The government slashed interest rates on post office savings schemes and that too dramatically, in some cases by 100 basis points with effect from April 1, 2016.
Surprised! Banks can still give you that 75-100 basis points, over and above post office interest rates. Take the case of RBL Ltd. This bank, formerly known as Ratnakar Bank Ltd, is giving interest rate of 9% on its 2-year deposit. This is pretty good. Even select cooperative bank are able to offer you returns of around 9 per cent.
Yes, there may not be branches of these banks all around, but, you can open a fixed deposit online. Bank Fixed Deposits are not tax efficient and hence you may end-up paying taxes.
2) Company fixed deposits
Company fixed deposits are also an excellent option. They can offer you interest rates of upto 8.85 per cent and yields near 10 per cent. For example, Bajaj Finserv is offering you an interest rate of 8.85 per cent on its 3 year deposit. KTDFC, the government of Kerala owned company is offering you an interest rate of 8.5 per cent. Dewan Housing Finance on the other hand is offering an interest rate of 9 per cent per annum.
Now, as you all know company fixed deposits are unsecure deposits. This means there is no security. Hence, you should look only for secure deposits. Bajaj Finserv has a strong pedigree. It is important to note that there would be a tax deducted at source that would be applicable for interest in excess of Rs 5000 per year.
3) Tax free bonds
While there maybe no tax savings bonds lined-up. You can look to buy tax free bonds from the BSE or the NSE. Some can give you post tax yields of as much as 10 per cent. It is important to remember that tax free bonds, as the name suggest are free from tax. In the sense, the interest income is free from tax.
However, you should remember that they can be slightly illiquid when you want to sell them and much would depend on the liquidity. Selling large chunks is difficult.