Fixed Income

Fixed Income Investments are those that offer a stream of return on a fixed schedule. The amount of the payout could vary, though. One of the most common forms of this kind of investment is individual bonds. This category also includes the likes of bond funds, Post Office Savings Schemes, Company Deposit, Certificate of Deposit, exchange-traded funds (ETF), and money market funds.

Latest Update

RBI has announced a new rule applicable to unclaimed, matured FD accounts. That is the funds in an unclaimed, matured FD account will attract an interest rate as applicable to the savings account or the contracted rate of the matured FD, whichever is lower.

Introduction

Fixed Income Investments offer a fixed rate of return with the interest getting accumulated over a predetermined period of time. These can be used by investors to diversify their portfolio given these are not as risky as derivatives and equities. Because the returns in fixed income investments are reliable, it is particularly popular amongst the retired investors.

What comprises Fixed Income Investment?

It is important to understand that fixed income funds are not a different category of funds in the mutual funds domain. Their identity is defined by their investment style and expected returns. Some common fixed income generating products are:

• Exchange Traded Funds
• Debt Funds
• Money Market Funds

Characteristics of Fixed Income Investment Funds

Fixed Income Investment Funds:

• The taxes imposed on fixed income funds are for debt funds with short term capital gains being added to your income and taxed based on the tax slab. The long term gains are taxed at 10 percent without indexation and 20 percent with indexation.
• The focus of fixed income investment is not as much capital appreciation as generating a fixed income to the investor.
• In fixed income investments, debt funds offer a better return than money market funds in the long run, but it is ETFs which garner more profit with their equity-like functioning.
• These are actively managed by fund managers who regularly adjust the portfolio to manage the portfolio in line with the changes in the interest rates and the economic conditions.
• Being highly liquid in nature, these can be accessed by the investor and withdrawn whenever they require.
• The aim of the fund is to keep the returns stable in the face of market fluctuations and adverse economic conditions.

What are some of the best Government Fixed Income Investment options available in India?

Since the focus of Fixed Income Investments is primarily Safety, Liquidity, and Returns, we have shortlisted schemes that are offered by the Government of India or PSUs.

• Public Provident Fund
• Voluntary Provident Fund
• Listed PSU Bonds
• Senior Citizen savings Scheme
• Pradhan Mantri Vaya Vandana Yojana (PMVVY)
• Sukanya Samriddhi Yojana (SSY)

Other Fixed Income Investment Avenues in India

As of June 2018, listed below are some of the Fixed Income Investment Options available to investors.

• Post office Recurring Deposit
• Post-Office Monthly Income Scheme
• Post-Office Time Deposit
• Savings Bank Account
• Bank Recurring Deposits
• Bank Fixed Deposits
• Public Provident Fund (PPF)
• RBI 7.75% Savings Bonds
• Sovereign Gold Schemes
• Stocks and Equity
• Mutual Funds
• Company Deposits