Magazine Ask Us Ask Us

The finance minister needs to be thanked for making only a marginal reduction in the interest rates. Also there has been only a small increase in tax liability by way of increase of surcharge. Now let us see the investment options that still hold out for investors.

Post Office Monthly Income Scheme
One of the safest monthly interest payment avenue. It provides an alternative monthly income in form of regular interest payment on the investment. It is currently offering interest at the rate of 9 percent per annum payable monthly (Rs.90 will be paid every month on a deposit of Rs.12,000). This is a high yielding scheme from Post Office where maturity period is six years. The minimum amount invested is Rs. 6,000 and there is a limit on the maximum investment - Rs. 3 lakhs in single account and Rs. 6 lakhs in joint account. Another big attraction of POMIS is that a 10 per cent bonus is paid on the investment at the time of maturity.

Government Of India Relief Bonds
The GOI Relief Bonds offer a high of 8% p.a., compounded half yearly or cumulatively. This return is completely tax free as it is exempted from income tax under the Income Tax Act, 1961 as well as wealth tax under the Wealth Tax Act, 1961. The current budget has imposed a limit on the investment on deposit at Rs. 2,00,000 per person per annum. This ceiling is effective from 1st March, 02 till 28th February, 03. This implies that if someone had made investment in these bonds before 1st of March 2002 he/she can still make further investment in these bonds subject to ceiling as aforesaid i.e. Rs. 2,00,000. Further, these bonds can be held in demat form, making the investment in the bonds hassle free, in case of sale or transfer. The interest/proceeds are credited directly to the investors' account. These bonds earn interest half yearly, or on a cumulative basis. The tenure of the bond is five years. The issue price is Rs. 1, 000 per bond. Further investments can be made in multiples of Rs. 1,000.

Company Fixed Deposits
Company Fixed Deposit (CFD) of top companies have been the most sought of instrument for the investors who are looking for assured returns over short to medium term period. They provide assured return on the investment. CFDs have always given interest higher than a bank deposit. While comparing interest rates of a Company and Bank FD, or of two CFDs, one can see that even a difference of mere 1% can give you as much as 25% increase in your assets over a long period of 20-25 years. Many good companies are offering interest ranging between 12% to 10% on 1 year deposit. These are - India Glycols offering 11%, Morepan Labs offering 11%, Ballarpur Industries offering 10%, and Ashok Leyland Finance offering 10%.

Income Funds
Tax-free status of dividend from mutual funds has been abolished.But that does not rule this investment option out from an investor's portfolio because the now the investor will have to pay tax on the dividend according to his/her tax slab. Earlier there was a uniform
tax on dividends @ 10% which mutual fund was liable to deduct. Now, no such deduction will be made by mutual funds. The result could be higher dividend in the hands of the investors. If the investor does not have taxable income then the dividend could be completely tax-free for him/her. Growth option provides option to long term investor to pay capital gains tax @ 10% or 20% with indexation benefit, whichever is less.

Deposit Scheme for retiring Govt. Employees
This is a scheme providing regular income, exclusively meant for retired govt. and PSU employees. The investor should make investment in this plan within three months of his\her retirement. It offers interest @ 8% per annum. This interest is totally tax-free for the investors. Interest is payable half yearly. The account can be closed after 3 years. Ideal for the retired having high tax-free income.

Bima Nivesh
An ever-popular investment plan from LIC. The plan offers high tax-free return of 7.47% for 5 years deposit and 8.30% for 10 years deposit. As compared to GOI Relief Bonds, Bima Nivesh provides easy liquidity option and the maximum investment limit (which is Rs. 50 lakhs) is also high.