Safest/Less Risky Investment Option for Long Term

Please read my previous article about Different Types of Investment Options here

On Continuation from Previous Article, i wish to start from Safest Investment Option to High Risky Investment Option.

Today, we are gonna to see list of Less Risky/Safest Investment Option in the Market.

Fixed Deposit / Term Deposit
National Savings Certificate
Public Provident Fund
Sukanya Samriddhi Account ( Thanga Magal Thittam )
Kisan Vikas Patra
Monthly Income Scheme
Senior Citizens Savings Scheme

Fixed Deposit / Term Deposit:

• What: As the name implies, we are depositing a fixed amount to Bank for fixed amount of time and bank returns the interest. There are two types of Term Deposit / Fixed Deposit
• Interest Payout Quarterly
• Interest Payout at the End of the Tenure
• Interest : Interest rates are fixed quarterly basis. Please check with respective bank for interest rates.
• Tax Benefit : 
• Interest received in this scheme is taxable and we need to declare in "Income From Other Source" when filling ITR (Income Tax Return). 
• As per the latest Financial Budget 2019: Interest earned upto Rs. 40000 per financial year are exempted from Tax.
• TDS (Tax Deduction at Source) is deducted in the Bank if it exceeds more than Rs. 40000. Still if your Taxable income is less than Rs. 5 Lakh, you can submit Form 15G and for seniors Form 15H to avoid TDS in the bank.
• Risk : It is important to know the risk involved in Fixed Deposit. Lets us assume a person named Ashok having Fixed Deposit of  Rs. 5 Lakh in a Bank and Just incase if Bank is in loss and facing Bankruptcy. Mr. Ashok will receive only Rs. 1 Lakh. This is because each account holder in Bank are insured with Rs. 1 Lakh irrespective of amount you invested with the given bank. So be aware there is always risk in every investment.

National Savings Certificate:

• What : It is a type of Term Deposit with Lock in Period of 5 Years. Interest earned yearly are deposited in next year and payout is at the end of the tenure i.e., after 5 years.
• Interest : Interest rate of this scheme are release on quarterly basis. But, please note that Interest Rate fixed on the day the amount deposited will be same during the tenure of 5 years.
• Tax benefit : 
• The Amount Deposited in this scheme can be shown under 80C category 
• The yearly interest is taxable and we need to declare in "Ïncome from Other Sources", but the interest is again deposit in the same scheme, it can be declared again in 80C and hence it is considered as Tax Free for first four year and at the end of the 5th year, interest earned in the 5th year is taxable.
• Please note: NSC taken in Post Office does not support TDS and hence interest earned needs to declared during ITR filling. Post Office does not support TDS.
• Risk : Safest Investment Option, Backed by Government.
• Note: In the recent, instead of Issuing Certificate for each investment. Passbook is being followed instead of Certificate.

Public Provident Fund:

One of my Favorite for long term wealth creation because of EEE feature (Tax Excempt during Investment, Interest Earned and on Maturity as Well) and also creates a discipline/habit of saving.

• What : It is also kid of Term Deposit with Lock in Period of 15 years.
• Deposit Frequency : We can deposit more than 2 times per month but not more than 12 per financial year.
• Interest : Interest rate of this scheme are release on quarterly basis
• Tax benefit :
• Tax Exempt from amount invested ( Under 80C )
• Tax Exempt from interest Earned
• Tax Exempt during Maturity
• Risk : Safest Investment Option, Backed by Government.
• Note: 
• It is considered as small savings scheme, hence invest on monthly and regular basis to built corpus for retirement/child education/buying home or for any reasons
• It bring habit of saving consistently
• Always invest small amount since the maturity amount is of 15 years, it is important to have liquid cash for some unknown reason. But invest consistently to build good amount of corpus during maturity.
• Can be opened in most of the banks and Post Office and we can create Standing Instructions to deduct certain amount in defined frequency.
• Since government encouraging this type of investment, interest rate of this scheme will be mostly higher than term deposit interest rates.

Sukanya Samriddhi Account:

Government introduced this scheme to have investment option for "Girl Child"

• What : Money can be deposited for the first 15 years and we don't need to deposit from 16th year till 21st year. Maturity amount will be payed out on 21st Year( From the Date of opening, not the age of the child)
• Deposit Frequency: We can deposit more than 12 times per financial year. But maximum limit not sure, will update soon
• Interest : Interest rate of this scheme are release on quarterly basis
• Tax benefit :
• Tax Exempt from amount invested ( Under 80C )
• Tax Exempt from interest Earned
• Tax Exempt during Maturity
• Risk : Safest Investment Option, Backed by Government.
• Note : Same as above "Public Provident Fund", only duration is different.

Kisan Vikas Patra:

• What : This is type of Investment Scheme, the amount invested will be doubled at the end of the maturity period ( 9 Years and 4 Months )
• Deposit Frequency : Deposited only once as Lump Sum
• Deposit Limit : There is no maximum limit for this investment.
• Tax Benefit:
• No Tax Benefit Exempt during investing
• No Tax Benefit from interest earned
• No Tax Benefit during Maturity
• Risk : Safest Investment Option, Backed by Government.

Monthly Income Scheme:

• What : As the name implies, deposit a lump sum amount and get interest received on monthly basis. The amount deposited is locked for 5 years and hence interest will be credited on monthly basis for 5 years. At the end of 5 years, deposited amount will be returned back.
• Deposit Frequency: One time as Lump Sum
• Deposit Limit : An individual can have a maximum of Deposit Limit of Rs. 4.5 Lakhs.
• Tax Benefit:
• No Tax Benefit Exempt during investing
• No Tax Benefit from interest earned
• Risk : Safest Investment Option, Backed by Government.
• Note : 
• To me best investment option for retired individuals to have higher monthly income. Comparatively better interest rate than Fixed/Term Deposit.
• Also, better than fixed deposit who has good amount of money and doesn't need money for atleast five years. Interest earned on monthly basis can be further invested in mutual funds for better returns. This might help for people who doesn't want to take risk in their principal amount in mutual fund.

Senior Citizens Savings Scheme:

• What : As the name implies, this is for "Senior Citizens" who aged 60 years or more. Deposit a lump sum amount for a period of 5 years and interest are payed out at the end of Calender quarter
• Deposit Frequency : One time as Lump Sum
• Deposit Limit : Maximum of Rs. 15 Lakhs can be deposited
• Tax Benefit:
• Tax benefit when Lump Sum is Invested ( Under 80C )
• No Tax benefit on Interest Payout ( Need to declare under Income from Other sources)
• Note: TDS will be deducted only when Interest crossed Rs. 50K per financial year. 

• Risk : Safest Investment Option, Backed by Government.
• Note:
• To me best investment option for retired individuals to have higher quarterly income. Comparatively better interest rate than Fixed/Term Deposit.

Note:

• In my next post, i will try to post more in depth detail about each of this investment option.
• I didn't cover Pension Schemes ( Like NPS, Atal Pension Scheme, PM Vaya Vandhana Scheme), i will post more details about this scheme in the future

Disclaimer:

• I am not Professional Financial Advisor, please discuss with your Financial Advisor before investing.
• I might be wrong. Correct me if any of my understanding is wrong.