Safe Investment Havens of India

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
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.
2014 Anands Blog. All Rights Reserved.
Page 1

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
Page 2

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
Page 3

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
Page 4

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
Page 5

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
Page 6

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.
Page 7

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
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.
Lets get started, Shall we?
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?
Page 8
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
Page 9

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 lockit-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.
b.
c.
d.
e.
f.
Kisan Vikas Patra (KVP)

National Savings Certificate (NSC)
Senior Citizens Savings Scheme (SCSS)
Bank Fixed Deposits (FD)
Post Office Time Deposits
Post Office Monthly Income Scheme (POMIS)
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
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)
Page 10

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.
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.
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.
Page 11

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,
Did you know that up until Oct11
in any given year, you cannot deposit more than
one could only deposit a maximum
Rs. 1.5 Lakhs into your PPF Account
of Rs. 70,000 into their PPF
2. You can make a Maximum of 12 Deposit
Account? The amount was
increased to 1 Lakh in Nov11 and
Transactions in any given Year.
was revised again in July14 to 1.5
3. The Lock-In Period is 15 years which means, you
Lakhs.
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
Page 12

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.
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.
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.
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.
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
Page 13

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.
Page 14

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
Page 15

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A Guide for the Safe Investor

2014 Anands Blog. All rights Reserved.

2014 Anands Blog. All Rights Reserved.