Fixed income is an investment strategy that can provide a consistent income stream with less risk than stocks and mutual funds. The benefits of fixed income include risk-free returns, deposit safety and long-term wealth creation. Bank fixed income investments have seen interest rate hikes since the repo rate hike, although they are still below the inflation rate. In June 2022, India’s annual inflation rate dropped from 7.04 per cent to 7.01 per cent, and investors, especially non-seniors, can now consider investing for inflation-beating returns. senior citizens This concern is excluded because they get additional rate benefits, and some private banks are now offering them. fixed deposit return Which outpaces inflation as a result of increase in interest rates. Hence, regular customers or non-senior citizens who are looking for inflation-beating returns in the current scenario can take a closer look at the investments listed below.
Fixed deposit
Non-senior citizens can look at the fixed deposit options offered by Tamil Nadu Power Finance and Infrastructure Development Corporation Limited (TNPFC) and Tamil Nadu Transport Development Finance Corporation Limited (TDFC) if they are seeking returns on fixed deposits that are not inflationary. go beyond. Investors should take a closer look first as both these non-banking finance companies are backed by the Tamil Nadu government, making interest and deposits more secure.
TNPFC offers non-cumulative fixed deposit options, with tenures ranging from 2, 3 and 4 to 5 years. Interest rates vary from 7.25 to 8.00 percent, and non-senior citizens can get a maximum interest rate of 8 percent on deposits maturing in 60 months – a rate that is significantly higher than the rate of inflation at the time. The cumulative option tenure of TNPFC is 1, 2, 3, 4 and 5 years and the interest rate for non-senior citizens ranges from 7 to 8 per cent.
When an investor invests Rs. 50,000 under the cumulative scheme, the maturity amount would be Rs. 74,297 after 60 months, while under the non-cumulative plan, the maturity amount will be Rs. 70,000 keeping in mind the 8 percent interest rate. In addition, TDFC offers a fixed deposit scheme with two options, Term Interest Payment Scheme (PIPS) and Money Multiplier Scheme (MMS).
Unlike MMS, which pays interest on maturity followed by quarterly compounding at the applicable interest rate, PIPS pays interest monthly, quarterly or annually. For deposits held for at least 60 months, the PIPS option of TDFC offers a maximum monthly and quarterly interest rate of 8.00% and an annual interest rate of 8.24%, respectively. For non-seniors opting for the MMS option, TDFC offers interest rates that range from 7 to 8 per cent on deposits maturing in 12 to 60 months.
recurring deposit
This is another form of fixed deposit, where investors can make monthly deposits in a fixed deposit account as opposed to a lump sum deposit. Returns on RDs can be compared to those on fixed deposits, but one thing to note is that like fixed deposits, RDs do not offer tax benefits under section 80C. TDS (Tax Deducted at Source) is also applicable on RDs, and it is deducted at the rate of 10% on interest earned on RDs which exceed Rs. 40,000 for non-senior citizens.
Keeping these things in mind, regular customers can invest in the RD scheme of Shriram Transport Finance Company (STFC). One of the coolest takeaways from the said scheme is that Shriram Transport Finance Company has been rated “RD”[ICRA] AA+ (Stable)” by ICRA and “IND AA+/Stable” by India Ratings and Research Ltd., and both indicate a high degree of safety when investing in company deposits. 12 to 60 months, and STFC currently offers an interest rate of 7.03% to 8.50% for non-senior citizens. 500, an investor can get the maturity value 37,500 after 60 months considering the current interest rate of 8.50%.
tax free bond
A government-run organization issues tax-free bonds to raise funds for the general public. The term “tax-exempt bonds” refers to an investment option where the interest earned is completely exempt from taxation under Section 10, but the principal amount invested in these bonds may not be deductible. Tax-free bonds typically have longer maturities of ten years or more. Since these bonds are issued by the government, the default risk is quite low, which makes them an excellent option for investors seeking fixed income.
However, if you sell bonds on a stock exchange and if your holding period is less than 12 months and if held for more than 1 year, capital gains on transfer or sale of bonds tax-free will be taxed as per your income bracket. is applied. Capital gains tax will be applicable at 10%.
Non-senior citizens looking for inflation-beating returns can invest in National Thermal Power Corporation (NTPC). The bond was issued on December 16, 2013, and will mature on December 16, 2033. The yield to maturity is 5.4938 percent per annum, while the coupon rate is 8.66 percent per annum. The issuer has made a total of Rs. 312.03 crores for this bond, and it has been rated AAA by CRISIL and AAA by ICRA.
NHPC Ltd. is another tax-exempt bond that has been rated AAA with Stable outlook from CARE, AAA from ICRA and AAA from India with Stable outlook. The bond was issued on November 2, 2013, and will mature on November 2, 2033. The bond’s annual interest payment term and yield to maturity (YTM) is 5.4936 percent per annum. Its coupon rate is 8.67 percent per annum. For this bond, the PSU tax-free issuer has made a total deposit of Rs. 336.07 crore coupon rate higher than bank deposits, as well as inflation.
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