Safe Investment Havens of India - 2nd Edition - Preview

A Guide for the Safe Investor

SAFE

INVESTMENT

HAVENS OF

INDIA 2nd

Edition

Build Wealth Safely!!!

Anand Vijayakumar

2014 Anands Blog. All rights Reserved.

Safe Investment Havens of India

2014 Anands Blog. All Rights Reserved. Page 1

Copyright 2015 Anands Blog. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means by electronic, mechanical,

photocopying, recording or otherwise without the explicit prior written permission of the Author.

LEGAL DISCLAIMER: The Author is an Independent Blogger and Financial Advisor. Use of the information contained in this book is at ones own risk. This is not an offer to sell or solicitation to buy any investment products. All stock market investments carry an inherent risk of loss and the author will not be liable for any losses incurred out of the investment(s) made by the reader. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situation or needs of individual investors. All content and information provided in this book is on an As Is basis by the Author. Information in this book is believed to be reliable but the Author does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. The author may hold investments in any of the products discussed here however the author has NO Vested Interest in recommending any of the products outlined in this book. The Performance of the products quoted in this book may or may not be sustained in future. All rate of returns used in calculations are for indicative purposes only and do not guarantee future results. The actual returns your portfolio will gain will be based on multiple factors like your investment choice, market performance etc.



Contents of this Book

Introduction .................................................................................................................................................. 7

Before We Begin ........................................................................................................................................... 8

So, what is a Safe Investment? ..................................................................................................................... 9

Types of Safe Investments ............................................................................................................................ 9

Type I Fixed One Time Investment Fixed Term Fixed Maturity ..................................................... 10

Type II Fixed Regular Investment Fixed Term Fixed Maturity ........................................................ 10

Public Provident Fund PPF ....................................................................................................................... 11

What is Public Provident Fund? .............................................................................................................. 11

Why PPF Was Started ............................................................................................................................. 11

How the PPF Account works ................................................................................................................... 11

How Much Can I Invest in PPF Each Year? .............................................................................................. 12

Things You Need to Know about PPF ...................................................................................................... 12

What Makes PPF Unique ........................................................................................................................ 13

Opening and Operating a PPF Account ................................................................................................... 13

Interest Calculation on PPF Investments ................................................................................................ 13

Historical PPF Interest Rates ................................................................................................................... 14

Handling PPF Maturity ............................................................................................................................ 14

Option 1: Withdraw the Maturity Amount ......................................................................................... 14

Option 2: Extend the Deposit Duration by an Extra 5 Years and Continue to Contribute ................. 15

Option 3: Extend the Deposit Duration by an Extra 5 years with No Additional Contribution .......... 15

Withdrawals from the PPF Account ........................................................................................................ 15

Loans from your PPF Account ................................................................................................................. 16

A Simple Calculation of How your PPF Money will Grow: ...................................................................... 16

Kisan Vikas Patra KVP ............................................................................................................................... 18

What is Kisan Vikas Patra? ...................................................................................................................... 18

How Kisan Vikas Patra works .................................................................................................................. 18

How much can I Invest in KVP each year? .............................................................................................. 18

Who can Invest in KVP? .......................................................................................................................... 18

How to Invest in KVP? ............................................................................................................................. 19



KVP and your Taxes ................................................................................................................................. 19

Premature withdrawals from your KVP Deposit ..................................................................................... 19

Things You Need to Know about KVP ..................................................................................................... 20

National Savings Certificate NSC .............................................................................................................. 21

What is NSC? ........................................................................................................................................... 21

How National Savings Certificate Works ................................................................................................ 21

How much can I Invest in NSC each year? .............................................................................................. 21

Who can Invest in NSC? .......................................................................................................................... 21

How to Invest in NSC? ............................................................................................................................. 22

NSC and your Taxes ................................................................................................................................. 22

Tax Treatment of the Interest you earn from NSC ............................................................................. 22

Premature Withdrawals from your NSC Deposit .................................................................................... 23

Loan Facility against your NSC Deposit ................................................................................................... 23

Things you Need to Know about NSC ..................................................................................................... 23

Senior Citizens Savings Scheme SCSS ....................................................................................................... 25

What is Senior Citizens Savings Scheme? ............................................................................................... 25

How Senior Citizens Savings Scheme works ........................................................................................... 25

Who can Invest in SCSS? ......................................................................................................................... 25

How to Invest in SCSS? ............................................................................................................................ 26

SCSS and your Taxes................................................................................................................................ 26

Tax Treatment of the Interest you earn from SCSS ............................................................................ 26

How much can I Invest in SCSS each year? ............................................................................................. 26

Premature Withdrawals from your SCSS Deposit ................................................................................... 27

Things you Need to Know about SCSS .................................................................................................... 27

Bank Fixed Deposits FDs .......................................................................................................................... 28

What is a Fixed Deposit? ......................................................................................................................... 28

How a Fixed Deposit Works? .................................................................................................................. 28

Who can Invest in a Fixed Deposit .......................................................................................................... 28

How to Open a Fixed Deposit?................................................................................................................ 29

Fixed Deposits and your Taxes ................................................................................................................ 29

Tax Treatment of the Interest you earn from FDs ............................................................................. 29

How Much can I Invest in a FD each year? ............................................................................................. 29



Premature Withdrawals from your FD ................................................................................................... 30

Safety of your FDs .................................................................................................................................. 30

Things you Need to Know about FDs ..................................................................................................... 31

Post Office Time Deposits POTD .............................................................................................................. 32

What is a Post Office Time Deposit? ....................................................................................................... 32

How a Post Office Time Deposit Works .................................................................................................. 32

Who can Invest in a Post Office Time Deposit? ...................................................................................... 32

How to Open a Post Office Time Deposit?.............................................................................................. 32

Post Office Time Deposits and your Taxes .............................................................................................. 33

Tax Treatment of the Interest you earn from your POTD .................................................................. 33

How Much can I Invest in a Post Office Time Deposit? .......................................................................... 33

Premature Withdrawals from your POTD ............................................................................................... 33

Things you Need to Know about Post Office Time Deposits: ................................................................. 34

Post Office Monthly Income Scheme POMIS ........................................................................................... 35

What is Post Office Monthly Income Scheme? ....................................................................................... 35

How the POMIS Scheme Works .............................................................................................................. 35

Who can Invest in the POMIS Scheme? .................................................................................................. 35

How to Open a POMIS Account? ............................................................................................................ 36

POMIS and your Taxes ............................................................................................................................ 36

How Much can I Invest in POMIS ............................................................................................................ 36

Premature Withdrawal from POMIS ....................................................................................................... 36

Things you Need to Know about Post Office Monthly Income Scheme: ................................................ 37

Bank Recurring Deposit RD ...................................................................................................................... 38

What is a Recurring Deposit? .................................................................................................................. 38

How an RD Works ................................................................................................................................... 38

Who can Open a Recurring Deposit? ...................................................................................................... 38

How to Open a Recurring Deposit? ........................................................................................................ 39

Recurring Deposits and your Taxes ......................................................................................................... 39

How Much can I Invest in a Recurring Deposit? ..................................................................................... 39

Premature Withdrawal from a Recurring Deposit .................................................................................. 39

Things you Need to Know about Recurring Deposits ............................................................................. 40

Post Office Recurring Deposits PORD ...................................................................................................... 41



What is a Post Office Recurring Deposit? ............................................................................................... 41

How PORD Works ................................................................................................................................... 41

Who can Open a PORD Account? ........................................................................................................... 42

How to Open a Post Office Recurring Deposit? ...................................................................................... 42

Post Office Recurring Deposits and your Taxes ...................................................................................... 42

How Much can I Invest in a Post Office Recurring Deposit? ................................................................... 42

Premature Closure of your PORD Account ............................................................................................. 43

Loan Facility Offered By Post Office Recurring Deposit .......................................................................... 43

Things you Need to Know about Post Office Recurring Deposits ........................................................... 43

The Sukanya Samriddhi Scheme ................................................................................................................. 45

Who can open this Sukanya Samriddhi Account? .................................................................................. 45

Where can we open this Sukanya Samriddhi Account? ......................................................................... 45

Minimum and Maximum Allowed Contributions ................................................................................... 46

Account Maturity. Withdrawal and Loan Options .................................................................................. 46

Interest Rate Offered .............................................................................................................................. 46

Tax Benefits and Taxation at Maturity .................................................................................................... 47

My Take on Sukanya Samriddhi Scheme ................................................................................................ 47

A Comprehensive Comparison of the Safe Schemes Covered in this Book ................................................ 50

Rating Rationale: ..................................................................................................................................... 50

5 Star Investments Public Provident Fund and Sukanya Samriddhi Scheme ....................................... 51

4 Star Investments NSC, Bank FDs and SCSS ...................................................................................... 52

3 Star Investments KVP and Bank RDs ................................................................................................. 52

2 Star Investments POTD and POMIS .................................................................................................. 52

1 Star Investment PORD ....................................................................................................................... 52

Sample Investment Portfolios Based on your Investment Size ............................................................... 53

For Senior Citizens: ................................................................................................................................. 53

For the Rest of Us: ................................................................................................................................... 54

Investment Up to 2 Lakhs Per Year ..................................................................................................... 54

Investment Up to 5 Lakhs Per Year ..................................................................................................... 55

Investment Above 5 Lakhs Per Year .................................................................................................... 55

Why many of the Safe Investments are Missing in these Model Portfolios!!! ................................... 56

A Smart Idea for Extra Benefits from any Monthly Interest Payout Scheme ............................................. 57



A Simple Calculation To Prove My Point .............................................................................................. 57

Option 1: No RD .................................................................................................................................. 57

Option 2: With Recurring Deposit (That pays 8% Per Annum) ........................................................... 57

Appendix A Q & A about Public Provident Fund ...................................................................................... 58

Appendix B Q & A about Kisan Vikas Patra .............................................................................................. 66

Appendix C Q & A about National Savings Certificate ............................................................................. 69

Appendix D Q & A about Senior Citizens Savings scheme ....................................................................... 72

Appendix E Q & A about Bank Fixed Deposits ......................................................................................... 76

Appendix F Q & A about Post Office Time Deposits ................................................................................ 81

Appendix G Q & A about Post Office Monthly Income Scheme .............................................................. 83

Appendix H Q & A about Bank Recurring Deposits .................................................................................. 85

Appendix I Q & A about Post Office Recurring Deposits .......................................................................... 88

Appendix J A Comparison between Bank Deposit Schemes and Post Office Deposit Schemes .............. 91

Appendix K Q & A about Sukanya Samriddhi Scheme ............................................................................. 92



Introduction

India is the Land of Miracles and Indians are a special breed. We want Safety and Security in

everything we do. In fact, up until a couple of decades before, anyone working in a Private Sector Firm

was considered Crazy to risk their careers because only a Government Job was considered Safe. When

it comes to Investments, our forefathers were even more cautious. Anything that did not have the

Backing of the Government was not even remotely considered.

Even with all the recent developments in Technology, Education and the world of Finance, we Indians

are still very reluctant to invest in the Stock Market. If we try to think about the reason for this, our

Mentality and Conservative Mindset occupy the top slots. Anyways, the purpose of this book is not to

analyze why our mindset is like that

In order to cater to the Conservative Investor Population, there is a whole Myriad of Investment

Products available in India that is not only fully 100% safe but also gives you good returns. Most of our

friends and family members would be interested in safe investment options but arent fully aware of

what they are. The purpose of this book is to help you understand in great detail about these Safe

Investment Havens.

Whats New In This Edition?

In this edition, the new Sukanya Samriddhi Scheme has been added to the list of Safe Investments.

Hope you find this book useful.

Best Wishes

Anand.



Before We Begin

Investment is a Life Long Exercise and there is no Overnight Get Rich

Secret. Most people who became Rich, the Legal Way spent their time

working hard and Investing Wisely. If you want your money to work as

hard as you do, you should consider the Stock Market. However, this

comes with a Risk. There is always a probability that you might end up

losing money. This is probably the biggest reason why We Indians

prefer Safe Investments.

A point to note here is that, this Safety comes at a Price. You

cannot expect extravagant returns from Safe Investments. Most Safe

Investment Options that are available in India will give you an average

of about 8% to 9% returns per year and are fully safe.

An Ideal Investment Portfolio would include a combination of Risky and

Safe Investments. But, if you are someone who isnt comfortable losing

money and you feel taking such risks is Unnecessary, then dont worry.

This book is going to explain in Great Detail about all the Safe

Investment Havens of our country and help you build a Substantial

Corpus

Lets get started, Shall we?

The Population of the United States

or any other Developed Nation is

much lower when compared to

India. But, the number of people

from India who actually invest in

Stock Market Related Instruments

like Stocks, Mutual Funds, and

Derivatives etc. doesnt even

compare to those countries.

If we take a step back and think

Why Stock Market Instruments

are so popular in developed nations,

the reason is pretty obvious. Safe

Investments in their countries yield

maybe 1% or at most 2% per annum

which is nothing when compared to

the Average 8% our safe

investments yield.

Did you know that by investing 2 lakhs each year into Safe Investments that earn

you 8% interest per year, you will end up with 98 lakhs at the end of 20 years? If the

interest earned is 8.5% the amount is 104 lakhs and with 9% it will be 111 lakhs.

Interesting isnt it?



What is a Safe Investment?

So, you have purchased this book (Or are reading the free preview) because you wanted to grow wealth

in a safe manner. Most blockbuster investments that can give you incredible returns like 20% or 25%

in a year are extremely risky because the stock market is always like that in nature. Are you someone

who is willing to wait in order to reap the benefits of your Sure Shot investments?

If so, this book is just what you need

So, what is a Safe Investment?

A Safe Investment is one where the Principal you deposit is fully and 100% safe which means, no matter

what happens, the amount you deposited will be returned to you ALWAYS!!!

That sounds nice, doesnt it? Yes, this is the main reason why a big chunk of Indian investors still feel

Safe is the way to go. However, most of them are not aware of all the safe Investments and hence are

limited to investing in one or two of the safe schemes that they know.

But, dont worry. In this book, you will learn about all the possible Safe and Sure Investments that are

available in India.

Types of Safe Investments

Safe Investments can be classified into TWO major categories. They are:

1. Type I Fixed One Time Investment Fixed Term Fixed Maturity

2. Type II Fixed Regular Investment Fixed Term Fixed Maturity

Did you see the words Fixed Maturity? This means that, the amount you will get if you wait until the

Fixed Term is not only Safe but also Fixed. You will be told upfront how much you interest your

investment will earn and how much money you will get at the end of the investment duration.

So, as an Investor, we are fully Sure and Aware of what our Investment is doing



Type I Fixed One Time Investment Fixed Term Fixed Maturity

Type I Safe Instruments are very straight forward. You start out with a One Time Investment and lock-

it-in for a Fixed Duration and at the end of the Investment Tenure, you will get a Fixed Amount back.

This fixed amount you will receive will include your Principal and the Interest which again is Fixed

The Investments that we will cover in this book that would qualify as Type 1 are:

a. Kisan Vikas Patra (KVP)

b. National Savings Certificate (NSC)

c. Senior Citizens Savings Scheme (SCSS)

d. Bank Fixed Deposits (FD)

e. Post Office Time Deposits

f. Post Office Monthly Income Scheme (POMIS)

Type II Fixed Regular Investment Fixed Term Fixed Maturity

Type II Safe Instruments are also straight forward. You start out with a Small Investment and make

regular contributions periodically, over a Fixed Duration and at the end of the Investment Tenure; you

will get a Fixed Amount back. As with Type I Instruments, the fixed amount you will receive will

include your Principal and the Interest which again is Fixed

The Investments that we will cover in this book that would qualify as Type II are:

a. Public Provident Fund (PPF)

b. Bank Recurring Deposits (RD)

c. Post Office Recurring Deposits (PORD)

Some of these investments also have regular/monthly interest payout options which can

be useful for people who expect a steady influx of cash each month Ex: Pensioners and

Senior Citizens



Public Provident Fund PPF

Public Provident Fund or PPF as it is more commonly called has been the staple investment avenue for

thousands of Indians over the past two decades. Not only is it an Excellent Long-Term investment

choice, but also an Investment that gives Tax Benefits which makes it doubly attractive for an investor.

What is Public Provident Fund?

Public Provident Fund or PPF is a scheme that is offered by the Central Government of India. Any Indian

Citizen can open and maintain a PPF Account. The PPF Account is a Close Ended Investment scheme

with a lock-in period of 15 years. This effectively means that, your investments cannot be withdrawn

until maturity which would happen at the end of the 15th

year.

Why PPF Was Started

Back in the late 1960s almost 80% of our population was dependent

on Agriculture for sustenance and did not have any Retirement

Savings. The Government wanted to provide Retirement Security for

its citizens who are Self Employed or work in the Unorganized

Sector where Employment Retirement Schemes like Employee

Provident Fund (EPF) are not available. At the same time, they also

wanted to cultivate the habit of Regular Savings. Accordingly, this

scheme was created and named as Public Provident Fund.

As the name suggests, this scheme was open to the Public with no

limitations. A PPF account can be opened by anyone and

contributions can be made as per their preferences.

How the PPF Account works

The way the PPF Account operates is very simple. Every year, you deposit whatever Investible Surplus

you have into your account. You are expected to make at least one deposit each year. The Government

calculates the Interest based on the prevailing Interest Rates and credits the same into your account

each year. The final corpus can be withdrawn at maturity.

Public Provident Fund or PPF is a

scheme that was introduced by the

Government of India in the year 1968.

Ever since that year, PPF has been the

preferred choice for the safety seeking

investor who want assured and Tax

Free Returns.



How Much Can I Invest in PPF Each Year?

As of now, PPF has an upper limit of Rs. 1.5 Lakhs (1,50,000/-) per year. You are also expected to deposit

a minimum of Rs. 500/- each year.

Things You Need to Know about PPF

As I just said, anyone can open a PPF Account. However, there are a few rules that have to be kept in

mind. They are:

1. You have to deposit a minimum of 500 rupees

each year to keep your account active. Similarly,

in any given year, you cannot deposit more than

Rs. 1.5 Lakhs into your PPF Account

2. You can make a Maximum of 12 Deposit

Transactions in any given Year.

3. The Lock-In Period is 15 years which means, you

have to wait a minimum of 15 years until you can

actually withdraw your money.

4. At any given time, you can only have ONE Active

PPF Account in your name. If you are found to have 2 accounts, the 2nd

will be closed

and only the Principal amount you invested will be refunded. The Interest amount that

you might have earned in the 2nd

account will be lost.

5. The Amount you Invest into your PPF Account is eligible for Tax Benefits under Section

80C of our Indian Tax Laws

6. You cannot open a Joint PPF Account

7. You can open a PPF Account in the name of your Spouse/Son/Daughter as well, if you

want.

8. The PPF Account cannot be attached to any of your external Debt or Liability.

9. NRIs cannot open a New PPF Account. However, if you became an NRI after actually

opening the PPF Account, you can continue to Invest in the scheme until Maturity. If you

are an NRI At the time of Maturity, you will not have an option to extend the tenure by

an additional 5 years (which is available for Resident Indians)

10. You are free to nominate any of your family members (Usually the Spouse or children)

as the beneficiaries of your PPF Account. In case of the sudden demise of the account

holder, the Nominees can claim the balance in the PPF Account after proving his/her

identity and relationship with the deceased account holder.

11. The Nominee Cannot Continue the PPF Account. The account has to be closed.

12. The PPF Account cannot be transferred from one person to another

Did you know that up until Oct11

one could only deposit a maximum

of Rs. 70,000 into their PPF

Account? The amount was

increased to 1 Lakh in Nov11 and

was revised again in July14 to 1.5

Lakhs.



What Makes PPF Unique

The Fact that PPF is a 15 year Investment Option that Mandates

the Investor to Contribute Every Year, makes this scheme very

unique. The Scheme also offers Tax Benefits (Under Section 80C)

to further motivate Citizens to sign-up for this scheme. To top it

all off, the interest you earn is also fully Tax Free.

Opening and Operating a PPF Account

Opening a PPF Account is very simple. All you have to do is,

visit your nearby Post Office or the branch of any Nationalized

Bank in your locality and ask for the PPF Account Opening

Form. Simple isnt it? After your account is open, you have

to visit the Post Office or Bank Branch where the account was

opened and make deposits every year. You will be given a

Passbook that will contain all the transactions that happen on

your account. Even the Interest Credit that happens on your

account will be entered into the passbook to help you track

your Investment. Recently ICICI Bank has started offering an

Online PPF Account Opening facility and tops it off with

options to transfer funds directly from your savings account to

your newly opened PPF Account.

You will need the following to open your PPF Account:

A Passport Sized Photograph

Address Proof

PAN Card &

Money for the Initial Deposit

Interest Calculation on PPF Investments

The Public Provident Fund Scheme currently offers an Interest of 8.7% (Changes every year) per annum

that gets compounded Annually. Interest for a particular month is calculated on the lowest balance

between the close of the fifth day and the end of the month. This accrued interest will be credited to the

account at the end of each year. It means, if you want to take full-advantage of the Interest calculation

If you forget to contribute the minimum

amount in any year then your account

will be deactivated. To activate you need

to pay Rs.50 as penalty for each inactive

year also you need to pay Rs.500 for each

inactive years contribution.

These days, many banks offer online

fund-transfer to deposit money into your

PPF Account. Except for transactions

initiated from an SBI account, all other

transactions will require a minimum of 3

working days to actually credit the

money into your PPF Account. So,

remember to initiate your transaction

early otherwise your money will not earn

interest for the current month.



cycle, you need to invest your monthly contribution within the 5th of that month. Else your contributed

amount will be eligible for gaining interest only from the following month and will remain idle for that

month.

Historical PPF Interest Rates

Did you know that when the PPF Scheme was offering citizens an Interest of 12% per annum during the

period between 1986 and 2000? Ever since that point on, the Interest has steadily decreased.

Handling PPF Maturity

As you know by now, your PPF Account will Mature at the end of 15 years. So, what are our Options

when our account completes the 15 year duration?

Option 1: Withdraw the Maturity Amount

This option is straight forward and doesnt require much explanation. You can just request for your

Investment corpus to be returned to you and you will get your amount along with Interest. Simple

Remember: If you choose to withdraw the money, the amount you receive is

Exempt from Tax.



Option 2: Extend the Deposit Duration by an Extra 5 Years and Continue to Contribute

It is not Mandatory to close your PPF Account after 15 years. You can extend the deposit duration by a

Multiple of 5 for as many times as you want and continue to deposit ever year like what you did

before.

Remember: If you decide to continue the contributions to your PPF account, you

need to submit the request within 1 year from date of Maturity.

Option 3: Extend the Deposit Duration by an Extra 5 years with No Additional Contribution

In case you dont need the PPF Money right now but at the same time, are not interested in making

additional contributions any more, you can select this option. You can just choose to extend your

deposit duration by a Multiple of 5 for as many times as you want and just let the corpus earn Interest

for you.

Remember: If you decide to continue the account, you need to submit the request

within 1 year from date of Maturity.

Withdrawals from the PPF Account

If there is one thing that I would consider as a Drawback of choosing PPF is the lengthy lock-in period.

Yes, you cannot withdraw the full amount until your account matures (In 15 years). However, in order to

help out account holders, PPF actually allows for Partial Withdrawals subject to a few conditions.

Condition No. 1: The first withdrawal can only be done after the

completion of 5 full financial years from the end of the year in which

your First Deposit was made.

Condition No. 2: Only one Withdrawal can be made each year.

Condition No. 3: The amount that was Withdrawn cannot be repaid

(This is Not a Loan)

The Maximum amount you can

withdraw will be 50% of the balance at

the end of the Fourth Year immediately

preceding the year in which the

amount is to be withdrawn or the

balance at the end of the preceding

year whichever is LOWER

Documents

Safe Investment Havens of India - 2nd Edition - Preview