Exploring RBI’s Floating Rate Savings Bonds, Post Office Monthly Income Scheme, and Senior Citizen Savings Scheme for assured returns and low-risk

In terms of investing, most individuals are in search of low-risk and guaranteed return options. Therefore, here are three investment ideas that provide assured returns and very low risk, making them appealing to eco-minded investors.

RBI’s Floating Rate Savings Bonds

Floating Rate Savings Bonds from the Reserve Bank of India are fixed-income bonds available to retail investors. Floating Rate Savings Bonds (FRSBs) are attached to these bonds which are issued by the central government and they can’t be traded in the market; furthermore, these bonds are allowed for only a seven-year lock-in period.

The Reserve Bank of India (RBI) has set the interest rate for Floating Rate Savings Bonds (FRSBs) at 8.05% for the period from July 1, 2024, to December 31, 2024. This rate is calculated by adding 0.35% to the National Savings Certificate (NSC) rate, which currently stands at 7.70%. These bonds are fixed-income securities that are issued by the central government and meant for retail investors. They cannot be traded or transferred, and they come with a lock-in period of seven years offering bi-annual interest payments.

Interest earned on these bonds is taxable, but the principal qualifies for tax benefits under Section 80C of the Income Tax Act. FRSBs are intended for investors seeking stable returns and a secure investment backed by the government. The bonds are designed for long-term investment, with a lock-in period of 7 years and non-marketability makes it a disciplined saving approach.

Post Office Monthly Income Account Scheme (MIS)

The Monthly Income Scheme (MIS) offers an annual interest rate of 7.4%, payable monthly, effective from January 1, 2024. To open an MIS account, a minimum deposit of ₹1000 is required, and deposits must be in multiples of ₹1000. The maximum investment limits are ₹9 lakh for a single account and ₹15 lakh for a joint account. Each joint account holder shares equally in the investment. An individual's total investment across all MIS accounts cannot exceed ₹9 lakh, though accounts opened on behalf of minors by a guardian have separate limits.

Interest is credited monthly, and any unclaimed interest does not accrue additional interest. Excess deposits are refunded, with only PO Savings Account interest applicable from the deposit date to the refund date. Premature closure is not permitted within the first year, and if the account is closed between 1 to 3 years, a 2% deduction from the principal applies; between 3 to 5 years, a 1% deduction is applied.

At maturity (5 years), the account can be closed with a prescribed application form and passbook. In the event of the account holder's death, the account balance, including interest up to the preceding month, is refunded to the nominee or legal heirs. The scheme is a good option for those who want to invest in low-risk avenues.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings program tailored for senior citizens in India, providing a secure investment option with fixed income and tax benefits. Available through Post Office branches and authorized banks, the scheme offers a 5-year tenure with a current interest rate of 8.2% p.a. Deposits can range from a minimum of ₹1,000 to a maximum of ₹30 lakh, and interest is paid quarterly. Tax benefits up to ₹1.5 lakh are available under Section 80C. Accounts can be held individually or jointly with a spouse, and multiple accounts are permitted.

Eligible individuals include those aged 60 or above, or retired employees within specific age ranges if investing within one month of receiving retirement benefits. The scheme allows premature closure with penalties depending on the duration of the account, and it can be extended for an additional 3 years. Accounts can be opened at authorized banks or post offices, and some banks offer online account opening options. Excess deposits over the limit will be refunded, and interest earned is subject to taxation.

Conclusion

These investment options provide a safe and guaranteed way to earn a steady income. Investors who are not willing to take risks will find these government-backed instruments very appealing as they give security and fixed returns.