings Certificates (NSC) offers an interest rate of 6.8 percent per annum and is fully taxable. NSC does not offer monthly or yearly interest payout and only has the cumulative option.
6. Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana (SSY) currently fetches an interest rate of 7.6 percent compounded annually. Currently, SSY offers the highest tax-free return with a sovereign guarantee and comes with the exempt-exempt-exempt (EEE) status. SSY can be opened any time after the birth of a girl till she turns 10, and you have to invest a minimum of Rs 250 (Earlier Rs 1,000) annually. A maximum of Rs 1.5 lakh can be deposited during each financial year.
7. 5-year notified tax saving fixed deposits
For someone who has not exhausted the yearly Section 80C limit of Rs 1.5 lakh and is looking for a debt tax saver, can consider the 5-year notified tax-saving bank fixed deposits. It comes with monthly, quarterly, or cumulative interest payout options on the investment.
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