Retirement saving options for self-employed, non-salaried persons in India: While mandatory retirement benefits such as EPF, EPS and Gratuity are available only to employees of covered establishments, self-employed or non-salaried persons are required to subscribe to voluntary retirement products to create a corpus for their post-retirement lives. There are several products to which such individuals can subscribe or invest in voluntarily to create a retirement corpus based on their needs or retirement goals.
Let’s have a look at 11 such investment options that self-employed or non-salaried persons can invest in.
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Public Provident Fund
PPF account can be used as a long-term saving product where an individual can invest up to Rs 1.5 lakh per year and claim tax-deduction benefits under Section 80C. The interest earned and maturity amount after 15 years are also tax-free. Further, the PPF account can be extended in blocks of 5 years each.
National Pension System
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Self-employed persons can also open NPS accounts and earn market-linked returns. Additionally, an investment of Rs 50,000 in an NPS account per year qualifies for a deduction above the Rs 1.5 lakh limit under Section 80C. There are various models under NPS for which you may need the advice of a retirement planner for a better understanding of this product.
National Savings Certificates
NSCs can be purchased at the post office for a tenure of 5 years. The current interest rate on NSC deposits is 7.7%, which is higher than many bank fixed deposit schemes. Investments in NSC also qualify for tax deduction under Section 80C. You can re-invest the maturity amount after maturity for a long term to accumulate wealth for retirement.
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Kisan Vikas Patra
Like NSC, you can purchase KVP at the post office. At the current rate of 7.5% interest, KVP deposits will double in 115 months. However, there is no tax incentive for investing in KVP.
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Post Office Deposits
Self-employed individuals can also open time deposit and recurring deposit accounts in the post office. The 5-year Post Office Time Deposit qualify for tax deduction under Section 80C. But there is no tax benefit on post office recurring deposits.
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Bank Deposits
You can also open fixed deposit accounts in a bank. 5-year tax-saving FDs qualify for deduction under Section 80C. Currently, banks are offering up to 9% interest on fixed deposit schemes. FD investments up to Rs 5 lakh in a single bank is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Fixed Income Investment
Self-employed individuals can also invest in Government securities (G-Secs), RBI Bonds, Corporate Bonds and Company deposits. G-Secs are listed on stock exchanges but they generally offer lower interest rates. Interest on G-Secs is not subject to TDS but is fully taxable.
Investors may also explore corporate bonds and deposits issued by private and public sector companies. The tenors of these bonds range from 2 to 15 years. However, they carry a degree of risk, measured by credit ratings. Listed corporate bonds are also subject to market risks.
RBI also issues 7-year floating rate bonds. The current interest rate is 8.05%. The minimum investment amount for these bonds is Rs 1000 and there is no maximum limit.
Direct Equity Investment
Self-employed investors can also invest in direct stocks of companies or participate in IPOs and FPOs. However, these carry a high degree of risk due to market volatility.
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Mutual Fund Schemes
Compared to stocks, mutual funds are relatively safer and hassle-free but they also carry a very high degree of risks. You should always consult a financial advisor before investing in mutual funds.
Gold
Gold is considered a safer option for long-term wealth creation. However, accumulating physical gold may be troublesome. Investors can look for investing in Sovereign Gold Bonds to benefit from the yellow metal in the long run.
Real Estate
Real estate is also another option that can be used for wealth creation of revenue generation through rents. Options like REITs also allow an additional opportunity to benefit from real estate investing. However, overall all growth of real estate prices is subject to various conditions such as economic cycles. One should, therefore, exercise caution while investing in real estate property.
