The interest rate cycle has reversed its trend to now take the northward shift and in this regime, these four fixed income options may be yielding high returns for you depending upon your investment horizon and tax slab.
1. 7.75% GoI India bonds: The 7.75% sovereign government of India bond can be raked in by investors with a minimum of Rs. 1000. The interest payment on these bonds is provided either in semi-annual or cumulative mode. The interest accrued will be eligible for tax deduction at source. With a sovereign backing, investors can be relaxed of the safety of the principal and interest payments.
2. Company FDs: If you have a slightly higher risk profile and thus have a penchant for more reward as higher interest rate, you can consider investments in FDs from some of the leading NBFCs including Mahindra Finance, Bajaj Finance, HDFC etc.
For a minimum sum of Rs. 25,000, these corporate FDs even for shorter duration of time such as one and two years are fetching 8.6% as in the case of Mahindra Finance FD for 2 years.
Further, in case you are requiring some ready cash out of these investments, you have the option to opt for monthly, quarterly, half-yearly, annual or cumulative returns.
3. NCDs: The recent NCD issue by Shriram Transport providing 9.5% return and before the DHFL's and JM Financial NCD issue serves for investor who are in the low-tax bracket. As per some investment experts, as it is unlikely the rates will rise higher than the current levels, it shall be wise to book investments at the current return rates.
Also, if you seek liquidity from NCD investment, these can be sold in the secondary market as they are traded on the stock exchanges and hence also provide the avenue for capital appreciation.
4. FMPs: Fixed maturity plans are closed-ended debt oriented fixed maturity mutual fund schemes. The corpus amount of such schemes is invested in debt instruments, including treasury bills, certificate of deposits, commercial papers (CPs) and corporate and government bonds. Further, the scheme can invest either only in one instrument such as the commercial paper or can also diversify its portfolio to its discretion.
The investment in securities in such plans is as per the maturity term of the FMPs. Through this route also, investors can earn higher returns of 8-8.5% as it offers the benefit of indexation when hold for three years time frame. These are ideally suited for HNIs or those individuals falling in higher tax slab as the post tax returns can be high as the taxation liability can be reduced significantly.