There are investment options that offer higher returns than a fixed deposit and ensure the safety of funds.
The interest rates for fixed deposits are the lowest. The returns are negative if one considers inflation. Therefore fixed deposit is not an ideal choice for those who want to earn a fixed income for investments.
SBI provides an interest rate of 5.8% to senior citizens over three years. The current inflation rate is around 5.5 – 5.59%. If one faces a high tax slab rate, then the returns from fixed deposits turn out negative.
Luckily, various investment options provide higher returns and keep one’s money safe and secured:
- Senior Citizen Saving Scheme (SCSS) – This is an ideal investment option for senior citizens. The interest is payable quarterly. Currently, the interest rate is hovering around 7.4%. The tenure is five years. One can get the benefits of section 80C. The minimum amount of investment should be 15 lakhs.
- Pradhan Mantri Vay Vandana Yojana (PMVVY) – The scheme is backed by the Indian government. It offers an interest rate of 7.4%. The interest is payable every month. But there is a lock-in period (period for which funds cannot be redeemed or withdrawn) of 10 years. It is best suited for conservative investors as it is provided by the government.
- NPS Tier II account – NPS Tier account II scheme G invests in government bonds and other related instruments. It has offered double-digit returns over the past year. But Section 80C is not applicable for private sector individuals.
- Corporate Bond Funds – It is like a debt mutual fund option, that invests in corporate bonds and non-convertible debentures. At least 80% of the funds are invested in corporate bonds where risk is considerably lower. These funds have provided returns of more than 9%. This investment option offers higher returns with low risk. If the investors hold the funds for three years, they get an indexation benefit (adjusting purchase price after considering inflation rate) because these funds are classified as debt funds while calculating capital gains.
- Short duration funds – It is for investors who do not mind taking a slight risk for higher returns. They offer higher returns as it provides interest income and capital gains. These funds remain unaffected by short-term interest rate fluctuations. It is considered a debt fund; hence, it carries indexation benefits for long term investors.
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