What is Fixed Income ?

• It is an investment which yields pre-determined return for the entire tenor of investment and which does not change on market movements .

• Fixed Income accounts which assure a pre-fixed income for a pre-fixed time period are popular investments made by ordinary citizens . many such schemes are either managed by government of India or Commercial banks which are considered safe for investment .
  1. BANK DEPOSITS : They are considered safe and have sufficient liquidity as they also offer loans against such deposits in case of need .
  2. SMALL SAVINGS ACCOUNTS : promoted by government of India managed by post offices or banks
  

SMALL SAVINGS SCHEMES :

Following are the Small Savings Accounts promoted by Government of India and managed by department of POSTS :
​1. PUBLIC PROVIDENT FUNDS
2. NATIONAL SAVINGS CERTIFICATES
3. KISAN VIKAS PATRA ( KVP )
​4. SUKANYA SAMRIDDHI ACCOUNT
5. SENIOR CITIZEN SAVINGS SCHEME
6. TIME DEPOSITS FROM 1 YEAR TO 5 YEARS
7. MONTHLY INCOME SCHEME
8. 5 YEAR RECURRING DEPOSITS SCHEME

​PUBLIC PROVIDENT FUNDS :

SALIENT FATURES :

• Ideal investment option for both salaried as well as self employed classes.

• Non-Resident Indians (NRIs) are not eligible.

• Investment up to INR. 1,50,000 per annum qualifies for IT Rebate under section 80 C of IT Act.

• The rate of interest on the subscriptions made to the fund varies quarter to quarter as per the announcement done by the Government .
  

• Loan facility available from 3rd financial year up to 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011. The rate of interest is reduced to 8.1% pa from 01.04.2016 and are subject to change every quarter.

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• Withdrawal permitted from 6th financial year.

• Free from court attachment.

• An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.

• Public Provident Fund(Individual account on his behalf or on behalf of minor of whom he is the guardian)INR. 500/- in a financial yearINR. 1,50,000/- in a financial year

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• The public provident fund is established by the central government.

• One can voluntarily open an account with any nationalized bank,selected authorized private bank or post office.

• SAFE , SECURE , TAX EFFICIENT AND LIMITED LIQUIDITY AVAILABLE FROM 3RD YEAR BY WAY OF LOAN FACILITY

NATIONAL SAVINGS CERTIFICATES
SOURCE OF INFORMATION INDIA POST
NSC VIII Issue

• Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses.

• No maximum limit for investment.

• No Tax deduction at source.

• Certificates can be kept as collateral security to get loan from banks.

• Investment qualifies for IT Rebate under section 80C of Income Tax Act.

• Trust and HUF cannot invest.

• Rate of interest changes every quarter.

• NSC can be transferred only once from the date of issue to maturity

• KISAN VIKAS PATRA ( KVP )

• The Government of India has on 19.11.2014 has re-launched KVP .

The rate of interest is reduced to 7.8 % pa from 01.04.2016 and are subject to change every quarter.
• Certificate can be purchased by an adult for himself or on behalf of a minor or by two adults.
• KVP can be purchased from any Departmental Post office.
• Facility of nomination is available.
• Certificate can be transferred from one person to another and from one post office to another.
• Certificate can be encashed after 2 & 1/2 years from the date of issue.

• Rate of interest varies quarter to quarter

SUKANYA SAMRIDDHI ACCOUNT :

• Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year

• A legal Guardian/Natural Guardian can open account in the name of Girl Child.

• A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.

• Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

• If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.

• Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.
• Account can be closed after completion of 21 years.

• If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

• Normal Premature closer will be allowed after completion of 18 years /provided that girl is married.

Account can be opened in Post office or specified commercial Banks ( For list of commercial banks and to visit their websites CLICK HERE )

SMALL SAVINGS TERM INTEREST RATES KEPT UNCHANGED
POST OFFICE INTEREST RATES

DATED 28.06.2024 : The interest rates on small savings schemes for the ensuing quarter from July 2024 to September 2024 is kept unchanged and the present rates will continue up to 30th, September 2024 .
The rates are

1. The Public Provident Fund : 7.1 % pa
2. Kisan Vikas Patra ( KVP ) : 7.5 % pa
3 . The 5 Year National savings Certificates ( NSC ) : 7.70 % pa
4. Sukanya Samruddhi Account : 8.20 % pa
5. Senior Citizen Scheme : 8.20 % . pa
6. Monthly Income scheme : 7.4 % pa
7. Term Deposits : For the period 1 year :6.9 % pa
For the period 2 years : 7.0 %
For the period 3 years : 7.10 %
5 year term deposit : 7.50 % pa
5 year Recurring Deposit : 6.7% pa

​​To check interest rates offered by Banks in India , CLICK HERE

• BANK DEPOSITS

• Most popular fixed income scheme administered by all scheduled banks

• Deposits can be made by resident as well as Non resident Indians . Interest Rates vary .

• Fixed Deposit, also called Term Deposit is an investment where the interest rate is guaranteed not to change for the nominated term, so you know exactly what your investment is worth.

• The deposits are accepted from 7 days up to 10 years of maturity

• Usually Banks lend up to 90 % deposit amount as Loan against the collateral of deposit receipt at an interest rate 1% to 2 % above the deposit interest rate .

• The deposits can be prematurely closed . In such cases , interest will be paid for the period run at the interest rate prevailing on the date of deposit for the period of deposit run .

• Interest can be received on monthly, quarterly, half yearly , yearly or on maturity .

• Interest is taxable and have to be added to the personal income of the depositor

• Deposits come under category of Low Risk class of assets of an investor.

• LOW RISK & LIQUID INVESTMENT AND HENCE MOST POPULAR WITH RISK AVERSE INVESTORS .

• Bank deposits are guaranteed up to rs 5.00 lakhs by DICGC

FOR LATEST BANK DEPOSIT INTEREST RATES CLICK HERE

COMPANY FIXED DEPOSITS

• Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest.

• Normally companies pay 2 % to tion is the % pa higher interest rate than Banks

• Like Banks, companies also offer Interest payment monthly, quarterly, half yearly , yearly or on maturity

• Safety of deposit depends up on the repayment capacity of the borrowing company

• Investors have to be cautious about the company before they place deposits . Investors are to be beware of Unrated companies / little known companies receiving deposits

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• For NBFC's, RBI has made it mandatory to have an 'A' rating to be eligible to accept public deposits, . Higher Rating of AA or AAA is better

• Caution is the key word while placing deposits with companies .

NBFC DEPSOITS : FOR DETAILS OF NON BANKING FINANCE COMPANIES ( NBFC ) DEPOSITS , CLICK HERE


BANK DEPOSITS ARE MOST PREFERRED INVESTMENT INSTRUMENT IN INDIA
NEWS ALERT DATED 06.04.2017 :
As per survey report published by Securities and Exchange Board of India ( SEBI ) , more than 95 % of Indians prefer to park their money in Bank deposits . The survey , conducted across India including urban and rural areas , listed Life Insurance as the second most popular investment avenue. Other top investment vehicles included Gold & Silver , Real estate and post office savings . Mutual Funds and Stocks investments were preferred by less than 10 % of the respondents .

Among the rural households , not even one percent invested in financial instruments and more than 98 % had any awareness about availability of Mutual Funds and Equities as an option for investment . However redeeming feature among rural households was that 95 % of respondents had bank accounts and 47 % life insurance . More than 25 % of rural respondents had their post office deposits .
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The survey , conducted by M/S Nielsen , was commissioned in 2015 by SEBI , completed last year and results released now .

​You may read the complete survey report by clicking on the link HERE

CORPORATE BONDS :

A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing is called Bond . The governments, states, corporations, and many other types of institutions sell bonds. Generally, a bond is a promise to repay the principal along with interest on maturity. Issuer may pay interest periodically or on maturity as per the terms of the bond . When an investor buys a bond, he/she becomes a creditor of the issuer. However, the buyer has no right of ownership of the issuer, while share holders get the right . . Though investor gets interest at the fixed rate periodically and principal on maturity as per Bond conditions , One can sell in between to third parties in stock markets at the market prices for such bonds . If one can hold till maturity , repayment is assured while selling in between may end up with loss and profits . Again like corporate deposits , safety of investment depends up on the capability of the issuer to repay till maturity . The market price of bonds are effected by the interest rate volatility in alternate instruments , liquidity in the market as well as credit rating of the issuer .

AMONG THE FIXED INCOME INVESTMENT , PPF AND NSC/ KVP ARE SAFEST , PPF AND NSC ARE TAX EFFICIENT UP TO CERTAIN AMOUNT , WHILE BANK DEPOSITS OFFER LOW RISK AND LIQUID OPTIONS. COMPANY FIXED DEPOSITS AND CORPORATE BONDS OFFER HIGHER RETURN ASSOCIATED WITH HIGHER RISK . CORPORATE BONDS OFFER LIQUIDITY AND OPTIONS OF HOLDING TILL MATURITY AND GET INTEREST OR TRADE IN THE MARKET FOR PROFIT / LOSS . INVESTORS CAN WEIGH RISK , RETURN AND BENEFITS BEFORE PLACING SUCH DEPOSITS . IN ALL THE CASES RETURN IS PREDETERMINED AT THE TIME OF PLACEMENT OF DEPOSIT