In old age, what remains prime concern for investors is steady flow of income and capital safety and for them bank fixed deposits are the most touted options. Nonetheless besides there have been better avenues with better returns with sovereign guarantee.
Why the government ceased the subscription and availability of 7.75% RBI Bonds?
At a time when government bond yield have dived to 5.78%, it was becoming difficult for the government to pay out such high yield on these sovereign backed instruments and hence it took a decision to altogether stop them.
Also, at a time when interest rates were going down, there was seen an incremental demand for the product which is seen to have prompted the government to all together stop its availability for further subscription.
So, how to tread your fixed income investment journey?
And here given the risk-averse or somewhat risky appetite there can be options for you as discussed below. But you even need to be mindful of the taxation aspect:
1. EPF :
For salaried class what can be a better option than EPF with maturity at 58 years of age. The interest rate on EPF is decided from time to time based on return on investment and it is notified year on year.
Also, if your liquidity position is not tight, you can also up your contribution in the VPF or Voluntary provident fund and enjoy tax free nature.
It is also a good option that enjoys EEE nature and fetches interest rate at 7.1%. And the contribution also qualifies for deduction as part of Section 80C. The maximum investment allowed in the instrument is Rs. 1.5 lakhs.
3. Sukanya Samridhi Yojana:
For parents of girls under 10 years of age, this is a pretty good investment option with tenure of 21 years and investment of up to Rs. 1.5 lakh per annum. Both the contribution as well as interest rate on it are tax-free in nature. Currently, 7.6% per annum is being offered.
4. Top rated corporate fixed deposits:
To improve your return, other than bank FDs you can also look up to corporate FDs that fetch higher return. Allocation amount in marquee names should be low and top AAA rated FDs should be aimed at. Importantly, interest earned on these is fully taxable at the slab rate.
5. Debt mutual funds:
Though do not give fixed return track underlying bond yield and return at par between 4-6%. So depending on one's risk appetite one can go for liquid funds,PSU, banking funds can still be a safer proposition.
Also, if held for more than 3 years then there is indexation benefit with 20% taxation rate and for shorter term, these are taxed at existing slab rate.