A Fixed Income Scheme allows you and other investors earn decent returns. It offers returns in the form of periodic interest payments and also the eventual return of the principal.
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Some of the most popular fixed income schemes are PPF, NSC, POTD and 5-year bank FDs. These schemes are popular among investors who want a tax efficient and safe investment avenue. Discussed below are some of the features and benefits of these fixed income schemes:
Public Provident Fund is a long-term fixed income scheme initiated by the government to mobilize savings in the form of investments. It is a small savings scheme. The scheme is popularly known as PPF. The scheme offers capital protection and is an ideal long term investment, which locks in your money for 15 years.
The rate of interest offered is 8% along with partial withdrawal facility from the 7th year onwards. Public Provident Fund enjoys EEE benefit. The principal invested enjoys tax deduction and the interest/amount withdrawn at maturity is tax-free. This is an ideal investment option for those willing to save regularly, create a corpus and grow money at a consistent rate.
National savings certificate is one of the best fixed income schemes available in the market today. National savings certificate is an initiative taken up by the Indian government and its main objective is to provide long-term investment options to the low and mid-income groups.
The scheme comes with varied maturity periods of 5 and 10 years and helps investors save taxes. NSC is a fixed income scheme which earns interest at a steady rate and the principal along with the accrued interest is paid to the depositor on maturity.
You can invest in the National Savings Certificate with no upper limit, at any post office in India. NSC is a tax-efficient investment as it enjoys tax deduction up to Rs 1.5 Lakhs under section 80C of the Income Tax Act.
An investor receives the full amount (principal and interest) on maturity. NSC offers an interest rate of 8% for Q4 FY2018-19. NSC is a low-risk investment which can be availed to save money, enjoy tax benefits and create a retirement corpus.
SEE ALSO: Fixed Income Securities
POTD scheme offers a fixed investment plan where the depositors can invest a fixed sum of money over a fixed time period and earn interest. There is no upper limit on the investment and it can be availed for 1 year, 2 years, 3 years and 5 years as per the depositor’s requirement. The POTD offers attractive interest rates that depend on the lock-in period and range from 6.90% to 7.8% a year.
This is a safe investment avenue with decent returns and tax benefits. The 5-year POTD offers tax benefits to the depositor under Section 80C of the Income Tax Act. This scheme can be availed by Indian citizens above 18 years of age. The scheme serves as an alternative to bank fixed deposits and offers similar features and benefits.
The 5-year tax saver FD is a variant of bank fixed deposit which helps get tax benefits by depositing money for a fixed period of 5 years. The rate of interest on tax saving FD varies and is generally in the range of 6.8% to 7.75% a year.
Bank fixed deposits are immensely popular due to the low risk and safety features. These deposits have high earning potential and are amongst the best fixed income schemes available in the market. As the name suggests, an investor can avail tax benefits on the 5 year bank tax saver FD under Section 80C. Interest earned on 5 year bank FD is subject to TDS. Interest earned is taxed under Income from other sources.
SEE ALSO: Fixed Income Instruments
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