Top 9 Fixed Income Investments in India

Introduction

In the pursuit of financial freedom, the concept of making your money work for you is a timeless mantra. It's not just a catchy phrase; it forms the bedrock of prudent investing. One common thread among affluent individuals is that they don't let their wealth languish in bank accounts. Instead, they deploy their capital into various investment avenues to secure and grow their wealth.

For the average salaried person in India, finding the right investment vehicle for assured returns can be a perplexing task. To help you navigate this complex landscape, we've compiled a comprehensive list of the top 9 fixed-income investment options in India. These investments offer stability and a regular income stream, making them an attractive choice for risk-averse individuals.

What are fixed-income securities?

Fixed-income securities are investment instruments that represent a debt obligation. These instruments pay a fixed amount of interest to investors at regular intervals, usually semiannually, and return the principal amount at maturity. Bonds are the most common type of fixed-income securities. Other forms include government bonds, corporate bonds, and fixed-income ETFs.

Now, let's dive into the top 9 fixed-income investment options in India.

1. Investing in Solar Assets and Projects

The future is bright for solar assets in India. According to the 2022 Global Status Report, India ranks fourth in the world in terms of solar power capacity, with a current capacity of 63.3 GW. The government has also given the green light to 59 solar parks across the country, totalling 40 GW.

Investing in the solar sector, a booming renewable energy industry, can be one of the top fixed-income investment choices in India. These investments are backed by the government and offer promising returns.

How to Invest:

You can invest in various solar projects offered by companies in this sector. You have the option to participate in debt funds or become an accredited investor. Your investment will be utilized in solar initiatives, and in return, you can earn attractive fixed-income returns.

Key Features:

Minimum investment can be as low as INR 5000, with a maximum cap of INR 25 lakhs or more, depending on the project.
Eligible for Indian citizens and NRIs, with the only requirement being a valid PAN and an NRO account.

Why Invest in Solar Energy?

Investing in solar energy offers not only attractive returns but also contributes to a sustainable future. Solar power is a clean and renewable energy source, making it a socially responsible investment.

2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

As retirement approaches, securing a reliable fixed income source becomes a paramount concern. The Pradhan Mantri Vaya Vandana Yojana is one such scheme tailored for senior citizens aged 60 and above, offering financial security for a 10-year period.

Key Features:

Maximum investment limit: INR 15 lakhs.
Payment modes: Lump sum or periodic payments (yearly, half-yearly, quarterly, or monthly).
Return rate: Between 7% to 9% for a 10-year term.
Maturity payout includes principal, final pension, and purchase price.
In the event of the policyholder's natural death, the amount is returned to the nominee or heir.
Loan option: Pensioners can avail of a loan of up to 75% of the purchase price for emergencies.
Pension payment modes: NEFT, Aadhaar Enabled Payment System.

Eligibility:

Age: 60 years and above for senior citizens.
Application process: Online through LIC's website.

Documents Required:

Aadhaar card.
Bank account details.
PAN card.
Age proof.
Address proof.
Income proof.
Retirement proof.

Modes of Pension and Purchase Price Limits:

Yearly: INR 1,44,578 to INR 14,45,783 (Minimum Pension: INR 1,000, Maximum Pension: INR 10,000)
Half-Yearly: INR 1,47,601 to INR 14,76,015 (Minimum Pension: INR 3,000, Maximum Pension: INR 30,000)
Monthly: INR 1,49,068 to INR 14,90,683 (Minimum Pension: INR 6,000, Maximum Pension: INR 60,000)
Quarterly: INR 1,50,000 to INR 15,00,000 (Minimum Pension: INR 12,000, Maximum Pension: INR 1,20,000)

The Pradhan Mantri Vaya Vandana Yojana is an excellent choice for retirees seeking stable, long-term income.

3. Senior Citizen Savings Scheme

Designed for individuals aged 60 and above, the Senior Citizen Savings Scheme (SCSS) provides an avenue for retirement savings. This scheme also offers tax deductions under Section 80C for the investments made.

Key Features:

Maximum investment limit: INR 15 lakhs or the amount received at retirement, whichever is lower.
Accounts can be opened at post offices or authorized banks.
Tax deduction: Up to INR 1.5 lakhs under Section 80C, but TDS will be deducted if the interest exceeds INR 50,000.
Extendable tenure: Three more years after the initial 5-year term.
Deposit limit: INR 1,000 to open the account.
Premature closure: A deduction charge of 1.5% for periods less than 2 years or 1% for closure after 2 years.
Interest is disbursed quarterly on the 1st of April, July, October, and January.

Eligibility:

Age limits: 55 to 60 years for VRS or Superannuation, 60 years and above for senior citizens, and 50 to 60 years for retired defence servicemen.
Application process: Forms available at authorized banks or post offices, along with required attested documents.

Documents Required:

Aadhaar card.
Voter ID.
PAN card.
Electricity bill.
Senior citizen card or birth certificate.
Two passport-size photographs.

The Senior Citizen Savings Scheme offers assured returns and is a secure investment for those planning their retirement.

4. RBI Floating Rate Bonds

The Reserve Bank of India (RBI) offers floating-rate bonds, which provide higher returns compared to regular RBI bonds. These bonds have interest rates that reset every six months, offering the potential for increasing returns.

Key Features:

The interest rate is reset every six months (182 days).
Recent example: Government of India floating rate bond 2033 with an interest rate of 8.51% from March to September 2023.
Minimum investment: INR 1,000; maximum has no limit but must be in multiples of INR 1,000.
Eligibility: Indian citizens, individuals, or HUF.
Bond tenure: 7 years.
Premature withdrawal or redemption is only applicable to senior citizens.
Taxation: Maturity amount taxable according to the Income Tax Act.
Non-transferable and not usable as collateral for loans.

RBI Floating Rate Bonds offer low-risk investments with the potential for attractive returns.

5. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one of the oldest and safest fixed-income investment options for salaried individuals in India. It offers a longer tenure, above-average interest rates, and a substantial savings amount at maturity.

Key Features:

Tenure: 15 years, extendable in 5-year segments.
Interest rate: 7.1%.
Minimum investment: INR 500; maximum investment: INR 1.5 lakh annually.
Eligibility: Indian citizens.
Accounts can be opened at authorized banks, post offices, and private banks.
Premature withdrawal: Up to 50% allowed after 5 years.
Annual deposit required for 15 years.
Opening balance: INR 100.
Nominee facility available.
Loan option: 25% of the available PPF amount.

PPF is an excellent choice for individuals looking for a low-risk investment with attractive long-term returns.

6. National Savings Certificate IX

The National Savings Certificate (NSC) is a low-risk investment option for individuals seeking fixed-income investments. It is also eligible for Section 80C deductions.

Key Features:

Tenure: 5 years and 10 years.
Interest rate: 7% annually.
Minimum investment: INR 1000, making it accessible to all income groups.
Eligibility: Indian individuals only.
Loan option available.
Interest rate revised quarterly by the government.

Please note that NSC IX was discontinued by the government in December 2015, and presently, only NSC VIII is available.

NSC offers a straightforward and secure fixed-income investment option for risk-averse investors.

7. GOI Savings Bonds

GOI Savings Bonds are issued by the Reserve Bank of India (RBI) and are considered risk-free investments since they are regulated by the government.

Key Features:

New 7.7% savings bonds offer a fixed interest rate of 7.7% annually.
Tenure: 7 years.
Eligibility: Resident individuals, HUFs, charitable institutions, institutions with a certificate under Section 80G of the IT Act, or universities under Section 3 of the UGC norms.
Joint ownership and nomination available.
Minimum investment: INR 1,000, with no maximum limit (multiples of INR 1,000).
Available through Stock Holding Corporation of India Limited (SHCIL) office, SBI branches, and select private banks.
Non-tradable and non-transferable.
Brokerage fee: One rupee for every 100 rupees of the principal amount.
Maturity amount taxable as per the income tax slab.

GOI Savings Bonds provide a secure investment option with attractive returns for risk-averse investors.

8. Equity Share Dividend

Equity Share Dividend is a way for investors to earn profits by owning equity shares in a company. Returns can be in the form of capital appreciation or dividend income.

Key Features:

Requires purchasing shares of the company and becoming a shareholder.
Returns can come from capital appreciation or dividends.
Higher returns compared to many other schemes.
Investment amount depends on share value at the time of purchase.

Investors can choose from various high dividend-paying stocks to generate income through equity share dividends.

9. Annuity Plans

Annuity plans are offered by banks, allowing account holders to deposit a lump sum amount for a specified period at an interest rate of 6% to 7%. Monthly payments are then credited to the account holder.

Key Features:

Deposit a lump sum amount for a fixed period.
Monthly payments provided at an interest rate of 6% to 7%.
Ideal for generating a regular monthly income.
Suitable for retirees and those seeking financial stability.

Annuity plans offer a safe and predictable income stream, making them a preferred choice for retirees and individuals looking for monthly income.

FAQs

Q1: Who can invest in solar projects?

A1: Anyone with the means to invest can participate, including Indian citizens and NRIs, provided they have a valid PAN and an NRO account.

Q2: What are the expected returns from investing in solar assets?

A2: Returns typically range from 10% to 15% annually, depending on the specific project and investment plan.

Q3: Is there a minimum investment requirement?

A3: The minimum investment can be as low as INR 5000, making it accessible to a wide range of investors.

Q4: What are fixed-income securities, and how do they work?

A5: Fixed-income securities are investment instruments that represent a debt obligation. They pay a fixed amount of interest to investors at regular intervals, with the principal amount returned at maturity. These securities include bonds, government bonds, corporate bonds, and fixed-income ETFs. Investors receive periodic interest payments, making them a source of stable income.

Q6: What is the minimum investment required for Pradhan Mantri Vaya Vandana Yojana (PMVVY)?

A6: The minimum investment for PMVVY can vary based on the chosen mode of pension payment. For example, the minimum purchase price for an annual pension payment is INR 1,44,578, while for half-yearly, it's INR 1,47,601, monthly is INR 1,49,068, and quarterly is INR 1,50,000. These figures may change over time, so it's advisable to check the current requirements.

Q7: Can NRIs invest in the Senior Citizen Savings Scheme (SCSS)?

A7: No, the SCSS is open to Indian residents only. Non-resident Indians (NRIs) are not eligible to invest in this scheme. It is specifically designed for senior citizens and retirees residing in India.