Fixed Income Instruments are those which generates periodic and guaranteed returns. There are large avenues for fixed income in India.

1. High Yielding Savings Accounts: High Yielding Savings accounts are those accounts which provides high savings account interest rate (4-7%). Ideal to maintain your day-to-day expense and Emergency Funds.

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Pro's

• High Liquidity.
• Regular income monthly or Quarterly
• Income Tax deduction upto 10,000 (80TTA) & upto 50,000 for senior citizens (80 TTB).
• Savings in banks are covered with DICGC for upto 5 Lakhs.

Con's

2. Fixed Deposit:  Bank Fixed Deposit is simplest & traditional form of fixed income instrument in India. They are ideal for Emergency Funds. FD can are available as

•  Regular FD         

Pro's

• Interest rate is guaranteed upfront. 
• High liquidity. Can be withdrawn when required.
• Ease of Deposit at convivence of home from mobile/ website.
• Tenure can be chosen from days to years.
• Payment frequency can also be chosen. 
• Can avail OD Loan on FD/ Secured Credit Card & continue earning interest. 
• FD in banks are covered with DICGC for upto 5 Lakhs.

Con's

• May not given inflation beating returns.
• Income Tax is as per your slab.
• Premature withdrawal penalty may be applicable on breaking the FD. 

• Tax Saver FD: Lock in period of 5 years. Claim 80C deduction upto 1.5 Lakhs/annum.  

• Floating Rate FD:  Banks have also started to innovate FD to attract investors. Banks like Yes Bank is providing Floating Rate FD where the interest rate is linked to repo rate plus a mark uprate. This results in immediate transfer to repo rate adjustments to the FD. It becomes attractive to investors during rising interest rate cycle where you dont have to locked in lower rate. 

3. PPF: It is Govt of India Guaranteed Risk free long term Fixed instrument with tax benefits. Ideal for term goals like retirement, child education, children's Marriage etc. The maturity duration is 15 years. Later in can be extended in blocks of 5 years with or without further contribution. 

Pro's

• High degree of capital safety. Guaranteed by Govt. of India.
• Contribution can be as low as 500/annum. 
• Income Tax Benefit: PPF has EEE status. Means you can claim deduction upto 1.5 Lakhs for investments (80C), Interest earned, and Maturity amount is also tax free.
• Loan facility is available from 3rd to 6th Financial Year.
• Partial withdrawal available from 7th Financial Year.

Con's

• Poor Liquidity: Corpus from PPF cannot be accessed for Emergency except as loan during the 3rd to 6th FY or partial withdrawal after 7th FY. 
• Inflation Risk: Though PPF has an inflation risk due to interest rate, Govt tends to keep the interest rate attractive for small savings scheme and tax benefits gives unparallel advantage than all other long term investment forms. 
• No regular income.

5. NSC:  National Savings Certificate is a Govt of India Guaranteed Risk free long term Fixed instrument with tax benefits. Investments gets matured by 5 years. Ideal for conservative or senior citizens. 

Pro's

Con's

6. Senior Citizens Savings Scheme: It is Govt of India guaranteed small savings scheme for Senior Citizens. Senior citizens aged above 60 or retired individuals above 55 years can deposit the amount within 1 of receipt of retirement benefits. It is one-time lumsump investment scheme. Maximum of 15 Lakhs is permitted, the cap has raised to 30Lakhs in 2023 budget.  Interest shall be paid every quarter.  Interest rates are revised & notified by government of India every quarter. Account matures by five years & can be extended in blocks of three. 

Pro's

• High capital safety. Guaranteed by Govt. of India.
• Guaranteed returns.
• Regular Income: Quarterly payout.
• Invest as small as 1000 to 30 Lakhs.
• Claim deduction under 80C upto 1.5 Lakhs.

Con's

7. RBI Floating Rate Savings Bond:  It is a RBI guaranteed fixed income instrument with highest degree of safety. It is ideal for risk free regular income generation. The interest rate are revised biannually with spread of 35bps above NSC Interest rate. The investment is locked in for a period of 7 years. 

8. Government Bonds:  Govt. Bonds are debt instruments issued by Govt. of India & carries a sovereign guarantee. There are various types like T-Bills / G-Secs/ State Govt Bonds.T-Bills are zero coupon bonds and taxed as capital gains. Interest from G-secs  are taxed as per your slab.  Bonds are considered long term when held for more than 1 year.

Pro's

• High capital safety. Guaranteed by Government.
• Guaranteed returns.
• Invest as small as 1000.
• Can be invested from RBI Direct Glit Account. No need for demat account. 
• Can be traded in secondary market. 
• Can invest on variety of instruments with maturity varying from 90 days to 10 years.

Con's

9. Debt Mutual Funds 

9. Corporate Bonds / Non Convertible Debentures (NCD)