There are a wide variety of reasons why individuals begin investing in the schemes and instruments available in the market. One of the most common investment objectives is ensuring financial security with a regular income stream. Especially the salaried individuals might wish to make provision for a stable income in their post-retirement life as well. One might choose among the following Post Office Saving Schemes or Bank savings scheme that provides regular income to the investors.
- Post Office Monthly Income Account: This scheme was introduced by the post office to ensure monthly payment of the interest on a lump-sum investment. The account can either be an individual or a joint account. The lump-sum amount invested initially could be as high as Rs 4.5 lakh. As of now, the rate of interest is 6.6% p.a. which is payable monthly. The investment made will earn interests for the next 5 years (maturity period). Premature withdrawal is allowed with penalties. If the withdrawal is after 1-3 years of investment, then there is 2% deduction on the deposit. Whereas, the deduction is 1% of the deposit if the withdrawal is after 3 years.
- Senior Citizen Savings Scheme: The SCSS was initiated mainly to support the senior citizens who are above 60 years of age (or 50 years in case of retired defence employee). The investor has to make an initial payment on which he/she earns quarterly interest payments for the next 5 years (maturity period). Currently, the rate of interest is 7.4% p.a. The minimum investment one can make is Rs 1000, while the upper limit is Rs 15 lakhs. One of the salient features of investing in this scheme is that one can claim a deduction of up to Rs 1.5 lakh from the taxable income, under Sec 80C. Although premature withdrawals are allowed, there are relevant penalties on them, based on the period of investment.
- Corporate Deposit: Certain companies allow individuals to invest in their FDs with attractive interest rates. Usually, these offerings are provided by Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFC). The interest payments are made on a quarterly or half-yearly basis. However, there is a risk that if the company defaults, invested capital may not be recovered.
- Government Bonds: These are low-risk options, beneficial when invested long-term. Although the lock-in period tends to be longer, they can be traded in the secondary market for liquidity purposes. It is advisable to choose government bonds with other investments to ensure a regular income flow.
- Monthly Income Plan (MIP): MIP is a type of mutual fund plan in which the funds are invested in debt and equity instruments. Based on the performance of the fund, the company pays a particular amount to the investors on a monthly basis. Though 70-80% of the investment is made on debt instruments, the returns are not guaranteed and tend to fluctuate based on the fund performance.