Investors who have a relatively low-risk appetite may not want to expose their savings to volatility. Let’s look at some investment options that are low risk and fetch assured return.
Tax-saving investments, typically long term in tenure, can be both market-linked and fixed. Returns fetched by market-linked products depend on the performance of the underlying equity or debt and are suitable for investors with high-risk appetite. The ones who have a relatively low-risk appetite may not want to expose their savings to volatility. Let’s look at some investment options that are low risk and fetch assured return.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a 15-year scheme that currently offers interest of 8% per annum. Although the maturity period associated with this investment is 15 years, it can be extended indefinitely in blocks of five years. You can start your PPF account with a minimum of Rs 100. Thereafter, maintain a minimum deposit of Rs 500 in a financial year. PPF offers tax benefit under Section 80C up to Rs 150000.
Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme (SCSS), a scheme available to senior citizens and early retirees, offers an interest rate at 8.7% pa at the moment. The rates are set every quarter. However, once invested, the rate remains fixed through the entire term. The lock-in period in this scheme is for 5 years. You can invest up to Rs 15 lakh lakh in a SCSS account and you can open more than one account in this scheme. The tax deduction benefits available are of Rs 1.5 lakh under Section 80C. From April 1, 2019, interest income exceeding Rs 40000 from SCSS would be subject to TDS, up from the earlier limit of Rs 10,000.
Bank Tax Saver FDs
Bank FDs are one of the most popular investment options for the risk-averse investors. Invest in the 5-year tax saving FDs. It comes with monthly, quarterly or cumulative interest pay-outs. The interest offered is around 7.5% to 8% pa and the interest earned is taxable as per the applicable tax slab.
Voluntary Provident Fund (VPF)
For salaried employees, it is mandatory to make a contribution of 12% of one’s basic pay toward EPF. However, you can make a voluntary contribution of up to 100% of basic and dearness allowance known as voluntary provident fund (VPF). The interest earned on VPF is tax exempt under Section 80C and all other rules are the same as that of EPF.
National Savings Certificate (NSC)
The NSC offers interest at 8.0% compounded annually. Through investment in NSC, you can avail tax deduction up to Rs 1.5 lakh under Section 80C. It comes with a lock-in period of five years. Interest earned in the initial four years is eligible for exemption under Section 80C. Interest accrued in the fifth year is taxed as per the applicable slab. However, there is no cap on the quantum of investment.
Sukanyaa Samridhi Scheme (SSS)
If you are blessed with a girl child, you may also consider investing in the Sukanyaa Samridhi Scheme. It fetches interest of about 8.5%, which can be safely stated to be higher than the prevailing inflation rate.
(The writer is CEO, BankBazaar.com)