Looking to park your money in investment avenues other than PPF? Read this article to find out the top five attractive savings tools that will fetch you good returns.
Public Provident Fund commonly called as PPF is one of the most attractive savings investment tools used by tax-payers. The reason for the popularity of PPF investment scheme is because it pays interest at attractive rates and is completely risk-free. No doubt the other investment options like mutual fund, equity linked savings scheme, etc. offer attractive and competitive returns on investment, but these investment tools are not suitable for investors who have very low risk appetite.
For low risk appetite investors, PPF account is the best investment tool but the main hitch while investing in PPF account is that this account allows investors to invest an amount up to 1.5 lakhs per financial year. If you want to invest more than the permissible limit, you need to search for other investment tools.
Another limitation of investing in PPF account is that the investment in this account is for 15 years. Thus, the amount is locked in the scheme for a long duration, while the other investment tools have comparatively lower duration.
List of Attractive Investment Options other than PPF:
Here is a list of five investment options other than PPF account that offer attractive fixed returns:
Bank FDs, also called as term deposits, are the most popular investment tool in India. They are suitable for conservative investors. Almost all financial institutions and banks in India offer term deposit schemes for investors.
You can park money in this investment scheme by considering the returns it offers. The amount of returns offered by bank fixed deposits vary as per the rate of interest offered by the bank. Currently, the rate of interest offered by all banks and financial institutions across India vary between 6% to 8.25% for various tenures.
Banks also offer tax saving fixed deposit schemes that allow tax deduction to investors under Section 80C of the Income Tax Act. The tenure of such fixed deposit is 5 years or more.
Tip: So, if you are looking for a conservative investment option with guaranteed return for a definite tenure, then Bank FDs are a good option.
Tax Aspect: The interest earned in Bank FD is taxable as per the slab of the investor.
Other than PPF account, investing in National Savings Certificate has proven to be one of the popular investment options. Investments in National Savings Certificate can be done only via a Post Office.
The investment in National Savings Certificate has to be done for 5 years i.e. the investment is locked for 5 years. Currently, the interest is accrued at 7.9% compounded annually as on July 1st, 2019. The entire interest earned on the investment is received at the time of maturity. The investment in National savings certificate can be as low as Rs. 100 while there is no higher cap on the amount of investment. Kindly note, the amount of interest earned is taxable as per the tax slab of the investor.
NSC has lost popularity over the years because of the difficulty of operation through the post office but it is still quite popular in the semi-urban and rural parts of India.
Tip: If you need a guaranteed investment option, then NSC can be considered.
Tax Aspect: The interest earned in NSC is taxable as per the slab of the investor.
The Government of India has introduced attractive investment option for investors who have a girl child called as ‘Sukanya Samriddhi Account’. This account offers interest rate of 8.4% per year. This account can be opened only by individuals who are parents of girl child below the age of 10 years. Another condition for opening this account is that it can be opened in the name of the girl child only. The maturity tenure of this account is 21 years from the date of opening this account. Also, it is important to note that you can open a maximum of two Sukanya Samriddhi Account in the name of the girl child and the scheme is allowed for maximum two girl children.
Tip: Sukanya Samriddhi Accounts are a great option if you have a girl child and can surely be considered.
Tax Aspect: The entire earning on these accounts are completely tax free.
Kisan Vikas Patra is an investment option offered by Government of India. Investment in Kisan Vikas Patra can be done through Post offices. So, if you intend to invest in Kisan Vikas Patra, you can visit the nearest post office with necessary documents.
Under the Kisan Vikas Patra scheme, one can double their investment by investing in the scheme for a tenure of 9 years 4 months or 112 months. The investment under this scheme is entirely risk-free and offers guaranteed returns as the scheme is backed by the government of India. This investment scheme offers an indicative return around 7.7%. The initial minimum requirement is of Rs. 1000, while there is no limit on the maximum amount of investment.
Tip: This investment tool is suitable for investors who have a low risk profile. Since the minimum investment requirement is quite low, this is quite good for beginners!
Tax Aspect: The interest earned in KVP is taxable as per the slab of the investor. However, a TDS @ 10% would be deducted from Interest and the rest needs to be paid as per the slab.
Time Deposit Schemes
One of the finest investment options for conservative investor other than PPF account is the ‘Time Deposit Scheme’ offered by post office. The time deposit scheme is offered by all post offices across India.
The rate of interest offered by the time deposits is around 6.9% to 7.7% while the tenure offered is as per the financial goals of the investor like – 1 year, 2 years, 3 years and 5 years. The interest rates of the post office time deposit scheme are decided quarterly by the government of India. While the interest rates are calculated quarterly, the interest is paid annually to the investor.
Note: The interest received on the investments under this scheme is taxable for the investor as per the income tax slabs defined by the Income Tax Department.
Tax Aspect: The interest earned in time deposit schemes is taxable as per the slab of the investor. However, no TDS is deducted. It needs to be paid at the time of filing Income Tax returns.
The above-mentioned points are 5 of the most attractive guaranteed investment options other than a PPF account. Following is an overview of advantages offered by the investment options:
- All the investment tools mentioned above are risk-free i.e. the investments remain unaffected from the volatility of the capital market.
- All the above-mentioned investment options offer fixed maturity amount at the end of the tenure
- The rate of interest remains unchanged throughout the tenure of the time deposit
- All the investment schemes offer Guaranteed returns. Many of the above-mentioned schemes are introduced by the Government of India, so all these investments carry sovereign guarantee i.e. investor shall receive the entire invested amount along with returns as per the terms and conditions of the scheme
- Depositors can claim tax benefit on their investments done for 5 years or more. This tax benefit can be claimed under Section 80C of the Income Tax Act.
Investors can park their money in these options and earn attractive fixed returns depending on the amount of investment and interest rate. The above investment options will also help you in saving tax, thereby answering the most important question “how to save income tax?” So, even if you have exhausted the limit of Rs 1.5 lakhs of your PPF account in a particular financial year, you need not worry. The above-mentioned 5 investment options will help you earn attractive returns and diversify your investment portfolio.
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