Fixed return investing: Top 5 investment options that offer a fixed interest rate with no market volatility

In today’s market, you can save your income tax because there are various tax savers available.

However, there are some tax saving plans like NPS, ELSS Mutual Funds and Ulips which are also market based investments but due to non-fixing of returns, many investors find that this is one of the reasons to avoid them.

If an individual is considering tax-saving fixed interest rate investments without any volatility in the stock market, the main investment choices that he can choose from are the public provident fund (PPF), the Post Office Term Deposit Account (POTD), National Savings Certificates. (NSC), the 5-year Bank Tax Saver and the Senior Citizens Savings Scheme (SCSC).

Under Section 80C, an individual can invest up to Rs 1.5 lakh per annum in the above mentioned investment schemes:

Savings plan for seniors

The Senior Citizens’ Savings Scheme (SCSS) is the preferred option for retirees. SCSS sets a 5-year mandate, which could be extended for three years once the scheme matures. The maximum investment limit of SCSS would be Rs 15 lakh and a person can open one account or more.

However, the same scheme would be available exclusively for seniors or pre-retirees. This scheme can be claimed from the post office or the bank, and only people over the age of 60 can apply for it.

In SCSS, pre-retirees can invest, given that they do the same within a month of obtaining their retirement funds.

Postal Term Account (POTD)
A Postal Term Account (POTD) has a term of 1, 2, 3 and 5 years whereas it is exclusively a 5 year deposit which benefits from the tax under Section 80C.

National cash vouchers
National Savings Certificates (NSC) is a 5 year scheme. NSC does not provide monthly or annual interest payments.

In addition, interest not reinvested in the last year of the period may qualify for Section 80C benefits for the year in which it is deemed to have been reinvested.

Taxed fixed deposits 5 years notified
Investing in 5-year notified tax saving fixed deposits in a bank (a debt tax saver) is a superior decision for people who have exceeded the Section 80C limit of Rs 1.5 lakh in one year.

These types of deposits would come with options to pay monthly, quarterly or cumulative interest on the investment incurred.

Public provident fund
The public provident fund (PPF) regime could be extended indefinitely. The same could be opened at a specified post office or a bank branch.

The PPF can be opened online with banks that have enabled online opening features for their customers. A public provident fund is suitable for investors who want to avoid the volatility of returns that typically characterizes the equity asset class.

But look at the long-term plan when the inflation-adjusted target amount is much higher than it would be efficient to choose equity assets, via equity mutual funds, and savings funds ELSS tax, rather than relying solely on the PPF.

(The author is MD, SAG Infotech)

Stephen V. Lee