We look for regular income in various situations. Moreover, this is true for people after retirement without any pension. Also, new entrepreneurs may be looking for a regular income until their start-up gains its ground. We discuss the 4 best investment options that will provide you with a regular income in this article. Let's begin!
Why is regular income important?
We all thus comfort in our lives. Regular income helps in achieving it in a way. Moreover, it gives us a sense of security, and a level of comfort that you should not worry about in the future.
You also become less anxious knowing the fact that regular income will take care of the future expenses.
It also adds discipline to your life and balances your spending habits. Thereby, helping you plan your next big-ticket purchase.
Above all, salaried individuals who have thus retired from service have a habit of seeing money credited to their accounts every month. This helps them in achieving that comfort again.
Here are the 4 best regular income options you should consider!
Bank Fixed Deposit
Bank FD remains the most popular of all regular income investments. Also, you can get the interest directly in your accounts monthly, quarterly, or yearly.
Returns: 3% to 7% for all individuals, while 3.5% to 7.5% for Senior citizens. Also, this figure keeps changing as per the interest rate cycle.
Pros:
1. Easy to invest. Online.
2. Also, the credit risk is very low in the case of Government banks and large private banks. But, you should be careful with cooperative banks.
3. Guaranteed income.
Cons:
1. Interest earned on FD is thus taxable, as per your income-tax slabs.
2. Annual interest income> Rs. 10,000 , TDS cut. Can thus be painful for people without a taxable income range.
3. Maximum tenure of FD's is 10 years. Post this, the interest can get much lower.
4. Pre-maturity closure can thus attract a penalty.
Investify suggests:
1. Always prefer Govt banks or large Pvt Banks for your FD. Avoid your exposure to cooperative banks as it can be risky.
2. In case applicable, use form 15G/H to get a TDS exemption.
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Company Fixed Deposit
NBFC's and Companies, (both Govt. and Pvt.) also offer FD schemes on a monthly, quarterly, or annual basis.
Returns: 8% to 9%(bonus 0.25% to 0.5% for Senior Citizens).
Pros:
1. Interest paid is often more than banks.
2. Guaranteed income.
Cons:
1. Interest on FD is thus taxable, based on your income-tax slab.
2. If Annual income> Rs. 10,000 , TDS cut. Can thus be hard for people in no taxable range.
3. Reinvestment risk is also high. FD tenure is 1 to 5 years(max. 10 years).
4. KYC formalities each time you invest.
5. Pre-maturity closure can thus attract a penalty.
Investify suggests:
1. Prefer Govt organizations or very high credit rating companies(AAA), as credit risk is thus low.
2. Diversify your investment across companies. Thus, don't invest everything in one.
3. In case applicable, use form 15G/H to get a TDS exemption.
Company Bonds (NCDs)
Most companies offer NCD from time to time. Moreover, NCDs pay a fixed interest. You can thus buy NCD from your Demat account or when the company issues them. Also, the interest get directly added to your bank account monthly/quarterly/yearly.
Returns: 8% to 11%(subject to ratings)
Pros:
1. Interest is thus higher than banks.
2. Interest is guaranteed.
3. Investment and selling can be done using the Demat account.
4. No TDS is cut if done through the Demat account.
Cons:
1. Interest is taxable as per the tax slab.
2. NCD tenure is 3 to 8 years. High reinvestment risk.
3. Despite being listed on the stock exchange, NCDs are traded less. So, getting the right price on selling it in need can thus be tough.
Investify suggests:
1. Prefer Govt organizations or very high credit rating companies(AAA), as credit risk is thus low.
2. Diversify your investment across companies. Thus, don't invest everything in one and reduce risks.
3. Most companies offer NCDs in physical form, hence TDS applicable.
Systematic Withdrawal Plan in Debt/Arbitrage Mutual Funds
A systematic Withdrawal Plan offered by debt funds can be used to derive a stable money supply.
Moreover, they are similar to Bank FD's but are tax-efficient, if SWP's are planned in excess of 3 years. Also, arbitrage funds can be used in place of these debt funds as returns are tax-free post 1 year.
Returns: Similar to Bank FD
Pros:
1. Suited for people in the higher tax bracket.
2. Can be managed online. Easy.
Cons:
1. Capital can thus run out if the market performance goes bad. Also, it can ask you to increase the investment duration.
Investify suggests:
SWPs in Mutual Funds are consequently better than regular FDs. They are highly tax-efficient and retirees can consider this as an option.
Conclusion
Having a stable income source is on everyone's mind. Moreover, there are thus a number of options available to us.
4 of the most promising ones have been discussed above, which can thus help you in maintaining a good liquidity situation in your lives.
Financial planning has been made easy with Investify Wealth Advisors Pvt. Ltd. offering you a range of choices, suited to your needs.
Experience financial wellness today! Happy investing!
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