The idea of passive income has received prominent limelight of late. While the previous options were limited, the growth of several digital platforms has offered Indians the chance to amplify their initial income. Along with that, the prevailing pandemic has stressed the requirement to have a passive income. With that, let us dig into several passive income ideas for 2022.
Earning passive income is considered among the ideal ways to attain your financial aims as fast as possible. Obtaining passive income can supercharge your potential to earn and offer you a financial buffer when shifting jobs or facing some unexpected events in your life.
In this guide, we will tell you the 5 most effective ways to gain passive income. This will also include a guide on how you can earn them.
What Is Passive Income?
Let us start with passive income meaning. Passive income implies the income that does not need too much attempt with respect to the money, resource, and time. It does not assure active participation, and you are not required to devote fixed dedicated hours to construct a passive income. Unlike regular income, passive income needs little maintenance.
Passive income supports you to earn more extra. Each penny earned matters in this case, and you can deploy the funds to construct an emergency fund, begin a systematic investment strategy in mutual funds, and many more.
6 Passive Income Ideas In India For 2022
Whether you are planning for a passive income avenue or aiming to begin your own income developing business, here are the 6 convenient passive income ideas for this year that you can consider.
1. Giving Property on Rent
This is perhaps among the most sought after passive income ideas, especially for those who have several properties. For example, if you have two houses, you can rent out the unoccupied and earn from that. Your rental income can be enough if you have a property in a central location with proper connectivity and infrastructure.
If you rent out a commercial property, it can give back a hefty amount of money as rent. Hence, before you purchase a property, look at all the rental dimensions that you should require in the future. To receive a decent amount of money via rent, maintain the property well, and carry out the required repairment on time.
Use real estate portals to list your house for rent. You also advertise in local newspapers to lure potential tenants. The rent you earn is taxed under the Income Tax Act, Section 24.
2. Non Cumulative Fixed Deposits
Non cumulative FDs can cater as a potent source of passive income. In these types of deposits, the financial institution, NBFC, and banks do not withhold the interest but pay it on a regular basis. The interest that is paid is either quarterly or monthly. In a few scenarios, it is semi annually.
Unlike a cumulative FD, where you do not earn anything at the time of your FD tenure, the case is varied for a non cumulative deposit. However, there is one thing that should be noted and that is the interest in a non cumulative deposit is slightly less than a cumulative one. Along with that, there is no choice but to reinvest in a non cumulative fixed deposit.
Making investments in such a deposit is easy and convenient. Walk into the branch of your bank with which you have an account, fill up the relevant form, and you are done from there. Apart from this, you can also invest in this type of FD via internet banking.
3. Dividend Choices In Mutual Funds
Mutual funds require no introduction. They have developed as a famous investment element for many to create funds for their scheduled life goals. The mutual fund space is quite big and provides varied types of funds. This concept of passive income in mutual funds can be a source of great passive income. This is also considered among the most effective passive income ideas with little money. You can consider this as beginner passive income.
In a dividend plan, the profits earned are distributed among investors. They are reinvested in the scheme. You receive the dividends on a quarterly, half yearly, semi annually basis. Note that the dividend announced gets decreased from the NAV of the fund. If the NAV of the fund is Rs 100 and the fund house announces a dividend of Rs 20, the NAV of the fund comes down to Rs 80. Along with that, a dividend is announced only when the fund earns a profit. The amount is not assured. If you are looking for a regular income opportunity from your mutual fund investment, you can consider this passive income idea.
4. Saving Account Offering a High-Interest Rate
While the rates of interest on the savings accounts of the banks have decreased, some banks provide a higher rate of interest. Along with that, there are some banks that credit the interest on the money each month instead of each quarter. These savings accounts with high rates of interest can cater as a good source of passive income.
If you have low risk tolerance and wish for assured income, then you can invest in a high yielding savings account. However, do your own research before you plan to invest. Also, you should note that the income above Rs 10,000 in a financial year is added to your income and is taxed according to the applicable taxes.
5. Peer-To-Peer Lending
If you have enough money to lend, getting yourself listed on popular peer-to-peer (P2P) lending platforms can help construct a prudent source of passive income. P2P lending avenues act as intermediaries between the lender and borrowers. You are linked with a potential borrower whose evaluation is reported based on their credit score.
You can plan the rate of interest that you wish to charge on your lending. Once all the formal documentation is done, you credit the amount to the account of the borrower’s account upon the payment of EMI, and you receive the interest. P2P exchanges must have an NBFC P2P license to function and are under the guidance of RBI regulations.
Most of the P2P exchanges also help you in recovery in the event of non payment. However, to ignore non repayments, choose for listing yourself on any P2P exchange with an evident risk assessment mechanism.
6. Freelancing In Various Niches
This is one of the most effective passive income ideas for young adults and the majority of the people presently implement this idea. This will help you earn some extra bucks. For instance, if you are good at writing, you can actually try your hands on content writing. Many businesses and avenues hire freelance writers for their ventures. Likewise, if you are good at doing marketing, then you can surely try digital marketing.
Also if you are someone who has a huge number of followers on social media, you can also become an influencer and earn a good amount of money. The evolution of the gig economy has boosted in the last few years implies you can shape your passion into a good avenue for income. All you are required to do is look out for changes in your niche and lap them instantly.
Passive Income Ideas: How Is It Different From Active Incomes?
The basic difference between passive income and active income is with the active income you get a one time earning and with passive income, your earnings are recurring. To understand the difference better between the various active and passive income ideas we will take the scenario of real estate.
- Active Income With Real Estate: Investors who are associated with wholesaling and flipping real estate attempt to develop an income from real estate in a short span of time.
- Passive Income From Real Estate: Passive income earned from real estate is developed by the buy and hold investors who rent their property and use that rent as a passive income. This is one of the most famous passive income ideas that are quite prevalent in the present time.
In this comparison there is one thing to remember, while you might be able to construct a passive income avenue with a small investment, you are not earning any less of a commitment in comparison to someone who is investing their full time. Comparing passive income in comparison to the incomes that are earned from active efforts needs a good quantity of work upfront.
The Closing Lines
In the above article, we have stated some of the most famous passive income ideas in India 2022 that you can begin with. Choose anyone from the above list and see how it works. But it is always advised to do your own research before you make any investment decision and then get into action. And if you want to go for freelancing then find your strength or the niches you are good at and then begin with that as it is among the most popular passive income ideas for students.