Surviving the fall

The interest rate landscape in India has seen some several developments since the start of this year. Interest rates on fixed deposits have been going down rapidly, but the major jolt has been the reduced rates on small savings schemes. Popular with retail investors, particularly retired individuals, they have been useful for meeting long-term needs. Given below are the changes that one should know about:

• Retirees who are not financially savvy and fall in the 10 per cent tax bracket can continue with traditional saving schemes.
• But individuals in the higher tax bracket should recalibrate their investment strategy, perhaps move away from tax inefficient and lower yielding fixed/recurring deposits to debt funds.
• Top rated debt funds have yielded over 9 per cent in a three-year time-frame, where returns post three years enjoy indexation benefits.
• Tax free bonds are another option for individuals falling in the 30 per cent tax bracket.
• For younger individuals especially parents with a girl child below 10 years, the Sukanya Samriddhi Yojana is still an attractive option, given the tax-free 8.6 per cent yield.
• For middle aged individuals, equity mutual fund are the best bet along with fixed income options mentioned above.