Steady returns and low risks are two of the most common factors which investors consider before choosing an investment option. Since no investor wishes to put his/her investment at risk, consequently, they look for the safest options to invest in.
Regardless, one should base their investment-related decisions entirely upon factors like their age, risk appetite, financial goals, and investment horizon. For instance, investors who are mostly risk-averse and are looking for a steady income mostly prefer fixed deposits in India, among other schemes.
Likewise, the following highlights the most preferred investment schemes that offer high returns and comes with a low-risk factor .
1.Unit Linked Insurance Plan
ULIPs are reputed for being among the top investment plans in India. The lock-in period for this kind of investment is 3-5 years. However, only a part of the premium is utilized for insurance coverage and the rest is invested in shares or bonds to accrue market-linked sufficient returns.
2.Public Provident Fund
Commonly known as PPF, it is an income-generating tax-saving investment option that is also considered to be one of the best schemes in India for various risk profiles. The lock-in period, however, has a tenor of 15 years. Taxes are not levied on this investment option; this makes it a fruitful investment and retirement planning option for most individuals.
3.Senior Citizen Savings Scheme
This plan can only be availed by senior citizens above the age of 60 years, which is both a major feature and a limitation of this investment scheme. Apart from their pension, this option can aid them with a substantial corpus post maturity. Additionally, it comes with a lock-in period of 5 years and investors can avail tax benefits under section 80C.
4.National Pension Scheme
This investment option is quite flexible and comes with two choices: auto and active. In the case of auto investment option, funds are invested into various assets automatically. Similarly, in case of an active option, investors have the option to choose the asset of their choice. Regardless, the maturity of this scheme occurs after the 60th year of the investor; hence, the lock-in period is dependable on their age.
5.RBI taxable bonds
Apart from fixed deposits in India, these bonds are known to be quite safe to invest in, especially with the financial support provided by the Reserve Bank of India. However, the encashment of these bonds is allowed after the investor has attained the age of 60 years.
Also, RBI taxable bonds come with a lock-in period of 7 years and one cannot use them as collateral against any loans. Additionally, only Indian citizens can purchase such bonds; NRIs are not eligible to avail these bonds.
It is one of the safest forms of investment avenues. Compared to market-linked investment schemes, fixed deposit interest rates do not fluctuate on their returns. A fixed deposit carries a higher rate of interest than most savings deposits. Further, they can also be used as a highly dependable asset. Though it comes with a specific lock-in period, FD holders can opt for premature withdrawal from their deposit to meet unforeseen expenses.
Fixed deposits offered by top financers also come with other benefits like –
- Assured returns – It is largely favoured by investors as only a few investment plans offer a combination of secure and stable returns. The security part arises from the fact that the rate of returns offered on fixed deposits is not market-linked. Also, most institutions extend higher senior citizen fixed deposit rates that further facilitates retirement planning. For instance Bajaj Finance offers up to 8.35% interest rate on fixed deposits for senior citizens.
- Loan facility – Only financial institutions readily sanction loans against fixed deposit and enables FD holders to apply for it online. This proves especially beneficial during an unforeseen situation. However, to avail such benefits, one must opt for financers who offer such a facility in the first place.
- Tax-benefits – Under Section 80C, the principal amount of 5-year fixed deposits are entitled to tax exemptions. It allows FD holders to claim up to Rs.1.5 lakh as tax exemptions on the principal amount of tax-saving fixed deposits.
- TDS rebate – The interest accrued on regular fixed deposits is liable for TDS. However, if in a financial year, FD holders accrue an interest that is less than Rs.40,000, they are required to submit a 15G form to claim TDS exemptions. Likewise, the taxation limit for senior citizen is Rs.50,000, and they have to submit 15H form to claim benefits under the same situation. To understand it better, one should learn how interest earned on fixed deposit is calculated.
Therefore, these investment options not only come with a low-risk burden but also extend substantial returns on the same. This being said, if one opts for investment options like a fixed deposit in India, they should come to the benefits extended and find out if it matches their financial requirements.