Best Passive Income Investments: Top 4 Methods

The COVID-19 pandemic has ushered a ‘new normal’ in the professional domain, particularly in terms of the preferences of the general public for working and earning. According to a recent poll conducted by the Pew Research Center of 5,889 people, 61 percent of respondents work from the comfort of their own homes, not because they are required to but because they choose to.


Therefore, if you are currently at home, saving time on travel, why not use that time to earn additional income? This is when passive income opportunities in India come in helpful. A passive income enables one to appreciate their wealth without exerting a great deal of work. There are numerous ways for individuals to generate passive income. However, one must be intelligent enough to recognize passive income opportunities that need low investment and work.



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What Is Passive Income?


In India, it can be difficult to get a solid job with a decent salary immediately after graduation. As a result, the majority of individuals are forced to choose between a difficult job with long hours or a relatively simple job with a poor wage. However, one is not required to choose between these two options.


What is passive income, though? Passive income is money that is earned without excessive effort on the part of the individual who receives it. For the majority of people, it is a passive source of secondary income that helps better their financial situation.


The sources for earning a passive income are growing in popularity, not only in India but globally as well. One may act on them to increase their finances while reserving leisure time for oneself.


“If you don’t make money while you are asleep, you have to work until you die,” said the world-famous investor Warren Buffet, encapsulating the value of passive income in a single line!


Passive income is money that a person can earn while sleeping. What could be more enjoyable? Ideas for passive income allow one’s money to work for them rather than the other way around. One need only be proactive in recognizing these thoughts and acting on them in a timely manner.


Best Passive Income Investments: Top 4 Methods


  • Rental Income


This is one of the most sought-after forms of passive income, particularly for individuals with many properties. For instance, if you own two residences, you can generate money by renting out the vacant one. If you possess a home in a premium location with excellent infrastructure and connections, you can generate a large amount of rental revenue.


When you rent out a business property, you can collect a substantial amount of rent. Consider the rental potential of a home before making a purchase, in case you need rental space in the future. To earn a sufficient amount of rent, maintain the property well, and promptly do any necessary repairs.


Utilize real estate portals to advertise your rental property. You might place advertisements in local newspapers to attract prospective tenants. However, the rent you collect is subject to taxation under Section 24 of the Income Tax Act.


  • Non-Cumulative Fixed Deposit


Fixed deposits that are not cumulative might be a good source of passive income. In such cases, the financial institution, bank, or NBFC does not withhold interest but instead pays it on a regular basis. Interest is paid either monthly or quarterly. In some circumstances, it is done semi-annually.


A non-cumulative fixed deposit is not like a cumulative fixed deposit in which you do not earn anything during the term of the FD. However, keep in mind that the interest rate on a non-cumulative deposit is slightly lower than that on a cumulative deposit.


There is also no possibility to reinvest in a non-cumulative deposit. Investing in such a deposit is simple and straightforward. Simply walk into the bank branch where you have an account, fill out the deposit form, and you’re done. You can also use internet banking to make a non-cumulative deposit. In most cases, you will receive the deposit certificate the same day.


  • Dividend


Investment in stock requires no explanation. They have become a popular way for many people to accumulate income for their intended financial goals. The world of stock investment is wide. Stock dividends can be an excellent source of passive income. Many companies who are performing well give a pie of their profit to their shareholders by declaring a dividend.


Additionally, it is important to note that a dividend is only declared when the company generates a profit. Note that dividends are added to your income and taxed according to the applicable tax rates.


  • Bonds/Debentures


Investing in bonds and debentures is one of the best passive income strategies. As an investor, you should check the credit rating of the issuer company before investing in bonds/debentures. Debentures/bonds often beat the interest rate offered by fixed deposits especially the bonds/debentures issued by private companies.


Role of Passive Income In Achieving Financial Independence


Earning passive income is essential for obtaining financial independence. When your secondary income can pay your monthly costs without you actively working or running a business, you are financially independent. Achieving the dream of not having to worry about daily expenses while living life to the fullest is possible through producing passive income whenever possible.


In addition, everyone can achieve financial independence by making the proper decisions. There is no requirement to come from a wealthy household. All that is required is an initial investment of both time and money. Investing or establishing a secondary source of income is essential. And you are already familiar with viable passive income strategies.


Additionally, you must consider a few other tips. First, confirm that you have paid off all outstanding debts. Reduce significant monthly expenditures. The sooner you become debt-free, the quicker you can generate money and accumulate wealth. Ensure that you always have sufficient funds set aside for a rainy day. It is essential to have an emergency fund or insurance policy to rely on in times of need.


Therefore, finding the means to generate income is insufficient. You must also continue to monitor your investments and be on the lookout for possibilities that can generate a steady stream of passive income.


The majority of people nowadays desire ‘immediate return.’ To begin earning passive income, you must alter your thinking from expecting immediate results to anticipating results in due time.


Likewise, you must be willing to devote some effort to managing all you have constructed or made. And if you find it tough to do so on your own, you should engage a financial professional. Additionally, you will need to consider tax implications.


Your passive income is still taxable, so you must plan accordingly. If you are interested in higher-yielding stocks or investments, you should speak with a financial advisor or investing expert.


Actively pursuing passive income production is a must, especially in the uncertain times in which we live. Start modest and persist as you discover new concepts.


Pros of Passive Income Investment


In addition to saving time and effort, earning a passive income provides a number of additional benefits. Let’s examine their specifics below –


  • Enhance Your Financial Stability – The Reserve Bank of India (RBI) has increased the estimated inflation rate for 2022-2023 to 6.7%, suggesting that commodity prices are anticipated to rise this fiscal year. Even if one has solid employment, it is necessary to have a passive income source in these high-priced times in order to retain financial stability.


  • Reduced Reliance on Employment – People frequently continue working despite low job satisfaction or disinterest because it provides a consistent income. One can lessen this reliance on jobs for financial reasons by embracing passive income strategies.


  • More Financial Freedom – Passive income enables one to gain more financial freedom and so fulfil aspirations that require financial backing, such as a weekend trip, overseas vacation, or the purchase of the most recent smartphone, etc.


  • Low Stress – Managing finances and all financial commitments with a single source of income can be stressful at times. A passive income source can alleviate this burden and the accompanying stress.


Cons of Passive Income


Passive income, like any other business, is not without its pitfalls. Listed below are some downsides of establishing various sources of income:


  • High risk


Passive income generation carries with it the same inherent dangers as any other enterprise. The level of risk varies depending on the source of income. Investing in stocks, bonds, REITs, new businesses, etc. has a significant degree of risk. Therefore, the investor is expected to have adequate risk tolerance.


  • Money requirement


The passive income source demands an initial financial investment. The majority of sources, such as stocks, fixed deposits, company investments, etc., demand an initial investment on your side. Therefore, you must earn the original amount before you may earn additional funds.


  • Non-dependable sources


The primary disadvantage of passive income sources is that they are unreliable. This is why they are referred to as passive income sources. There is always a need for a primary or active income source. Your principal source of revenue is the active source. Here, you invest time and effort in order to gain money. This money can serve as a source of passive income. This is due to the fact that, at least in the beginning, you cannot rely solely on passive income for your daily costs.


Things To Consider Before Making a Passive Income Investment


Many individuals who desire to earn a bit extra money pursue part-time employment, freelance work, or other side pursuits. However, these need consistent and deliberate effort on your part. Therefore, it would be preferable to avoid spending so much time and seek out passive income opportunities.


Here are a few things to consider if you’re new to passive income before you begin investing and earning money.


  • It is not a scheme to become wealthy quickly – With a passive income, you can earn money with minimal effort, but you’re not getting anything for free. You must still put in the effort or make investments up front, but these will create income, dividends, interest, or increase in value over time, providing you with financial stability.


  • Even if the majority of your effort and investment will be completed at the beginning, you may still be required to perform more labor. This may require updating your product, maintaining your rental property, or monitoring your stocks and investments in order to sustain your passive income.


  • Passive income is subject to taxation – Although this type of income is taxed differently than active income (such as a salary), it will be subject to taxation.




In conclusion, having a secondary source of income is essential for achieving financial security. The aforementioned strategies are some of the best passive income ideas available. The best concept must be selected based on each individual’s own preference, interest, capability, availability, investment capacity, and so on.


Different sources of passive income, their advantages, and disadvantages have been examined previously. Depending on your preferences and risk tolerance, you can select the most suitable option. You can set a goal for the amount of money you wish to make during a given time period and work toward attaining it. Enjoy the additional revenue stream with no work and time investment.




  • What is the safest passive income investment?


Fixed deposits are perceived as one of the safest passive income investments. Fixed deposits offer guaranteed returns with minimal risk.


  • Are Passive Income Investments a Good Idea?


Yes, given the inflation, rise in prices, and low-interest rates, it is prudent for an individual to have multiple sources of income.


  • How can I make 10k a month in passive income?


If your objective is to earn a predetermined income, fixed income instruments such as fixed deposits, bonds, debentures, etc would be the best mode of investment.

You may use various calculators available on Kuvera such as FD calculator, RD calculator, Lump Sum calculator, etc to get a better picture of returns before making any investment.


  • What investments provide passive income?


In India, passive income sources include dividend-paying assets such as Indian stocks, US stocks, and mutual funds. Bonds, FDs, RDs, and other assets that generate interest income are also passive income sources.

But there are more alternative investments (assets that do not fall under the traditional branch of investing) such as P2P lending, Consumer Loans via Merchants, Asset Leasing, etc. produce passive income via recurring payments.


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