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FD Rates Are Falling! Don’t Worry, These 8 Other Options Will Provide You Surprisingly High Interest

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Are you worried about falling Fixed Deposit rates? This is the right time to explore the scenario of falling interest rates and take a prudent look at the alternative investment avenues to bank fixed deposits. Here is the wealth lists alternatives that offer better rates or greater tax efficiency:

Voluntary Provident Fund (VPF)
Interest 8.65%* (same as EPF rate) 
Invest for: As long as you continue with EPF 
Age: No limit 
Investment amount: Depends on salary 
Taxation: 80C benefits available; interest is tax-free 
Useful for: Accumulating long-term wealth without any risk. 

*For 2016-17; it is expected to come down a bit for 2017-18 

Listed PSU bonds (Taxable) (Values taken for SBI Bond N5) 
Interest 8.55% 
Invest for: 8 years (March 2026) 
Age: No limit 
Investment amount: No limit 
Taxation: Interest and capital gain (if any) taxable 
Useful for: Investors who need regular income & are in lower tax brackets. 

Senior Citizens’ Savings Scheme (SCSS) 
Interest 8.3% 
Invest for: 5 years, can be extended by 3 more years 
Age: Above 60 years (55 for early retirees) 
Investment amount: Rs 15 lakh or money received as a retirement benefit, whichever is lower. 
Taxation: 80C benefits available; interest is taxable 
Useful for: Senior citizens who need a regular income and are in lower tax brackets. 

Sukanya Samriddhi Yojana 
Interest 8.1% 
Invest for: Deposits can be made till the age of 14; maturity at 21. 
Age: 10 years or less 
Investment amount: Rs 1.5 lakh a year. 
Taxation: 80C benefits available; interest is also tax-free 
Useful for: Building long-term wealth for girl child without any risk. 

Pradhan Mantri Vaya Vandana Yojana (PMVVY) 
Interest 8% (this is the pension rate) 
Invest for: 10 years 
Age: Above 60 years 
Investment amount: Up to Rs 7.5 lakh per family (maximum pension of (Rs 5,000 per month) 
Taxation: No 80C benefit; pension also taxable 
Useful for Senior citizens who need regular income & are in lower tax brackets. 

Savings (Taxable) Bonds 2018 (RBI Bonds) 
Interest 7.75% 
Invest for: 7 years 
Age: No limit 
Investment amount: No limit 
Taxation: No 80C benefit; interest also taxable 
Useful for: Investors who need a regular income and are in lower tax brackets.

Public Provident Fund (PPF)
Interest 7.6% 
Investment for: 15 years; extendable by blocks of 5 years 
Age: No restriction 
Investment amount: Rs 1.5 lakh per annum (maximum) 
Taxation: 80C benefits available; interest is tax-free 
Useful for: Accumulating long-term wealth minus any risk. 

Listed PSU bonds (tax-free) (Values taken for IRFC N2) 
Interest 6.29% Yield to maturity (YTM) 
Invest: for 9 years (Feb 2027) 
Age: No limit 
Investment amount: Coupon rates will be 25 bps lower if holding in each series goes above Rs 10 lakh 
Taxation: Interest is tax-free, but capital gain (if any) taxable. 
Useful for investors who need a regular income and are in higher tax brackets. 

Investing in fixed income products

-SLR rule 
When it comes to debt products, experts ask investors to stick to the SLR rule (safety, liquidity and return—in that order). We take a look at all factors that need to be assessed while investing in them. 

-Safety 
Since the safety of principal is the most important factor, we have kept only the schemes offered by government or PSUs. 

-Liquidity 
While it is better to have liquidity, it cuts both ways. Some long-term products like EPF, PPF, etc are made deliberately less liquid to control the urge to spend. 

-Coupon rate and yield 
Since face value (interest is paid on this) and market rates vary for listed papers, the yield may vary from the coupon rates. 

-Capital gains
Capital gain is an increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. 

-Returns 
Returns for listed bonds will be interest received plus capital gain or loss. For most other debt products, the coupon rate will be the returns. 

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