What Are The Income Generating Assets In India 2024?

What Is Income Generating Assets?

Income generating assets are also known as passive income. 

Passive income? As the name says it is a “passive way” of earning. You don’t work on it every day and it isn’t like your daily 9-5 job. It is an additional way of generating income apart from your main livelihood.

If we put it more formally, passive income is revenue that takes negligible effort to acquire. It includes earnings from rental properties, limited partnerships, and other projects where you’re not involved in the continued generation of earnings. 

While these moneymaking ventures may have initially required your resources, time, or efforts, they generally eventually pay out automatically without you breaking a sweat.

Did you know, according to Deloitte’s 2022 survey, 62% of Gen Z and 51% of Indian millennials are into side gigs or finding ways to make money with minimal effort?

But what is the importance of generating income from assets from a business approach? Let’s see.

Importance Of Passive Income Business Ideas In India

Passive income is, for sure, like a superhero for your wallet. So, why not try different ways to make money on the side and make your financial future brighter? Before that, have a look at how it could be beneficial and what its importance is!

• Safe money: Passive income is your money safety net, easing financial worries.
• Reduced job dependency: It means less 9-to-5 grind and more free time.
• Diversified income: Multiple passive income sources mean more cash options.
• Entrepreneurial opportunity: Passive income is like a business training ground.

Let’s see what are the benefits of passive income that so may youngsters are opting for it.

Benefits Of A Passive Income

The advantages of creating a passive income source are numerous:

• Passive income allows people to make money without actively working, giving them more time and freedom to pursue other interests or passions.
• Passive income offers monetary security and stability because it can generate a consistent income stream.
• Because it enables people to reinvest their earnings into other passive income streams or other investments, the best passive income ideas can offer a mechanism to accumulate Wealth gradually.
• Financial independence through passive income can give people more control over their time and financial resources.

Now, let’s move into the type of income generating assets in India.

Best Income-Generating Assets to Invest in India

Here are the best income-generating assets in India, which are great investments and shall help you generate a regular stream of income but also help you grow your wealth in the long run.

Rental Properties

One of the most common income-producing assets is rental properties. This investment involves purchasing a property and renting it out to tenants. The rental income generated from the property is then used to cover the expenses of the property, such as mortgage payments, property taxes, and maintenance costs. Any remaining income is then considered profit.

While rental properties can be a lucrative investment, they do require a significant amount of effort and work on the part of the investor. Property management, tenant screening, and maintenance are just a few of the responsibilities that come with owning a rental property.

Interest From Bank Deposits

A bank deposit is one of the easiest and safest ways to generate passive income. There are different types of bank deposits offering interest income to investors.

• Savings Account: You can open a savings account with a local bank and receive interest earnings on your deposit. The annual interest rate of a savings account ranges from 2.5 to 3%.
• Fixed Deposit (FD): Fixed deposits allow you to invest a lump sum amount for a dedicated timeframe in return for interest income. The interest rate varies between 6 to 6.5%.
• Recurring Deposit (RD): Recurring deposits allow people to invest in regular intervals to earn interest income. The interest rates are similar to that of the FD.

Dividend-Paying Stocks

Stocks that pay dividends are a well-liked strategy for investors to generate passive income and gain from possible stock price growth. These companies have a history of paying out quarterly dividends to shareholders, representing a distribution of a portion of their profits to stockholders. 

Stocks that pay dividends can offer a steady source of passive income; some businesses even raise their payments over time. Investors may profit from possible capital gains if the stock price increases. Before investing in dividend-paying stocks, conducting due diligence and studying the company’s financial standing and dividend history is crucial.

Peer-To-Peer Lending

Peer-to-Peer or P2P lending lets retail investors take up the role of a bank and lend money to borrowers.

P2P lending can generate regular income with a minimum of 5 to 7% annual returns, but it involves counterparty risk. It’s the probability that the other party in a transaction may default on their contractual obligations.

Pension Plans

Pension plans are essentially income-generating assets suitable for senior citizens. The income payouts can be yearly, half-yearly or monthly, depending on the investor’s preferences.

One can expect a 6 to 7.5% return per annum from these pension plans. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is one of the popular pension plans from LIC, offering an annual interest rate of 7.4%.

Bonds

Bonds are another type of income-producing asset. They are debt securities that are issued by companies or governments to raise capital. When an investor purchases a bond, they are essentially lending money to the issuer, who then pays interest on the loan.

Bonds  are often considered a low-risk investment, as they are generally backed by the issuer’s ability to pay. However, the interest paid on bonds tends to be lower than other income-producing assets, such as dividend-paying stocks.[Text Wrapping Break]

Government bonds are considered the safest, while corporate bonds offer higher yields but come with higher risks. Investors can also consider municipal bonds, which offer tax advantages in addition to regular income.

Mutual Fund SIP

Systematic Investment Plan (SIP) is a popular method of investing in mutual funds, which allows investors to invest a fixed amount at regular intervals, usually monthly. This helps investors average out the cost of investing over time, reducing the impact of market volatility.

Mutual funds can provide exposure to a diversified portfolio of stocks and bonds, making them a good option for investors seeking a low-risk income stream with growth potential. Investors should research the fund’s fees, management quality, and performance history before investing.

Private Equity Investing

Private equity investing is a suitable option for those who don’t want to build their own business but looking to invest in one.

This is a method where one can invest in private companies or start-ups, especially ones in the early stages. This can be a very attractive avenue for people with more risk appetite, but the capital requirement for entering this space is usually high (at least a few crore rupees).

FAQ: Income Generating Assets In India

Can I Use the Losses From One Passive Income Source To Offset Profits From Another?

Yes, losses from one passive activity can generally be used to offset income from other passive activities. For example, if you incur a loss from a rental property, that loss can usually be used to offset passive income from a limited partnership. However, there are rules and limitations, such as passive activity loss limitations, so it’s important to consult with a tax professional for specific advice on your situation.

Is passive income taxable?

Yes, just like active income, passive income is typically taxable. How passive income is taxed depends on the precise source of the payment and the local or national tax regulations. It’s vital to seek advice from a tax expert as some passive income streams may be subject to reduced tax rates or qualify for deductions.

Which asset has the highest return?

The profitability of an asset depends on the holding time and the risk associated with it. The thumb rule is “Higher the risk, higher the returns.” Risky assets like cryptocurrencies, stocks, and private equity investing can be very rewarding, but they come up with higher risks.

Conclusion

Passive income can be derived over time using different means. From renting out property and leveraging automated technologies to creating digital content, these avenues offer the potential for sustainable financial growth. 

While each method carries its own set of risks and rewards, the key to successful passive income lies in initial strategizing and occasional monitoring. 

As we move further into an era where traditional income models are being supplanted by gig and other non-traditional forms of work, many are finding they need more flexible income streams as they work toward a more secure financial foundation for themselves.