Last Updated: Nov 16, 2023 Value Broking 8 Mins 1.5K

Investors always seek opportunities with high returns while minimizing risk in the fast-paced investing world. Although no investment can guarantee complete risk-free returns, there are options available in India that are relatively low-risk and provide a greater sense of security. These investment avenues enable individuals to protect their hard-earned money while targeting consistent returns.

This article explores safe investment opportunities in India, giving you valuable information on options that can bring stability and peace of mind. Whether you’re an experienced investor or just starting out, learning about these low-risk choices can help you make wise decisions and create a well-rounded investment portfolio.

We will look into various investment options that are known for being safe, such as government-backed securities, fixed deposits, savings accounts, and post office schemes. The two options have different features that match different financial goals and risk preferences. We will go through their characteristics, advantages, and potential returns to provide insights into why they are good choices for people who prefer low-risk investments.

Best Risk Free Investment in India

Let us have a look at the risk free investment in India

  1. Public Provident Fund (PPF)

In India, the Public Provident Fund (PPF) is a highly sought-after and trustworthy investment option with no risk. This savings scheme, supported by the government, offers long-term financial stability and advantageous tax benefits.

Investors can benefit from an annual interest rate under the PPF system, which is presently fixed at 7.1% compounded yearly. For risk-averse people looking for consistent and tax-effective wealth creation, PPF is a desirable option because to its compounded growth and tax-free nature of the returns.

The tax treatment of PPF is one of its key benefits. The invested amount, interest generated, and maturity amount are all free from income tax since it fits under the free-Exempt-Exempt (EEE) category. In addition, PPF investments are eligible for tax deductions under Section 80C of the Income Tax Act, allowing investors to deduct up to Rs 1.5 lakh in annual investments from their taxable income.

The lock-in period for PPF is 15 years, providing a disciplined approach to long-term savings. However, partial withdrawals are permitted from the seventh year onwards, adding flexibility for emergencies or financial needs.

  1. National Savings Certificate (NSC)

India Post offers National Savings Certificates (NSCs) as a secure investment option, with a current interest rate of 6.8% compounded annually. NSCs qualify for tax deduction benefits under Section 80C, with investments up to Rs 1.5 lakh annually eligible. NSCs offer complete capital protection, ensuring the invested amount is secure and investors can receive the principal amount and accrued interest upon maturity. The tenure of NSCs typically ranges from five to ten years, allowing individuals to choose the most suitable option based on their investment horizon and financial goals. However, taxpayers must consider the tax implications of NSCs, as the maturity amount is taxable according to the investor’s income tax slab.

Tax Deduction at Source (TDS) is not applicable, so taxpayers must pay income tax on the maturity amount. Investors should ensure they have sufficient funds available to fulfill their tax obligations when the NSC matures.

  1. Gold: A Timeless Investment Choice

Gold is a timeless investment choice due to its unique properties and historical significance. It is a tangible and finite resource that remains relatively unaffected by market shocks and acts as a hedge against inflation. Gold mutual funds have emerged as an ideal way to invest in gold, offering convenience and potential returns. These funds pool money from multiple investors and invest in gold-related assets like ETFs, mining stocks, or bullion, diversifying the market and mitigating risk. Gold funds typically have a three-year Compound Annual Growth Rate (CAGR) ranging from 11.4% to 12.8%, making them an attractive option for capital appreciation.

Gold funds offer liquidity and flexibility compared to owning physical gold, as they can be easily bought and sold on stock exchanges. The ongoing uncertainty surrounding the global pandemic has further highlighted the importance of investing in gold. Gold funds provide diversification to an investment portfolio, reducing overall risk by including an asset less correlated with traditional investments like stocks and bonds. They also offer a convenient and cost-effective way to gain exposure to the gold market, avoiding the hassles of purchasing, storing, and insuring physical gold by buying units of a gold mutual fund.

Gold funds provide flexibility, as investors can easily enter or exit their investment positions, subject to market hours and regulations. However, investors should evaluate the fund manager’s track record, reputation, and associated expenses before investing. Additionally, monitoring market sentiment and factors influencing gold prices, such as economic indicators, geopolitical tensions, and central bank policies, can provide valuable insights.

  1. Government bonds

Government bonds are a safe investment option in India, issued by central and state governments, offering capital protection and fixed returns. They come in various tenures, allowing investors to choose the one that aligns with their investment horizon and financial goals. Government bonds can be invested through primary dealers or stock exchanges, which facilitate the issuance and distribution of government securities. The primary dealer system facilitates easy accessibility for investors, while stock exchanges offer liquidity for buying or selling holdings.

Government bonds are one of the high returns investments at low risk, making them attractive for risk-averse investors seeking a stable and secure investment avenue. They also provide a predictable stream of income through fixed returns, with predetermined interest rates ensuring regular payments over the bond’s tenure. Income-oriented investors looking for reliable cash flows are preferred. Government bonds also offer tax benefits, such as tax-saving bonds, which help optimize tax liability while earning steady returns.

Government bond yields are influenced by factors like prevailing interest rates, inflation expectations, and fiscal policies. Investors should stay informed about macroeconomic conditions and monitor changes that may impact bond yields and prices.

  1. Direct Equity 

Direct equity investment involves purchasing stocks or units of a company listed on the stock exchange, presenting an opportunity for market-linked returns. Despite the inherent high-risk nature, direct equity investments offer potentially higher returns compared to other investment avenues. This characteristic positions direct equity as a favorable long-term investment option with promising returns.

Investing in direct equity translates to acquiring ownership stakes in a company, proportional to the stocks purchased. To engage in direct equity investment, individuals require a Demat account, which acts as a platform for managing and holding these stocks.

  1. Mutual Funds

Mutual funds present an effective means of disciplined investment by pooling money from various investors to invest in market-linked financial instruments like equity, debt, stocks, and money market funds. The returns generated are influenced by the fund’s performance in the market. These investment vehicles offer several advantages, such as holding diversified portfolios, allowing potential high returns over the long term, and being managed by professional fund managers. Additionally, Equity Linked Savings Scheme (ELSS) mutual funds provide tax exemption benefits under Section 80C of the IT Act, 1961. The transparent management process by fund houses assists investors in making informed decisions regarding their investments, ensuring a more confident and strategic approach to wealth creation.

  1. Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust, commonly known as REIT, stands as a high-return investment avenue. These entities typically own and manage substantial real estate assets and properties. By mortgaging these assets, REITs generate income, which is distributed among shareholders as dividends. The earnings for stakeholders primarily come from the appreciated value or rental income of the real estate.

REITs offer an opportunity for both small and large investors to participate in stock exchange trading. However, it’s crucial to note that REITs do not provide tax exemption benefits due to their high-value and market-linked nature. Despite this, they offer a steady stream of dividend income for investors seeking long-term stability.

  1. Corporate Bonds

Corporate bonds are debt securities issued by corporations to raise capital. These instruments offer investors fixed interest payments over a predetermined period, typically ranging from 1 to 10 years. Suited for those seeking stable income with lower risk exposure, corporate bonds come with varying levels of risk and returns based on the bond type. They provide regular interest income and the potential for capital appreciation.

  1. Index Funds

Index funds replicate the performance of specific market indices, like the Nifty 50 or BSE Sensex, by holding diversified portfolios that mirror index compositions. Operating on a passive investment strategy, they offer diversification across sectors and stocks within the index, with lower expense ratios compared to actively managed funds.

  1. ETFs (Exchange-Traded Funds)

ETFs function as investment funds traded on stock exchanges, mirroring the performance of specific indices or sectors. They offer exposure to various assets like equities, bonds, and commodities, combining the benefits of mutual funds and individual stocks. ETFs provide liquidity, flexibility, and transparency, with diversified portfolios across multiple assets.


India offers several low-risk investment options, such as the Public Provident Fund (PPF), National Savings Certificates (NSCs), gold funds, and government bonds, to provide security and long-term financial stability. PPF offers compounded growth, tax benefits, and is attractive for risk-averse investors. NSCs provide capital protection and tax deductions, while gold funds offer convenience, diversification, and potential capital appreciation. Government bonds offer capital protection, fixed returns, and tax advantages. To choose a risk-free investment option, assess financial goals, tolerance, and investment horizon.

Diversifying your portfolio across these options can mitigate risk and enhance overall returns. Staying informed about market conditions, economic indicators, and other factors can also influence these options’ performance.

FAQs on Risk Free Investment Options in India

India offers several low-risk investment avenues suitable for cautious investors seeking stability. Some notable options include the Public Provident Fund (PPF), National Savings Certificates (NSCs), government bonds, gold funds, and Fixed Deposits (FDs). These instruments provide varying degrees of safety, capital protection, and consistent returns.

The Public Provident Fund (PPF) is a government-backed savings scheme known for its security and favorable tax benefits. Offering compounded growth and tax-free returns, PPF serves as a long-term investment option with a lock-in period of 15 years. Additionally, it provides tax deductions under Section 80C of the Income Tax Act, making it an appealing choice for risk-averse investors seeking consistent returns.

Government bonds issued by central and state governments offer investors a safe avenue for capital protection and fixed returns. These bonds come in various tenures and provide predictable income through predetermined interest rates. Furthermore, they offer tax benefits and serve as an attractive choice for individuals seeking stable returns with minimal risk exposure.