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Synopsis
A low-risk investment refers to a financial option that provides stable, predictable, and secure returns with minimal exposure to market volatility or capital loss. These investments are typically backed by the Indian government, regulated institutions, or fixed-income financial instruments that ensure safety of principal and modest but consistent growth.
Characteristics of Low Risk Investment
- Capital protection is prioritized over high returns.
- Returns are fixed or guaranteed.
- Ideal for conservative investors, retirees, or short-term goals.
- Generally unaffected by stock market fluctuations.
- Backed by banks, government schemes, or insurance companies.
Common Low Risk Investment Options available in India
Fixed Deposit (FD)
A fixed deposit (FD) in India is a financial instrument offered by banks and non-banking financial institutions, where an individual deposits a lump sum amount for a fixed tenure at a predetermined interest rate. The interest rate on an FD is fixed at the time of opening and provides guaranteed returns, making it a safe investment option with no risk of capital loss.
The deposited money cannot be withdrawn before the maturity date without penalties, but investors may take loans against their FD. Fixed deposits often offer higher interest rates than regular savings accounts, and some types of FDs provide tax benefits under Indian tax laws.
Additionally, the deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh per depositor, adding further security. Interest on FDs can be received monthly, quarterly, annually, or reinvested to earn compound interest, depending on the holder’s preference.
To open a fixed deposit (FD) in India, you can choose from post office, banks or non-banking financial companies (NBFCs) and complete the process either online or by visiting a branch. The steps generally involve form filling, KYC verification, and deposit amount and tenure selection, with digital processes making it even faster today.
Government Securities (G-Secs) Investment
Government securities are low-risk investments where you lend money to the government, which in return promises to pay you interest and return your initial investment at the end of a specific period. These securities help governments raise funds for public projects, infrastructure, social programs, or managing the country’s economy.
Government securities include Treasury bonds, bills, and notes, mainly issued by the central government. The length of the investment can range from short-term (like Treasury bills) to long-term (like bonds), and the interest paid is called a coupon. The main benefit is safety and steady income, although returns are generally lower compared to riskier investments.
Government securities are straightforward, safe investments ideal for those seeking predictable returns and capital preservation, funded by the government to meet various fiscal needs.
National Saving Certificate (NSC)
A National Savings Certificate (NSC) is a government-backed fixed-income savings scheme offered by the Indian government through post offices. It is a safe, low-risk investment designed to encourage small and medium savers to invest their money.
When you invest in National Saving Certificate (NSC), you lend money to the government for a fixed period of 5 years, and in return, you earn a fixed interest rate, which is currently around 7.7% per annum compounded yearly and payable at maturity.
It offers tax benefits under Section 80C of the Income Tax Act, allowing you to save up to ₹1.5 lakh annually on taxes.
NSC is a way to safely save money with guaranteed returns and get tax benefits, making it a popular choice for individuals who want to save for the medium term without much risk.
Public Provident Fund (PPF)
A Public Provident Fund (PPF) is a long-term savings and investment scheme introduced by the government of India to encourage individuals to save money securely while earning attractive, risk-free returns. It is a popular tool for building a retirement corpus or achieving long-term financial goals.
PPF accounts have a 15-year lock-in period, which can be extended in 5-year blocks. You can contribute any amount between ₹500 and ₹1.5 lakh per year, either as lump sums or monthly deposits.
The main benefits of PPF include tax savings under Section 80C of the Income Tax Act, and the interest earned, as well as the maturity amount, are fully tax-free. You can also avail loans against your PPF balance between the 3rd and 6th years, and partial withdrawals are allowed from the 7th year onward under certain conditions.
It is a government-backed scheme, so it offers safety and assured returns, making it ideal for risk-averse investors who want to grow their money steadily over time without market risks.
Monthly Income Scheme (MIS)
The Post Office Monthly Income Scheme (POMIS) is a government-backed savings plan designed to give you a fixed and regular monthly income. When you invest a lump sum amount in this scheme, the money earns interest, which is paid out to you every month. It is a safe investment because it is guaranteed by the government and is not affected by market ups and downs.
The lock-in period in this scheme is 5 years and minimum deposit amount is ₹1,500 and in multiples of ₹1,500. The interest earned is taxable, but the principal is safe and secure.
This scheme is popular among retirees and those who want a steady source of income every month without risking their capital.
Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme (SCSS) is a government-backed savings plan designed especially for senior citizens aged 60 years and above. It helps retirees get a regular income after retirement with safety and guaranteed returns.
You can open an SCSS account at a post office or authorized banks by depositing a minimum of ₹1,000 and up to a maximum of ₹30 lakh.
Tenure of SCSS is 5 years, which can be extended by 3 more years. The interest earned is taxable, but you can claim tax benefits on the deposit amount under Section 80C.
Premature withdrawal is allowed with certain penalties depending on the withdrawal time.
Kisan Vikas Patra (KVP)
Kisan Vikas Patra (KVP) is a savings scheme offered by the Indian government through post offices. It helps you double your money over a fixed period of about 9 years and 5 months (115 months) by investing a lump sum amount.
The minimum investment is ₹1,000, and there is no maximum limit, making it accessible for all investors. The interest rate is fixed and compounded annually, providing guaranteed returns with very low risk since it is government-backed. However, the interest earned is taxable.
Kisan Vikas Patra (KVP) is a safe and simple way to grow savings steadily while avoiding market risks, suitable for all kinds of investors wanting guaranteed doubling of their money within roughly nine and a half years.
Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana (SSY) is a government savings scheme specially designed to secure the future of a girl child. Parents or legal guardians can open an account for a girl child below the age of 10 to help save money for her education, marriage, or other future needs.
The account has a tenure of 21 years from the date of opening or until the girl marries after turning 18.
You can start with a minimum deposit of ₹250 and deposit up to ₹1.5 lakh per year. The invested money, the interest earned, and the maturity amount are all completely tax-free under the Income Tax Act.
This scheme is part of the government’s Beti Bachao Beti Padhao campaign to promote the welfare and education of girls. It is a safe, long-term investment that helps parents build a substantial fund for their daughter’s needs while enjoying tax benefits.
Disclaimer: This article is published for education purpose only and should not be considered as an encouragement for investing or any kind of investment advise.