Category: Personal Finance

Post Office MIS

India Post’s Post Office Monthly Income Scheme (POMIS) is a type of investment. This is a fantastic option for risk-averse investors looking for a steady stream of income. At the moment, the POMIS is offering a 7.6% interest rate. A single account can carry investments worth up to Rs 4.5 lakh, while a joint account can hold investments worth up to Rs 9 lakh. Furthermore, with a 5-year investment period, it is a very low-risk investment. You will receive not only your principal but also a 5% bonus when the bond matures. Once the POMIS investments have matured, they can be re-invested for another five years for a total of ten years.

Government Bond

A government bond is a debt instrument issued by the Indian government, including both the central and state governments. When the issuing body faces a liquidity crisis and needs funds for infrastructure development, these bonds are issued. Depending on the bond’s terms, the authorised issuer may be required to pay interest and/or repay the principal at a later date when the bond matures. A bond, in simple terms, is a formal agreement to repay borrowed funds with interest at predetermined intervals. Investment bonds are a less risky investment option, so your money is safe. Bonds that can be used to raise funds are known as investment bonds. Investment bonds provide guaranteed returns, although at a lower rate than equity.If you are in a higher tax bracket, tax-free investment bonds are one of your best options.

Post Office Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme (SCSS) is a post office savings scheme for senior citizens that provides investors with security and a stable income. It’s also a tax-saving approach. It’s ideal for retirees looking for a low-risk investment. Section 80C of the Income Tax Act allows for a tax deduction for investments in SCSS. Interest, on the other hand, is taxed according to the individual’s tax bracket. The Senior Citizens Savings Scheme requires a minimum deposit of Rs 1,000. A maximum of Rs 15,00,000 is also available. As a result, eligible investors can only invest in the specified range. The amount put into the account cannot be more than the amount received upon retirement. The current interest rate is 7.4% for the quarter of April to June (2020-2021). Every quarter, the interest rate is reviewed. It is also subject to change on a regular basis by the Ministry of Finance.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a Government of India-sponsored pension scheme for senior citizens aged 60 and up, which was available from May 4, 2017, to March 31, 2020. The program has been extended until March 31, 2023, for a total of three years beyond March 31, 2020. The scheme’s goal is to provide seniors with a regular pension. Because Life Insurance Corporation of India has been given exclusive rights to operate the scheme, it can be purchased both offline and online. The scheme offers an initial guaranteed rate of return of 7.40% per year for the years 2020-21, with the rate reset every year after that. If the pensioner lives to the end of the ten-year policy term, the purchase price and final pension instalment will be paid. A lump sum Purchase Price can be paid to purchase the scheme. The pensioner has the option of selecting either the pension amount or the Purchase Price.

Fixed Deposits MIS

Monthly income fixed-deposits are term deposits in which the interest received is credited to the investor’s account each month. Individuals who want a monthly fixed income should consider this form of investment vehicle. These accounts have interest rates that are similar to those for regular term deposits. They also tend to charge senior citizens a higher interest rate, ranging from 0.25%to 0.5% higher than the current rates. IT is backed by the government to a certain amount

Non-Government Backed Monthly Income Scheme- Corporate Deposits

A corporate fixed deposit (corporate FD) is a term deposit held for a set period of time at a set rate of interest. Financial and non-banking financial institutions offer company fixed deposits (NBFCs). Fixed deposits issued by companies can have maturities ranging from a few months to a few years. Choose higher-rated corporate FDs based on the credit rating, which indicates the company’s underlying risk. Corporate FDs offer more liquidity and have a shorter lock-in period than Bank FDs. They offer higher interest rates when compared to bank fixed deposits Corporate FDs offer more liquidity and have a shorter lock-in period than Bank FDs. The returns on CFDs are dependent on market fluctuations. If your interest income exceeds Rs.5,000, you’ll be subject to Tax Deducted at Source (TDS).

Non-Government Backed Monthly Income Scheme- Monthly Income Plan

The Monthly Income Plan is an investment option that primarily invests in lower-risk securities and is typically designed for conservative risk-averse investors and retirees.

It provides a consistent source of income for those looking to supplement their monthly income. Monthly Income Plans primarily to generate income in the form of interest and dividends. MIP earnings are higher than those from traditional fixed deposits and the Post Office Monthly Income Scheme. MIPs have been linked to a lower risk component. Because money is invested in low-risk securities such as preferred shares, fixed-income instruments, and dividend stocks, the risk is reduced.

Investment

oi-Vipul Das

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Published: Saturday, April 10, 2021, 12:00 [IST]

The Reserve Bank of India (RBI) decided to keep the repo rate steady at its recent bi-monthly monetary meeting on April 7, 2021. The central bank has kept the key rates unchanged for the sixth time in a row. Fixed deposits are one of the most common investment products in our country, particularly among risk-averse investors such as senior citizens, due to their guaranteed returns, high liquidity, and tax benefits. Following the pandemic outbreak last year, FD interest rates have begun to drop, which has been upsetting investors, and the central bank’s latest declaration that the key policy rate will remain at 4% may not put them at ease. Considering the current low-interest-rate environment, risk-averse investors can benefit from investing in five-year tax-saving fixed deposits (FDs). Despite the fact that bank FD rates have sunk to historically low levels, some banks still deliver competitive 5-year FD rates.

5-Year Tax Saving FD Rates

On tax-saving FDs, small private banks bid interest rates as high as 6.75 percent. These tax-saving FD interest rates are higher than those offered by large public sector banks. With 6.75 percent interest, DCB Bank and Yes Bank are at the top of the list, followed by RBL Bank, which offers 6.6 percent interest on five-year tax-saving FDs. Union Bank of India provides the highest interest rate on a 5-year tax-saving FD at 5.55 percent, followed by Canara Bank and State Bank of India (SBI) at 5.50 percent and 5.40 percent, respectively across public sector banks of India. Below are the 5 best private and public sector banks that are currently fetching higher returns on tax-saving FDs.

Private Sector Banks	Regular FD Rates In %	Senior Citizen FD Rates
Yes Bank	6.75	7.5
DCB Bank	6.75	7.25
RBL Bank	6.6	7.1
IndusInd Bank	6.5	7
City Union Bank	6	6
Public Sector Banks	Regular FD Rates In %	Senior Citizen FD Rates
Union Bank	5.55	6.05
Canara Bank	5.5	6
State Bank of India	5.4	6.2
Bank of India	5.3	5.8
Punjab National Bank	5.3	5.8
Source: Bank Websites

TDS on tax-saving FDs

The interest earned on a fixed deposit is tax-deductible. Individual investors’ tax on FD interest is deducted according to their tax slab rate category. If the earned interest is more than Rs 40,000 for regular investors and Rs 50,000 for senior citizens, banks and non-banking financial firms deduct TDS (Tax Deducted at Source). TDS is usually deducted at a rate of 10%; but, if the investor does not submit a PAN card, the rate increases to 20%.

Tax benefits and capital security on tax-saving FDs

For investments made in tax-saving fixed deposits, a person can claim a deduction of up to Rs 1,50,000 in a fiscal year under Section 80C of the Income-Tax Act, 1961). To settle at net taxable income, the amount thus invested is withheld from gross taxable income. Premature withdrawals are not permitted on these deposits, which have a 5-year lock-in period. When a bank collapses, the Deposit Insurance and Credit Guarantee Corporation (DICGC) only provide insurance coverage to the depositors. Savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), and other types of deposits are covered by DICGC’s insurance cover. Each depositor in a bank is covered up to a limit of Rs 5 lakh for both principal and interest amounts maintained by her or him, according to the DICGC rules.

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