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What are the safe avenues available for investment to get a regular monthly income? Bank FDs are not fetching interest or giving enough monthly income.

—Name withheld on request

 

These are tough times, and we must find the best solution in the current circumstances. Bank deposits, or for that matter any regular income payout, are at quite low levels. And considering the current interest situation, such a scenario will prevail for the next 12-24 months before you see any rise in interest rates.

So, any investment option that you may consider can be done for two years and it can be then renewed hopefully at a better rate of interest.

Investments having low risk can be your bank deposits. You can consider post office deposits as their rates are currently higher than bank deposits. You may also consider company fixed deposits with high credit ratings.

 

It has been a month since I left my private job. I have a provident fund (PF) corpus of 77 lakh. In the given circumstance, until when can I keep my PF account live? If I have to close the account, where can I invest the money? Please advise some safe avenues for investing the money to earn a regular income that beats inflation. Also, please advise how to invest about 50 lakh in bank deposits.

—S. Bhatia

 

The PF account can be held by you till the age of retirement and it continues to earn you interest. However, if there is no contribution to the account, the interest earned on the accumulated corpus will attract income tax as per your marginal rate of tax. The tax is prospective and if you have continuous period of service of five years, the corpus does not attract tax till the time you were in active employment and only becomes taxable on the accruals after your active employment.

And for reinvestment if you plan to do the same, you need to realize that a safe investment with low risk can at best provide you return equal to inflation, and this is when tax has not been factored in. This is true for your bank deposits also, which currently cannot even match inflation and is also taxable as per your marginal rate of tax. You need to consider some degree of risk if you want to have an inflation-adjusted return. This can be subject to your risk profile and for a moderate risk you can consider debt hybrid funds and for moderate to medium risk dynamic equity funds.

Surya Bhatia is managing partner of Asset Managers.

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