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Passive income ideas in India

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Passive income ideas in India
July 15, 2024

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Whether you are a salaried individual with a steady source of income through a 9 to 5 job or an entrepreneur or professional such as a lawyer or doctor, one of the best ways to earn some additional money without too much of your effort every month is through passive income. Passive income ideas in India can include investing in dividend stocks, online business, blogging, rental income, tuition, pension from retirement plans, etc.

Moreover, having a passive income can also provide you that extra money to buy an adequate term life insurance plan for securing your family's financial future.

What is Passive Income?

Simply put, passive income is a form of income that generates a regular inflow of money without too much of your effort or participation. In contrast to active/regular income which requires your continuous effort as well as time, passive income provides you an income inflow with much lesser efforts and time. The extra bucks you earn from passive income ideas in india can help you achieve your financial goals acts as a savings plan and also build wealth through the additional source of income.

Why is Passive Income Important?

  • Saves Time

Passive income allows you to earn additional money without putting too much of your time and effort into it, which thus enables you to spend that saved time on any hobby or with your family/friends. At the same time, having more time to pursue other interests or even choose to spend time with family/friends. Passive income also provides you with both flexibility as well as freedom by not tying you down to a 9-to-5 timing or fixed working hours for your side gig.

  • Pursue Passion

Besides the monetary benefit, passive income also offers you the freedom to break free from your regular mundane job and pursue your passion. When you turn your passion such as cooking, singing, videography, teaching etc into a side gig, you get to purse your passion as well as earn income from it.

  • Reduce Financial Stress

Having a single source of income is a big reason for financial stress among most individuals. Relying on that one regular income is what brings anxiety and financial stress regarding the thought that what if that one income gets disrupted. How would all your financial commitments and expenses be taken care of? That is exactly where having a passive income in India can reduce your overall financial stress, as that additional income can be useful to tackle various adverse financial situations in life.

  • Increase Financial Stability

Having a passive income gives you a sigh of relief by not only acting as an additional income, but also boosting your financial stability. This helps to tackle various adverse financial situations in life, such as job loss or any other unexpected emergency.

  • Entrepreneurship and business ownership

Apart from side hustle ideas such as cooking, singing, videography, teaching, etc, passive income in India can also be generated through entrepreneurship/business ownership. Starting and building a successful business can provide you with passive income and also act as the foundation of a legacy for your future generation. 

  • Retirement planning

Passive income is essential for retirement planning as it ensures a steady stream of income even after you retire. Many retirement and pension plans offer life coverage, providing a payout to beneficiaries if something happens to the policyholder. During retirement, when your primary source of income from your career is no longer available, this passive income helps you maintain your standard of living and stay financially stable.

  • Helps secure family’s financial future through insurance

Having an income generating source of passive income can also give you those extra bucks to buy a sufficient term life insurance plan that can secure your family’s financial future in case of your untimely demise.

Ways to Earn Passive Income

  • Real Estate Investments

For many decades, real estate has been a very popular investment option for both active and passive income ideas in India. Investing in properties such as rental or commercial properties can turn out to be a great source of passive income in the form of monthly rental income.

  • Dividend Stocks

Another way to earn passive income is through investment in dividend stocks, i.e. dividend paying stocks in India. Simply put, dividend stocks are the stocks of companies which regularly distribute a part of their profits to their shareholders in the form of dividend payments. So, by investing in such dividend paying stocks, you can earn a regular source of income, which can either be reinvested or utilised for your own expenses.

  • Systematic Investment Plans (SIPs)

Given that mutual funds pools in money from many investors and then that money is professionally managed by financial experts who invest them into a diversified portfolio of bonds, stocks, etc. they can turn out to be a passive income source too. By investing in SIP,   investments for a fixed amount at regular intervals like monthly, weekly, quarterly, etc,  can help you gain significant returns.

  • Fixed Deposits and Bonds

Although bank FDs (fixed deposits) and bonds can not be entirely termed as passive income sources, both of them do provide regular interest income. That is why they can be considered as relatively low-risk investment plan and passive income options. 

  • Affiliate Marketing Schemes

Another way to earn money from passive income in India is by doing affiliate marketing. As its name suggests, affiliate marketing is a program in which you can promote businesses/companies in exchange for a particular amount of commission. You can begin affiliate marketing from your social media handle, blogging site, etc. But keep in mind that you would need an affiliate link to the product that you are promoting in order to earn a commission. Regular income from such commissions can act as a passive income source.

  • Online Business

Starting an online business is one more way to earn passive income. All you need is a business idea, skills and a little investment to begin with. Such online businesses can gradually scale up and provide you with a significant revenue stream, which then acts as your passive income source.  

  • Pensions plans

Investing in retirement plans such as pension plans, can your work life years can turn out to become your passive income during your post retirement years.

Things to Know About Earning Passive Income

  • Research and Education

Before jumping onto any passive income source, it's crucial to properly conduct a dep research and also educate yourself about various passive income ideas in india, and their associated risks, returns and rewards.

  • Tax implications

Besides your regular/primary income, your passive income in India too may have tax implications, which is exactly why you must understand the associated tax laws and regulations in your area of jurisdiction. While some passive income ideas like rental income attract taxes, others such as dividend stocks may have tax advantages.

  • Time and patience

Do note that earning passive income requires both time as well as patience. It may take some months or even a few years for you to actually start seeing any significant returns. That is why it is crucial to have realistic expectations from your passive income sources and be willing to remain patient.

Conclusion  

Its a no-brainer that passive income ideas in India offer attractive investment opportunities for individuals who are looking to earn additional income and in the longer term, build wealth. With the focus on financial independence and diversification of income streams increasing day by day, passive income ideas are gaining more and more significance in India.

FAQS on Passive income ideas in India 

Q. Is passive income taxable in India?

  • Yes, passive income is usually taxable in India. The income tax rates applicable to passive income would depend on the type of income and the individual's tax slabs.

Q. Is passive income legal in India?

  • Yes, except some particular types of passive incomes, all other sources of passive income are legal and also subject to taxation, according to the Income Tax Act (1961)1.

Q. Are there any risks or limitations associated with passive income in India?

  • Yes, there are some risks & limitations associated with passive income in India, such as: 

  • Capital outlay, or initial investment requirements

  • Market risks, for instance fluctuations in interest rates, stock prices, or real estate values

  • Regulatory risks due to the changes in tax laws and regulations

  • Management as well as maintenance responsibilities, especially in the case of rental properties or even businesses

Q. How can I generate passive income in India?

  • There are multiple ways in which you can generate passive income in India, including dividend stocks, rental income, affiliate marketing, pension plans, etc.

Q. How can you make 10k a month of passive income in India?

  • You can earn Rs 10,000 per month or even more through passive income ideas such as returns from dividend stocks, blogging, rental income,online business, etc.

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ARN: DM/07/24/12983

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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1. Tax benefits are subject to conditions under Sections 80C, 80D, Section 10(10D) and other provisions of the Income Tax Act, 1961.

Note: This material has been prepared for information purposes only, should not be relied on for investment, tax or any accounting advice. It is requested to seek advice of your financial advisor with respect to any investment or financial decision.

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