Worried About Falling Interest Rate on FD? Here Are 6 Good Options

fixed deposits

Saving money for future needs is one of the major concerns of every salaried and non-salaried individual in India. Most people think conservatively when it comes to investment and savings in India. They want risk free investment instruments which could yield them high return benefits. This is the reason why people are more inclined to bank fixed deposit schemes than any other investment options. However, the falling bank FD interest rates have created much difficulty for conservative investors. Here are some better investment and savings options than bank FDs for you.

6 Good Savings and Investment Options

Those who want to put their hard earned money in a risk free yet better savings and investment option, which would fetch higher interest rates than bank FD interest rates, may check out other attractive yet safe investment options. 6 better savings and investment options or fixed income choices in India other than bank FDs are as follows:

  1. Voluntary Provident Fund – VPF is just like other provident fund savings scheme for accumulating corpus for retirement. Its current interest rate is as high as 8.75% and it falls under complete exemption category i.e. EEE. This means the amount contributed, principal sum and the maturity benefit amount are all eligible for tax exemption. The VPF savings scheme is available to only salaried individuals. This fixed income instrument offers you following benefits:
  • You are not obligated to make a VPF contribution but you may contribute any part of your salary towards the scheme according to your will. However, the amount of contribution is outside the 12 percent contribution towards the Employee Provident Fund.
  • The scheme comes with a basic tenure of 5yrs. Once you choose to invest in the scheme, your money gets fixed at the current rate of interest for the next 5yrs.
  • Being a government aided savings scheme the plan provides zero risk investment option.
  • VPF allows easy partial or complete withdrawal facility. You can withdraw from VPF for paying out medical expenses, for higher education or marriage of children and for purchasing new property.
  1. Public Sector Undertaking Taxable Bonds – These are public sector taxable bonds which provide you long term investment solution along with the security of government. This investment choice could be beneficial for those who are looking for fixed income. The current interest rate provided by the bond is 8.55% and the amount invested gets locked in for 8yrs. Since, this is a taxable bond the capital gain from the bonds is subjected to income tax.
  2. Senior Citizen Savings scheme – This savings scheme also provide a zero risk investment opportunity to the conservative investors. This is government aided savings scheme offered for retired and senior people. The scheme offers high rate of return i.e. 8.3%. Usually, people above the age of 60yrs are eligible to invest in this scheme. However, people, who have taken early retirement and fall between the age of 55yrs and 60yrs, can also invest in this plan provided all retirement benefits are received. This plan is also available to retired defense employees, irrespective of their age. The maximum amount can be invested in the scheme is ₹15lakhs. Both single and joint accounts can be opened. The invested amount gets locked for 5yrs and the plan can be continued for 3 more years after the initial term of the scheme.
  3. Sukanya Samriddhi Yojana – This savings scheme is exclusively designed for saving money for your daughter. Sukanya Samriddhi Yojana is a government sector scheme which can be bought only for maximum two girl children each family, who are citizen of India. The scheme provides high rate of return interest, i.e. 8.1%. SSY accounts can be opened for girls of age 10yrs or less. Deposits can be made until the age of 14yrs of the child and the plan matures at the age of 21yrs. This account can be opened by either parent of the child.
  4. LIC’s Pradhan Mantri Vaya Vandana Yojana – This is yet another government secured scheme of savings, which is being employed via Life Insurance Corporation of India, to ensure social security to the elderly people who might suffer due to fall of FD interest rates at this current market condition. The scheme has been designed for retired individuals above the age of 60yrs. It offers interest rate of 8% and investment limit of ₹15lakhs.
  5. Public Provident Fund – It has always been one of the most attractive savings option for salaried and small business owning individuals. It offers fixed income at current interest rate of 7.6%. As per policybazaar reviews, it provides the safest long term investment option in India. Maximum investment amount capping is ₹1lakh and 50 thousand every year. The amount gets locked in the scheme for 15yrs and can be extended in the block of 5yrs. PPF scheme is also eligible for EEE tax status, hence, the amount invested, interest earned and the maturity benefit received remains completely tax free.

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