Better than FD: Higher Return Options for Indian Investors

Why Look for Better Options Than FDs?

Fixed Deposits (FDs) are still a popular savings option for millions of Indian investors due to their safety and guaranteed returns. But with current FD interest rates mostly between 5% and 7% per annum, they often fail to beat inflation.

If you’re wondering, what is better than a fixed deposit, you are not alone. Many investors now look for smart, low-risk investment options that can deliver better returns without taking on too much risk.

At Ultra, we help you discover simple and trusted investment options that are better than FDs for short-term goals, long-term wealth creation, or monthly income.

FDs give assured returns, but the returns are fully taxable, and post-tax gains often fail to beat inflation. For example, if you fall under the 30% tax bracket and earn 7% on your FD, your post-tax return drops to below 5%. This is often lower than the inflation rate in India.

This is why many people prefer alternatives to FDs for higher returns, better tax efficiency, or regular income.

Who Should Consider FD Alternatives?

• Salaried individuals with surplus funds

• Retirees looking for higher monthly income

• Investors in higher tax brackets

• Anyone who wants better post-tax returns

• Investors seeking diversification beyond traditional FDs

Top Investment Options Better Than FD

Below are some safe and popular FD alternatives that can help you earn more without taking on excessive risk.

1. Debt Mutual Funds

What are they: Funds that invest in bonds, treasury bills, and money market instruments.

Returns: Around 6% to 9% per annum.

Why better than FD: They offer indexation benefit if held for more than 3 years, which can reduce your tax outgo compared to FDs.

2. Corporate Bonds

What are they: Bonds issued by reputed companies to raise money.

Returns: 7% to 10% per annum depending on credit rating.

Why better than FD: Higher interest than bank FDs and better for long-term fixed income if you choose AAA-rated issuers.

3. Non-Convertible Debentures (NCDs)

What are they: Long-term debt instruments that offer fixed interest to investors.

Returns: 8% to 10% per annum.

Why better than FD: They can offer regular income through periodic interest payouts.

4. Post Office Monthly Income Scheme (POMIS)

What is it: A government-backed savings scheme designed to offer steady monthly income.

Returns: About 7.4% per annum (subject to change).

Why better than FD: Safer than corporate bonds and ideal for retirees.

5. Ultra Short-Term Debt Funds

What are they: Debt mutual funds that invest in very short-term securities.

Returns: Around 5% to 7% per annum.

Why better than FD: Offers better liquidity and slightly higher returns than savings accounts or FDs.

6. Tax-Free Bonds

What are they: Bonds issued by government-backed entities like NHAI and REC.

Returns: Around 5% to 6% per annum, but the interest is tax-free.

Why better than FD: Tax-free income means higher effective returns for high tax bracket investors.

7. Monthly Income Plans (MIPs)

What are they: Hybrid mutual funds that invest mostly in debt and partly in equity.

Returns: Typically 7% to 9% per annum.

Why better than FD: Good for steady income with some growth po

Better Than FD for Short-Term

For short-term investment options better than FD, consider liquid funds or ultra short-term debt funds. These options help park surplus cash for a few months while earning better returns than a savings account or recurring deposit.

Better Than FD for Monthly Income

If you want an alternative to FD for monthly income, some smart choices are:

• Post Office Monthly Income Scheme

• Senior Citizen Savings Scheme

• Corporate Bonds with monthly payouts

• MIPs or annuity plans

These ensure a steady cash flow with potentially better returns than regular FDs.

FAQs on FD Alternatives

What is better than a fixed deposit?

Debt mutual funds, corporate bonds, NCDs, tax-free bonds, and Post Office MIS are some good options to earn better returns than FDs.

Which short-term investment is better than FD?

Liquid funds and ultra short-term debt funds are smart alternatives for short-term goals.

What is the best alternative to FD for monthly income?

Post Office MIS, SCSS, and corporate bonds with monthly payouts are some of the safest choices.

Are FD alternatives safe?

Most FD alternatives like government-backed schemes and AAA-rated corporate bonds are safe, but all investments carry some risk. Always check the credit rating and diversify.

Where can I invest in FD alternatives?

You can start investing in safer fixed-income options through Ultra and diversify your portfolio with the help of expert curation.

Final Thoughts

FDs are safe but not always enough to grow wealth or beat inflation. By exploring better options than FD in India, you can earn more, enjoy tax efficiency, and achieve your goals faster.

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