What are the Best Fixed Income Instruments with high safety in India (in 2021)?

Best Debt/Fixed Income Instruments with high safety:

How many of you park your savings in Bank Fixed Deposits (FDs) here in India?

The latest FD Rate of State Bank of India is 4.90% which is too low when you compare it with past returns.

The question is: there any debt instruments which can provide higher returns with good safety.

By ‘safe’, I mean debt instruments –

• Unlisted, and not having any direct, visible impact of market fluctuations
• Are either government-backed or bank-issued (with DICGC protection)

The following are the 𝘁𝗼𝗽-𝟳 ‘debt instruments that tick all the above boxes!

If you have Option to Max Out EPF (which gives 8.4% PA), do it first. Next is Sukanya Samriddhi Account (7.6%) & PPF (7.1%). Returns are fully tax free in all these 3 instruments which makes it sweeter. If you are looking for long-term debt vehicles, opt for these 3 first. If you have surplus or need lower lock-in, you can consider the following options.

Senior Citizens

1. Senior Citizens Saving Scheme (ROI = 7.40% pa)
   1. Invest up to 15L
   2. 5years maturity with 3 years optional extension
   3. 5% of deposit as penalty if withdrawn between 1-2 years
   4. 1% of deposit as penalty if withdrawn after 2 years
   5. No penalty for withdrawing 1 year after extension
   6. 4% fixed interest rate – changed quarterly
   7. Contributions can be shown under 80c
   8. Interest Given Quarterly
   9. Interest Fully taxable
2. Pradhan Mantri Vaya Vandana Yojana (ROI = 7.40% pa)
   1. Only for senior citizens
   2. Invest up to 15 lakh
   3. 10 year lock in
   4. 4% fixed interest
   5. Interest can be paid monthly/quarterly/half-yearly/yearly
   6. No premature withdrawal (only in case of death or critical illness)
   7. Interest fully taxable
3. Post Office Monthly Income Scheme (ROI = 6.60% pa, new rate set every quarter)
   1. Invest from 1.5K to 4.5L
   2. 5 Years maturity
   3. 2% penalty if withdrawn in 1-3 years
   4. 1% penalty if withdrawn in 3-5 years
   5. Interest is fully taxable
   6. Fixed rate of interest (6.6% currently, new rate set every quarter)
   7. Interest paid monthly
4. Kisan Vikas Patra (ROI = 6.90% pa)
   6. Money double in 124 months (6.9% interest rate)
   7. Fixed interest rate
   8. Interest earned is taxable
   9. Can withdraw prematurely after 2.5 years without losing any benefits
5. National Savings Certificate (ROI = 6.80% pa)
   1. Interest compounded annually but paid at maturity (hence saves taxes)
   2. 5 year locked
   3. No premature withdrawal (Only in case of death)
   4. 100 rupees min, No max limit
   5. Contributions (and interest earned) can be shown under 80c
   6. Interest is taxed at the time of maturity
6. Savings Account of IDFC First Bank (6%) & FDs of IndusInd Bank(6.5%) & State Bank of Mauritius (7%)
   1. Most liquid option available at the moment.
7. RBI Floating rate savings bonds (ROI = nsc+0.35% = 7.15% pa)
   1. Maturity in 7 years from the date of issuance.
   2. Interest will be 0.35% higher than NSC (new rate set every 6 months)
   3. Premature redemption shall be allowed for specified categories of senior citizens
   4. Minimum ₹ 1000/- and in multiples of ₹ 1000/-.
   5. Interest is payable semi-annually
   6. Income from the bonds is taxable.

Let me know in case of any queries on investing in any of these instruments.