Fixed Income Investment Schemes That Offer Guaranteed* Returns

Guaranteed return fixed income plans
 

Here are some schemes which guarantee the returns that you get –
 

● Fixed deposits
 

Quite popular among investors, fixed deposits offer a guaranteed rate of interest on your deposit for the chosen term². You can choose the amount that you deposit, the deposit tenure and the type of FD. Based on these factors, the interest is determined, which remains fixed over the deposit tenure. For instance, if you deposit ₹50,000 in a fixed deposit scheme offering 6% p.a. annual returns for 3 years, the return will remain fixed over the next 3 years. Even if the bank revises the interest rates, you will get a guaranteed return of 6% p.a. on the deposited amount.
 

● Public Provident Fund
 

Public Provident Fund (PPF) is a government-backed, long-term investment scheme offering guaranteed returns³. Under this scheme, the interest rate is guaranteed, though it might change every quarter based on the government’s financial policies⁶. Currently, the interest rate is 7.1% p.a.³. The minimum investment starts from ₹500, while the maximum is ₹1.5 lakhs in a financial year⁶. The investment made into the PPF scheme, the interest earned, and the maturity amount are all tax-free subject to terms of the Income Tax Act ,1961³.

 

● Post Office Monthly Income Scheme
 

The Post Office Monthly Income Scheme (POMIS) is another guaranteed return⁷ fixed income plan that offers regular income over the deposit term⁴. Issued by the post office⁷, the scheme has a maturity period of up to 5 years⁴. The interest rate is 5.50% p.a. for a term of 1,2 or 3 years and 7.60% p.a. for a term of 5 years⁴.

You can open an individual or a joint account with a minimum investment amount of ₹1500⁴. The interest income is paid every month, which creates a fixed and guaranteed income stream⁷.

● Employees’ Provident Fund
 

The Employees’ Provident Fund is a retirement-oriented investment scheme for salaried employees. Both employees and their employers contribute towards the scheme to create a retirement corpus for the employee. The corpus earns a fixed rate of return over the deposit period. You can withdraw from the EPF for your financial needs subject to the fulfilment of specific terms and conditions⁵.

● Traditional life insurance plans
 

Traditional life insurance plans include endowment and money-back plans, among others, that  provide life insurance coverage and also help you save  These savings-oriented plans can be offered as participating or non-participating plans. Participating plans earn bonuses if declared by the insurance company. However, non-participating plans don’t. When it comes to returns, both plans offer safe returns which are not exposed to market risks. Participating plans offer bonuses which are not guaranteed. They depend on the performance of the insurance company. On the other hand, non-participating plans offer fixed benefits on premature demise or maturity. They might offer guaranteed* additions or loyalty additions that enhance the corpus.
 

Choosing the right option
 

Guaranteed return fixed income plans are a good choice for investors seeking assured returns on their income. These schemes provide capital guarantees along with assured savings for different financial goals. Moreover, some plans might also offer tax benefits. For instance, life insurance savings plans offer tax benefits on the premiums paid as well as the benefits received from the policy. Similarly, 5-year fixed deposit plans offer tax deductions on the amount that you invest. As such, with these tax-efficient options, you can create a tax-efficient corpus for your goals and also save tax on your income.

FAQs
 

1. What are some of the safe investment offering guaranteed* returns?
 

There are many investment options that are considered safe. Some of them include life insurance savings plans, bank fixed deposits, which are insured up to a specified limit, PPF, EPF,  etc.

2. Will the returns be taxable in my hands?
 

The tax implication on returns depends on the investment avenue that you choose. Some avenues offer tax-free returns, while others do not. For instance, the returns earned from fixed deposits would be taxable in your hands if you are below 60. However, the returns earned from endowment plans or money-back plans, in the form of maturity benefit or bonus (if declared), can be tax-free, subject to specific terms and conditions.

3. Is it possible to generate monthly income from an investment?
 

Some investment avenues allow you to get monthly incomes. For instance, POMIS and non-cumulative FDs can offer monthly incomes. Similarly, there are specific life insurance plans which offer monthly incomes during the policy term or even after the term. You can check the plan details to find the income benefit.

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