In addition, a dividend is declared only when the fund makes a profit. The amount is not guaranteed. If you are seeking a regular income stream from your mutual fund investment, you can go for the dividend option. Note that the dividend you receive is added to your income and taxed as per the applicable tax rates.
Saving Account Offering a High-Interest Rate
While interest rates on bank savings accounts have come down, some banks offer a higher interest rate. Additionally, some banks credit the interest on the money every month instead of every quarter. These high-interest savings accounts can serve as a good source of passive income.
If you have low-risk tolerance and want assured income, you can invest in a high yielding savings account. However, do your due diligence before investing. Also, note that interest income above INR 10,000 in a financial year is added to your income and taxed as per the applicable tax rates.
Peer-to-Peer Lending
If you have money to lend, getting yourself listed on peer-to-peer (P2P) lending platforms can help build a prudent source of passive income. P2P lending platforms act as intermediaries between borrowers and lenders. You are connected with the potential borrower whose evaluation is done based on their credit score.
You can decide the interest rate that you want to charge for lending. Once the formalities are done, you credit the money to the borrower’s account and upon EMI payment, you earn the interest. P2P platforms must have an NBFC P2P license to operate and are under the purview of RBI regulations.
Most P2P platforms also assist you in recovery in the event of non-payment. However, to avoid non-repayments opt for listing yourself on P2P platforms with a solid risk assessment mechanism.
Freelancing in Various Domains
You can freelance to earn some extra bucks. For example, if you are good at writing, you can try your hands at content writing. Many companies and platforms hire freelance writers for their projects. Similarly, if you are good at marketing, you can try digital marketing.
If you are someone with many followers on social media,affordable luxury watch brands you can become an influencer and earn a handsome amount. The rise of the gig economy has fuelled in the past few years means you can turn your passion into income. All you need to do is lookout for opportunities in your domain and lap them instantly.
Bottom Line
Start with one idea in the beginning and see how it works. If it works well for you, you can branch out and try out different ideas. Since a passive income does not require much effort, it is advisable to actively scout for them and give it a try.