Passive income is the money earned with little or no effort on a regular basis. It’s a great way to build wealth and financial freedom over time. In India, there are numerous ways to generate passive income, and here are some of the most popular methods.
- Real Estate Investments:
Real estate investment is one of the best ways to generate passive income in India. Real estate investments can be in the form of rental properties or commercial properties. Rental properties generate monthly rental income, while commercial properties generate rental income as well as capital gains. Real estate investments can be lucrative, but they require significant capital investment and expertise.
To invest in real estate, you can either buy a property outright or invest in real estate mutual funds or real estate investment trusts (REITs). Real estate mutual funds invest in real estate stocks and bonds, while REITs are like mutual funds that invest in real estate properties.
- Dividend Stocks:
Investing in dividend stocks is another way to generate passive income in India. Dividend stocks are stocks that pay out a dividend, which is a portion of the company’s profits to shareholders. Dividend stocks are less volatile than growth stocks and offer a steady stream of income. The dividend income earned from these stocks is tax-free up to Rs. 10 lahks in India.
To invest in dividend stocks, you can either invest in individual stocks or dividend mutual funds. Dividend mutual funds invest in a basket of dividend stocks, providing diversification and risk management.
- Fixed Deposits:
Fixed deposits are a popular investment option in India for generating passive income. Fixed deposits offer a fixed interest rate and are considered low-risk investments. The interest earned from fixed deposits is taxable as per the income tax laws in India.
To invest in fixed deposits, you can either invest in bank fixed deposits or company fixed deposits. Bank fixed deposits are offered by banks and are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs. 5 lahks. Company fixed deposits are offered by companies and are unsecured.
- Mutual Funds:
Mutual funds are a popular investment option in India for generating passive income. Mutual funds pool money from several investors and invest in a diversified portfolio of stocks, bonds, and other securities. The returns earned from mutual funds depend on the performance of the underlying assets.
To invest in mutual funds, you can either invest in equity mutual funds or debt mutual funds. Equity mutual funds invest in a portfolio of stocks, while debt mutual funds invest in a portfolio of bonds and other fixed-income securities.
- P2P Lending:
Peer-to-peer (P2P) lending is a relatively new investment option in India for generating passive income. P2P lending platforms connect borrowers with investors, providing an opportunity to earn a fixed interest rate on loans. The returns earned from P2P lending depend on the creditworthiness of the borrower.
To invest in P2P lending, you can register as an investor on a P2P lending platform, select a borrower, and lend money to them. P2P lending platforms charge a fee for connecting borrowers with investors.
- Rental Income:
Renting out property is a popular way to generate passive income in India. Renting out property can be in the form of residential or commercial property. Rental income is a steady stream of income and can provide significant returns over time.
To generate rental income, you can either buy a property or rent out a portion of your existing property. You can also rent out your property on online platforms like Airbnb and Oyo.
- Royalties:
Royalties are a form of passive income earned from creative works like books, music, and artwork. Royalties are earned as a percentage of the revenue generated from the creative work. Royalties can provide significant returns over