Public Provident Fund [PPF] - An Overview

The Public Provident Fund (PPF) is one of the most popular savings option in India and this is the tax benefit it offers - it comes under the EEE (exempt-exempt-exempt) tax status.  

This means that at the time of investment, the interest earned, and the amount that is received at maturity are all tax-exempt or free. 

PPF is an financial option that comes with a lock-in period of 15 years and the maturity date is not calculated from the date of the opening of account.

The date of calculation of maturity is taken from the end of the financial year in which the deposit was made irrespective in which month or date the account was opened. 

 It is among the few investments that not only offer you tax benefits under Sec 80C of the Income Tax Act, but also the interest income is exempted from tax.


The other advantage is that it helps to build a long term investment corpus for retirement when looked at from an interest and tax perspective.


Since its inception, the objective was to encourage savings across income classes, minimum deposit requirements are very low and affordable.

They are also tax-free accounts, easily accessible, safe being backed by the government and simple to understand, making them a popular investment avenue for a large majority of individuals in India.

PPF accounts can be opened at any nationalized, authorized bank and authorized branches, post offices and private banks as well.

These accounts can be opened by filling out the required forms, submitting the relevant documents and depositing the minimum pay-in at the authorized branches or offices for completion.

Account can be opened by cash/ Cheque and in case of Cheque, the date of realization of C​heque in Govt. account shall be date of opening of account. 

Interest rates are set and announced by the government of India. is calculated for a financial year according to the rate announced for the said year.

The interest rates are not fixed for the entire tenure of the holding while the maximum amount that can be deposited in the account is also subject to change.

All those who are employees and working with professionally managed companies, must be aware of the Employee Provident Fund (EPF).

The employer and employee equally contribute to these funds, the return of investment is interest earnings and the total amount invested by an individual gets tax exemption under section 80C.

The option to increase the employee contribution is also available where you can withdraw your PF based on upper limits and it is allowed for some specific purpose only.

If you change your job or you quit, then you can withdraw the PF or transfer with your new employer and it is also taxable if a criterion of continuous service for five years is not fulfilled apart from certain other conditions. Returns on PF are also similar to PPF.

You can always opt for the PPF scheme as a means that is to deliver for the similar purpose of investment and saving.

Though the maturity period for PPF account is 15 years as seen above, but partial withdrawal is allowed form 7th year onward subject to the prescribed specified limit.

The option of loan against your PPF account is also allowed and the same can be availed during a specific time period.

PPF is one of the best and easiest investment tool to serve your long term financial needs and its returns are completely tax free and offers you tax savings as well. 

One should invest in it though small or big but consistently and everyone should open a PPF account right when they start working and as a parent also you should open PPF accounts in your children’s name so that once they attain maturity they continue it and enjoy the benefits of the PPF account.

Monthly Income Plan - How They Work

A Monthly Income plan or MIP can best be described as a debt oriented mutual fund which gives you income,  in the form of dividends. 

They are debt oriented funds that invest in debt instruments like debentures , corporate bonds, government securities etc. 

It has most of its money in debt and rest in equity and cash and you can decide how you want to receive income quarterly, half-yearly or annually. 

MIPs can be viewed as a financial instrument that assure some income to their unit holders every month without much risk.

Many of these schemes not only declare dividend at regular intervals, even the dividend amount declared varies accordingly.

Most MIPs offer a growth option too which make them more of the exception than the rule when compared to other investment options.

This means that unit holders are exposed to NAV related risk with their primary objective of earning a monthly income according to prevailing market conditions.

The fluctuations in the equity market are more than that in the debt market, a smaller proportion of equities may serve as a measure of capital protection. 

They have an advantage on the tax compared to other fixed income options, as unlike interest income which is taxed according to the income tax slab, the dividend distribution tax  levied is lower than the income tax slab of most investors and long term capital gains too are charged at a concessional rate

The disruption of your regular source of income due to any mishap can lead to disastrous situations especially if someone has a single breadwinner in the family.

The chaos because of the mishap is added by the financial uncertainty due to loss of the income and most people are in the misconception that a regular insurance policy which pays out a lump sum amount at the time of claim will fulfill all their financial requirements,

You  need to remember that a major portion of your claim amount is spent on the recovery of the mishap and you are left with no any stable source of income for your future.

A monthly income plan can make a difference as it is an investment gives you an alternate source of income for you and your loved ones.

Government regulations demand that dividend can be paid only from surpluses and not from the capital investment. 

This means that the dividends can be declared from earned income only and not from the initial capital value . 

This makes sure that they can not show to the world that they are constantly giving income in case they have not done well.

While the aim of MIPS is to regularly declare dividends, it might happen at times, that they do not declare any dividends because of bad performance. 

There is no regulation on the MIP’s part to declare regular dividends so if you don’t get your income once in a while just because it’s a debt oriented product, It does not mean that they are reliable.

Even MIPs can give negative return, but in extreme cases and the debt portion is influenced by interest rates. 

When the interest rate falls, the NAV rises as price of bond increases and when interest rate rises, NAV falls. 

At such times the equity portion of the fund helps to maintain the return, interest Rates and how they affect Mutual funds .

MIPs offer lucrative commissions to agents in Equity funds and due to this it becomes easy to sell MIP’s as they can be labelled as the best investment option that is available in the market today.

Recurring Deposit - Why Invest?

Recurring Deposit can be described as an investment that is risk averse and gives guaranteed returns especially if you have short term investment goals.

It is suitable for short term goals that involve a time span of 1 to 3 years and it is the right financial product if you are planning to tackle short term situations that require immediate financial assistance.

They are also a financial product where one can not only invest but at the same time generate a regular monthly income.

 It is similar to other forms of investment with the only difference being that here we invest small amounts every month in a very systematic way.

The amounts are like fixed deposits in that they are taxable, which does not make them a very attractive investment option for tax purposes.

You can invest in them if you want to save for regular purposes, but for tax purposes this is not a good investment.

One needs to compare the interest rates before you invest, as these have undergone a lot of changes in recent times.

 Interest rates on recurring deposits are fully taxable though it still considered one of the best and the safest forms of investment in India.

You will be required to deposit a fixed amount every month for a select tenure and the amount will earn interest.

The effectiveness of the investing in such schemes depends on its features and ability to meet the investors objectives and financial goals.

Recurring Deposit can be viewed as a better investment as it does not involve market risk and you are assured a guaranteed return on investment.

The interest Rates offered by banks for recurring deposits depending on the principal amount and tenure of the deposit.

You will find most banks offering these products through Net Banking and investors can make a deposit online without any hassles.

Flexible recurring deposit schemes allow deposits of any amount at any time and one can make a deposit a small amount every month and one does not need to invest a lump sum to start a recurring deposit.

Interest Rates are low when compared to other forms of investment and customers get an interest rate that varies for Recurring deposits.

Recurring deposits give guaranteed but low returns when compared to other popular investment schemes like Mutual Funds and SIPs.

In case of withdrawals from a recurring deposit account before the end of tenure there is a penalty and instant withdrawals may not be possible in case of a financial emergency.

In case the RD is not flexible, the customer will not be able to change the monthly investment amount.

The customer can deposit money in a recurring deposit account, close the account, update information, view transactions, deposit details and do much more online. 

It is about making an investment and earning interest without even having to leave your home while investing in a recurring deposit.

Interest rates depend on the tenure and deposit amount and in most cases, the recurring deposit interest rate is very similar to that of fixed deposits.

 Interest rates vary  depending on the bank and the plan chosen by the customer. 

Also, many banks offer higher interest rates for senior citizens and can also use a RD calculator to find how much interest you will accumulate for the deposit amount, interest rate and tenure.

If you are a salaried employee you can set aside a particular amount every month as savings and for this recurring deposit is the best option. 

Also, RD schemes come with guaranteed returns and the rate of interest for RD is locked in which will protect the investor from changes in the interest rate.

Some banks offer flexible Recurring Deposit schemes where the investor will not be penalized if the amount is not deposited during a particular month. 

Also, in a flexible RD scheme, you will be able to withdraw the amount from your RD account anytime you want

When you deposit the money in an RD, you will never have the privilege to withdraw any part of the money until the term of the deposit is over. 

Hence, if you are looking for an easy liquidity instrument, recurring deposits are not a good alternative but if you want to discipline your savings then this disadvantage may work to your benefit.

It must be noted that he interest rate that you earn on recurring deposit is much lower that regular fixed deposit schemes, since your deposits are being made in small installments and not as a lump sum amount.

It is not possible in the case of recurring deposits to be able to change your deposit amount, regardless of your financial situation at the moment. 

When you have a fixed amount for investment each month, then the chances of extra or less funds for the deposit should be discouraged from opting for this product.

Systematic Investment Plans - Why Invest

In the information age, many of us develop our own set of beliefs and judgement which is good but it is vital to recognize whether you are investing your money the right ways and this is where we must look at our investment options

Systematic Investment Plan or SIP is a form of investment that allows one to invest a certain amount of money at a regular interval. 

You can start by investing small amounts of money in weekly, monthly or in quarterly basis instead of investing at one go in a year.

It can be viewed as a method of investing a fixed sum, regularly, in a mutual fund scheme and lets one to buy units on a given date each month, so that one can implement a saving plan for themselves. 

When investing in SIP one does not need to time the market which makes it different from investing in the stock market.

It allows you to invest in a mutual fund by making smaller periodic investments in place of a one-time investment.

You can invest in an mutual fund without changing your other financial liabilities which involves rupee cost averaging and compounding to better appreciate the working of SIPs.
It has brought mutual funds to the common man as it enables even those with tight budgets to invest a specific amount on a regular basis.

While making small investments through SIP  it enables investors to get into the habit of saving and over the years, it can really add up and give you handsome returns. 

A monthly SIP would grow in 10 years, 30 years and 40 years depending on the time period you wish to invest.

SIPs reduces the chance of investing at the wrong time and then trying to recover after a wrong investment decision. 

The true benefit of an SIP is derived by investing at lower levels. 

One must remember that the rule of making your money work for you is to stay focused, invest regularly and maintain discipline in your investing pattern.

 A small amount set aside every month will not affect your monthly disposable income as it is easier to part with a few hundreds every month, rather than set aside a large sum for investing all at once.

It is said that one must start investing your hard earned money at an early age if you want to attain the benefits of compounding.

The effect of compounding an be gauged from the fact that the longer the compounding period, the higher the returns.

Instead of investing a specific amount each year, suppose you invested some money after every five years, starting at the age of 35. 

When it comes to rupee cost averaging you will find that when you invest the same amount in a fund at regular intervals over time, you buy more units when the price is lower and this would reduce your average cost per share over time. 

Rupee cost averaging can make a difference if you follow a long-term investment approach, as it can reduce the risks of investing in volatile markets.

Those who invest through SIPs have to be present during both the highs and the lows of the market and your average cost of investing comes down since you will go through all the phases of the market.

It is a very convenient way of investing as one can submit cheques along with the filled up enrollment form. 

There are no entry or exit loads on SIP investments although capital gains, wherever applicable, are taxed wherever applicable.

It works on the principle of regular investments and is similar to a recurring deposit where you put in a small amount every month. 

The total amount invested, thus remains the same when you will be 60, but your need to look at the fund value and this is where the advantage of compounding that is present in the early years makes a huge difference.

The mutual fund will deposit the cheques on the requested date and credit the units to your account and will send the confirmation when it is done.

Remember, there is more than just a return while selecting a mutual fund scheme that works for your portfolio.

Real Estate Investment Trusts - How They Work

One of the fastest growing sectors in India is real estate, with huge prospects in major sectors like housing, commercial, hospitality, manufacturing, retail etc.

Buying a flat or plot of land is the best decision among the investment options and the risk is very low because the rate of property increases within months.

Real Estate Investment Trusts are a good investment option with efforts being made to make these tax-efficient for investors.

 The real estate sector in India has been lucrative for savvy investors over the last decade, but it has not been without accompanying uncertainties.

 It will open up a platform that will allow all kinds of investors  to make safe and rewarding investments into the Indian real estate market.

The best thing about REIT is that investors can start with as small a sum as is required to secure units in exchange.

The REIT platform has already been approved by the Securities and Exchange Board of India (SEBI) and like mutual funds, it will get the money from all investors across the country.

 The money collected from the REIT funds will then be invested in commercial properties that are used to generate income.

It will be registered by an IPO or initial public offering. REIT units and will have to get listed with exchanges and traded as securities with the minimum asset sizes to be invested.

The investors here would have the choice to be able to buy the units from either primary and/or the secondary markets.

It can be used to generate funds from a lot of investors to directly invest in profitable real estate properties like offices, residential units, hotels, shopping centers, warehouses and more.

All trusts with REIT will be listed with stock exchanges as they would be structured like trusts and all assets will be held with independent trustees for unit holders or investors.

They have defined duties which typically involve ensuring compliance and adherence to all applicable laws that protect the rights of the investors.

The objective is to provide the investors with the dividends that are generated from the capital gains accruing from the sale of the commercial assets.

The trust distributes  the income among its investors by dividends, besides the minimum entry level, a REIT is supposed to provide diversified and safe investment opportunities with reduced risks, and under a professional management to ensure the maximum return on investments.

REIT will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis

According to the guidelines, they will have to diversify and invest in a minimum of two projects with the highest asset value in a single project

More than half of the assets will have to be invested into revenue-generating and completed projects to lower the risk of investment.

The remaining part that include properties like under construction projects, equity shares of the listed properties, mortgage based securities, equity shares that derive a minimum amount of income from Government securities , money market instruments, cash equivalents and real estate activities.

 However, the real estate regulations in place have not had the desired effect due to the market conditions in the country as yet.

The exemption from tax on the distribution of dividends would also make it a much more attractive option for investors.

According to a recent report , commercial properties in India that are investment opportunities are of great value across the top cities.

Investing in REIT can also be compared to other forms of investment like investing in gold bonds.

The Indian property market is now almost stabilized and it is the right time to buy self-owned homes and while it is better to wait and watch, the market cannot be accurately predicted at the best of times.

At the end of the day, these are investment instruments and not a means to acquire actual property which is always high on the wish-list.

A budget that clearly favors purchase decisions for first- time home buyers and is a step closer to make home ownership a reality.

Post office monthly income account schemes

The Post Office Monthly Income Scheme is a scheme available to investors which gives you a guaranteed return on your investment.

It is a popular scheme with investors are rewarded with assured returns every month on their deposit and is one of the most beneficial investment options that can be procured as it offers returns, ensures that the capital invested is intact and also provides a fixed income every month. 

This scheme is provided by the Indian Postal Service and is administered by the Finance Ministry of India, making this one of the most secure options to invest in. 

Anyone who wants to generate a monthly income can open this account and then get an assured monthly income.

There are many ways to invest and you can lend money to someone to use it for a specific period of time and this will come back with an interest or you can also invest in stocks.

You get interest per year, which is payable on per month basis and you will get the interest each month from the date of making the investment, not from start of the month.

If you do not withdraw the amount for some month, it would not earn any interest and just lie there in the account.

This post office saving scheme does not come under sec 80C so there is no tax-exemption for the amount you invest in this, and interest income is taxable, but there is no TDS cut in this scheme.

You can deposit the money with cash, demand draft or local cheque and once you open a monthly income scheme account, you will be issued a scheme certificate and a passbook to record the transactions against the scheme. 

The maturity period of this scheme is for a specific period of times, you will be eligible for a bonus if you retain your scheme foe 6 years and your overall return including this bonus will be higher although there is a limit on the amount you can invest in the scheme.

You can have any number of accounts, but within the overall upper limit and you do not need to take your money out after maturity, you can leave the money in the account, but then it would earn the interest equal to saving bank account for next 2 years only.

You get withdraw from the income amount by directly going to the Post-office but you need to check if you want the income in your saving bank account. 

You need to confirm that you can provide ECS information at the time of opening the account and get the interest amount created in your Bank account.

Even though the maturity period for the scheme is fixed, there is an option to break it and take your money out.

 You can take your money only after 1 year and have to pay a penalty for early withdrawal which is as follows

If you break it within 1-3 yrs : 2% penalty on Deposit amount

If you break it after 3 yrs : 1% penalty on Deposit amount

A minor above age 10 years  can open an account on his/her own name directly, there is a limit for the amount invested by the guardian and it would not be included with guardian limi.

If you are a non-resident Indian / HUF then you  cannot open the Account.

The interest not withdrawn does not carry any interest.

You account can be transferred  from one post office to any Post office in India free of cost.

The amount deposited that is invested is exempt from Wealth Tax.

One of the benefits of having these schemes you as an investor, have the option to pick one that is most suited to their income and other requirements.

 Most individuals would prefer opting for those investment schemes that are relatively risk free, while offering guaranteed returns and although post office schemes are not very risky by nature do not offer high returns, whatever offered is substantial enough for applicants to invest high amounts in.

Options Trading - The Basics

Options trading is one of the instruments of investing that gives an investor a choice when it comes to making maximum profits with minimum risk.

They can be used for a variety of reasons depending on your trading goals and styles, it may be a better trading choice than owing a stock.

An option is defined as a contract that gives the buyer the right to buy or sell an asset at a specific price on or before a certain date.

Option is one of the most diversified trading instruments available and can be traded with various financial instruments like stocks, stock indexes, currencies, futures, exchange traded fund, commodities and bonds.

It is a derivative as its value is derived from something else and in the case of an index option, its value is based on the index.

It is a security and constitutes a binding contract with strictly defined terms and properties and is a valid trading instrument, whereby the holder has the right, but no obligation to buy or sell the stock or financial instrument.

The buyer will pay some price to get this right called premium and the seller will have to buy or sell the underlying stock, if the owner of option decides to exercise their right.

- Option type as CALL or PUTStrike priceOption type as call or put Expiry date An option that gives you the RIGHT  to BUY the underlying stock/instrument at agreed price called strike price, before agreed date called expiry date.

The person who is selling you the call option carries the obligation to deliver you the instrument, if you decide to exercise your right.

An option allows you to sell the stock at agreed price called strike price, before agreed date called the expiry date.

The person who is selling you the put option carries the obligation to take the delivery from you of the stock, if you decide to exercise your right.

When you trade with stock options is more than simple stock is the leverage involved as options enable you to control the shares of a specific stock without tying a large amount of capital in your trading account.

The amount of capital that you are paying is a comparatively small amount comparing to the cost of buying the same amount of stocks.

It gives one the ability to invest a smaller amount of capital and control the stock and give the option trader the flexibility.

You can magnify profit when the stock moves in your favor.

One can make money based on a relatively small movement in the stock.

Certain income producing option strategies enable you to generate a monthly passive source of income and one of the most used strategies to generate passive income is to write covered calls.

The trader who wrote the covered calls may be forced to sell his stock when the options is exercised so use this only if you are willing to depart with the stock that you own.

There are various options strategies that give the options trader the ability to make money from all market directions with limited risk exposure and potentially unlimited profit.

One can buy call options when the market is bullish, buying put options when the market is bearish and entering into various credit spread strategies to earn profit when the market is range bound.


Stock options can be used as an instrument to hedge against various risk exposure of a stock holder and as insurance to protect your stock portfolio from any adverse move in the market.

Unlike stock where you can hold on to it for many years or even passes on to your children, all options have an expiration date and there is nothing you can do to stop the options from expiring.

 The rate of time value increases over time when the options get closer to the expiration dates so be sure to watch over your open options position and not to let it expired worthless.

If you hold onto a trade and are out of money at expiration date, then you may lose that what you invested in the options.


Leverage works both ways as it can help you earn profit in shorter time frame and can break your account in half that time just as quickly.

The risks of leverage is present when one is involved with calls or puts or entering into any unlimited risk option strategies.

Options trading is a risky venture and it has substantial risk and reward involved and you need to trust your instincts and do what you feel is the best for you so that you achieve your financial goals without any losses.