Smart ways to earn extra income with right investment

Let’s face it. Nobody likes taxes eating into their investment returns. However, choosing an investment option just because it saves on tax is not a smart idea either. Ideally, when making investment choices, there are 3 main things you should look for:

  • Returns
  • Risk
  • Tax Saving

Here then are some great investment options, and why you should select each of them.

Rent from Property

One great form of investment that is safe and lucrative, is investing in ready-to-move-in homes like those from of Tata Housing. Although rent is taxable, the income is usually high, with a low risk factor. Metros are known for high property returns and as such, investing in an apartment can be a lucrative source of income considering people often travel to metros for business and require short to mid-term accommodation. Monthly rent from property is steady, dependable and regular. What’s more, you get a 5-10% raise every year, which takes care of any effects of inflation. If you have a steady source of income you can consider taking a loan for purchase of the property. The rent will take care of the EMI, leaving you free to put your own income to better use.

Mutual Funds

The thumb rule for Mutual Funds is – the higher the risk the higher the potential return. That said, balanced funds offer a fairly good ROI. Most dividends are exempt from tax. Dividends received from foreign countries are taxable either in the country of origin or in India. Any dividend in excess of 10 Lakhs is taxable. Mutual Funds are however more lucrative in terms of resale value than in terms of dividend. Also, income from sale of mutual funds is taxable as capital gains. Mutual funds are a good choice when if you have a high risk-taking-capacity and would like to make small investments at a time. It is ideal for youngsters who have a small income and no family responsibility.

Government Schemes

Various government schemes such as National Pension Scheme (NPS), PPF, and National Savings Certificate offer varying returns to investors. The schemes are conservative and usually low risk investments. However, the ROI is not very high when compared with other options. Government schemes offer better tax saving options as compared to other forms of investment. One short-fall, however, is the lock-in period which is usually quite long. So, if you are looking for short term gains or a steady monthly income, this is not the choice for you.

Interest from Deposits

This is a relatively low risk investment with a reasonable and short-term ROI. However, the amount of interest received from fixed deposits is entirely taxable so this should factor into your calculations. Since interest rates are currently at an all-time low, this is perhaps not the best option at the present.


This is, by far, one of the riskiest investments, considering the volatility of the share market. Share prices fluctuate with variations in various factors varying from economic conditions to the weather. Dividend on shares is admittedly tax free; however, it fluctuates, and hence is not entirely dependable.

Summing Up

Investing decisions must be taken with great care keeping in mind the availability of funds, your need for returns, and your risk-taking capacity. Investments could be in the form of lump sum – investing a large sum of money at one go – or deferred – paying small amounts over a fixed period, in exchange for a large return at the end of the period. Either way it’s your money and you should invest it with care.