The most opted for investment and saving scheme by Indians is Fixed Deposits and has been so since a long time. The reason behind the ensuing popularity of FDs is the minimal risk involved and also guaranteed returns.
Where to invest now when Fixed Deposit rates are falling?
The Reserve Bank Of India (RBI) has cut the repo rate continuously since 2019 and as a result, banks following suit have lowered interest rates on Fixed deposit investments avenue. So what now? Here are some alternative investment options for you to consider.
Post Office Time Deposit
POTDs offer the most security of the principal amount as they come with a sovereign guarantee. Quarterly payment can be made on the interest of these deposits and the interest earned is taxed in the same manner as bank FDs are taxed. The income tax rate applicable to your income determines the interest taxed on these deposits.
RBI savings bonds
These bonds are currently offering a much higher interest rate than bank FDs and as a result, is a more lucrative option. With a tenure of seven years, RBI savings bonds have no maximum investment limit. The interest can be earned either via cumulative or non-cumulative manner.
Tax-free bonds
This a safe option provided by the government companies in regard to the principal amount. Gains from the sales of the bonds are taxed while the interest income is not taxed. You can buy and sell these bonds on the stock exchange but the trade of these bonds aren’t done actively. High-interest rates will lower bond prices and vice versa.
Senior citizen savings scheme
SCSS is a good scheme for senior citizens. You can avail this from the post office and banks. Maximum investment limit with this scheme is Rs.15 lakhs and the interest can be paid on a quarterly basis. Being a government-approved scheme, your money will be safe and guaranteed.
Company fixed deposit
Fixed deposits can not only be issued from banks but also from private companies. Since these are not government schemes, the interest rates are higher than bank FDs. The security surrounding these is a little feeble but if you choose trustworthy companies then it can be a good option in dire times like this. If however, you have second thoughts about investing in private company fixed deposits, you can always go for government-backed company deposits as well.
Post office monthly income scheme
While SCSS schemes are only available to senior citizens, POMIS can be availed by everyone. This ensures a monthly return that can act as an income in return of investments. The maximum limit for a single account is Rs.4.5 lakhs. The amount increases to Rs. 9 lakhs for joint accounts. It is a safe scheme that can be opted for instead of bank fixed deposits.
Conclusion
Don’t leave FD’s completely or don’t invest in solely that scheme either. The wise thing to do will be to channel your savings into various mixed schemes thus minimizing total risk.
