If you have extra money in your account, there are a few places you can park the money. When we say "high" interest rates, it largely means comparing the same to interest rates offered by banks. We have taken safety as well returns when recommending the following:
Kissan Vikas Patra
The interest rates on the Kissan Vikas Patra (KVP) is even better than the post office monthly income plan and the NSC. It is pegged at 6.9 per cent, which is way better than banks, which are at best offering 5.5 per cent per annum.
The amount deposited under the Kissan Vikas Patra doubles in 124 months, and the amount can also be encashed after a period of 2 and half years. The KVP can be easily transferred from one person to the other. For those looking at safe investment options, this is a good bet. However, for those desiring digital access or the best of service, this is not a great option. In terms of safety and interest rates, a definite "yes".
Post Office Monthly Income Plan
The post office monthly income plan offers an interest rate of 6.6 per cent per annum and the interest is payable monthly. If we compare the interest rates with the larger banks like State Bank of India, ICICI Bank or HDFC Bank, it is a good 1.1 per cent higher. These banks offer an interest rate of a maximum of 5.5 per cent.
The Post Office Monthly Income Plan gives interest rates monthly, which means your yields are much higher, given that banks compound every quarter. One can open the deposits only for a total sum of Rs 4.5 lakhs in individual names and Rs 9 lakhs for joint accounts.
Any number of accounts can be opened, but, the maximum limit would apply.
National Savings Certificate
The interest rate offered here is as high as 6.8 per cent, which is much better than government owned banks that offer 5.5 per cent. Apart from that, the National Savings Certificate qualifies for tax exemption under Sec80C of the Income Tax Act.
Unlike the post office monthly income plan, there is no maximum limit for investment in the NSC. However, the tenure for the same is 5-years. Most banks lend money as loans against the National Savings Certificate. A sum of Rs 1,000 deposited in the NSC would fetch as much as Rs 1389.49 after a period of 5 years. There is unlikely to be any TDS on the NSC, but, the individual must show the interest income when computing tax and paying income tax.
Savings account from IDFC First Bank
IDFC First Bank currently offers an interest rate of 7 per cent on its savings account. Interest income upto Rs 10,000 from a savings bank account is exempted from tax.
The deposits at the bank are AAA rated and hence can be considered as safe.
About the author:
Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, debt, commodities, mutual funds and tax planning.