Best Passive Income Ideas in India in 2023

What is Passive Income?

Passive income is money earned regularly with little to no effort required to maintain it.

Do you know what it takes to generate passive income ?

It typically requires an initial investment of time, money, or resources upfront but generates ongoing income without requiring continuous work or active involvement.

Examples of passive income can include rental income from property, dividends from stocks, royalties from creative works like books or music, affiliate marketing, and other forms of residual income that continue to generate revenue over time. While passive income streams can provide financial freedom and security, they often require careful planning, research, and investment to establish and maintain.

Why you need passive Income ?

If you set up ways to generate passive income when you are working or in business, then this passive income can overtake your active income in a certain period.

Everyone are working hard for making money to fulfill our needs. Once this passive income starts increasing and takes care of monthly expenses, then you can relax in your work or take a break.

You can also start focusing on your passion and work on to make it profitable. Once you are working on your passion, there will not be any burden of work and you can enjoy your life.

Passive Income Ideas in India

Passive income is money earned with little to no effort on an ongoing basis. For this we need investment options which requires little or no effort on an ongoing basis,

  1. Rental Properties
  2. Dividend Income from stocks
  3. P2P Lending
  4. Interest from Bonds & NCDs
  5. SWP in Mutual funds
  6. Investing in other Business
  7. Selling Digital Courses & Books
  8. Renting out your Space
  9. Starting a Franchise Business

Let us look into all these ideas in detail and you can decide which will suit you.

1. Rental Properties

You could have seen a few who had developed residential property complex and earn monthly income in lakhs. There are few who earn monthly income in crores via commercial rental properties. These are people who got into those properties long back when it was available at low price or it is their ancestral properties.

Residential properties in India earn less than 3% on an average. Look at a report published in Money control.

Commercial property yields can start from 8% and it will appreciate on a regular basis.

Even as a retail investor you can invest in commercial properties via Fractional commercial real estate investment option. There are few aggregators who manages the properties and as an investor, you can just invest your money alone. Entire property valuation & legalities will be handled by them.

In India, we have strata, Myre Capital & Gayn Capital etc operating in commercial real estate investing.

2. Dividend Income from Stocks

If a business does well it may earn more profits. As a properly managed listed company, they share their profits with investors. Though it is not mandatory to share dividends on yearly basis, most of the well managed companies provides dividends to their investors.

You can get a list of companies which provides regular dividend income and stay invested in them. Most of the PSU provides dividend income but the stock price haven’t appreciated much.

You should be careful on whether you need growth of your portfolio or dividend income out of your portfolio.

3. P2P Lending

Peer to Peer Lending or P2P platform brings, investor & borrowers together. Investor can select on whom to give their money for an interest. Borrowers can register for getting short term loans.

As the loans are for short term, the interest rate tend to be higher and this is the advantage of investors. They make more money than traditional bank deposits. RBI has brought in regulations only from 2018. Now P2P companies can register with RBI as NBFC which is a recognition.

Certain companies offer regular interest payout on monthly basis, based on their investment option they have chosen.

Invest with any company which is registered as NBFC.

To know more about P2P Investing in India read here.

4. Interest from Bonds, NCDs & Fixed deposits

RBI provides half yearly interest on an investment with them which has lock in of 7 years. As of now it is offered at 7.35%

PSU companies and other private companies offer rated Bonds with interest rates. If the rating is high, the interest rate will be lower and on par with bank deposit rates. As the rating goes down, the interest can go as high as 10% also depending on the market condition.

Tata Capital, Icici home finance, UPPCL etc offers Bonds at higher interest rates.

NCD or Non Convertible Debenture are issued by companies who are in need of money. Again interest rate depends on the ratings provided by rating agencies & based on the market condition.

NCD can be bought during its launch or from secondary market. Edelweiss, Muthoot etc offers NCD.

Fixed deposits are being issued regularly by Bajaj Finance, Mahindra finance, Shriram finance etc at a higher interest rates. They are in this business for a very long time. They get money from people and use it for their finance business.

Depending on your age and need for regular passive income, invest with these fixed income products.

5. SWP in Mutual funds

Systematic Withdrawal plan can be used to withdraw money into your bank account directly. Say you have accumulated corpus of 1 crore in your mutual fund portfolio. Instead of withdrawing fully, you can use this option to withdraw monthly a fixed amount.

If you had started investing in SIP and accumulated a huge corpus then it is easy to withdraw by using Systematic Withdrawal Plan.

Say you accumulated 3 crores at the end of 20 years by SIP. Now you can withdraw 6% or 7% alone every month and then the rest of the amount can grow in this equity fund itself.

Even if you have Lumpsum amount and need monthly returns, this can be used for pensioners

Refer the previous blog for using SWP in your life – SWP in Mutual Funds.

6. Investing in other Business

You should be clear about the business models and revenue generation part. You can either get a stake out of the company or stay as an investor.

Even if it is a known friend or family members, it is wise to have business dealings being documented clearly.

Generally startups look for initial seed funding and it goes on based on their business viability. You can be a seed fund investor as well.

The associated risk with this investment is also high as business can go anyway depending on external conditions or improper management and returns are also high if the business starts picking up.

7. Selling Digital Courses & Books

The most easiest of all the passive income generation ideas but one of the difficult thing to achieve success is this model.

You can launch digital courses along with a book in your name. For doing these 2, you don’t need any investment at all and all you need is your knowledge.

You need perseverance and right approach to make more money. Money will keep coming in, only when you provide lots of value in what you are doing.

Checkout my Personal Finance courses & Personal Finance books

8. Renting out your space

Air BNB has created an opportunity based on their experience for need of a place at lower cost when they travel. Though this company is based out of US, it is operating across the world.

If you have a room in your home, you can take pictures and attach it with them in their website. Once the customer starts coming in, provide enough value that your space/room is occupied on regular basis and this serves as extra income for you.

Personally when I visited Australia with a friend, we booked a room on the way in flight and we got it. It was spacious and the owners were courteous enough. It was much cheaper than big hotels and for them it is an extra income.

Try it out.

9. Starting a Franchise Business

One of the easiest way to start a business it getting a franchise. You should be knowing in and out about the business or you should be ready to learn more about the business once you start.

Remember to provide enough time in the initial 6 months to 1 year to have a strong understand regarding that business in the area you are operating. Else, everything falls apart and you will be forced to close.

How to identify Fake Passive Income Ideas/schemes

Everyone across the world wants to generate passive income. Most of the scams also happen taking advantage of this need.

Many chit fund scams offering higher returns got busted, PACL which was a property scam which spread across India, since Covid there were many crypto currency related apps and scams. Last year there were 3 major scams which happened in Tamil nadu, which was worth around 14000 crores.

IFS which was related to stock market, Hijau which was related to high interest offering based on investment in petroleum wells, Aarudra which was related to Gold.

All these were operated in Pyramid model. If you can find a pyramid model, then it can be easily identified as MLM Scam. MLM is nothing but Multi level marketing. Suppose if you are joining this scheme of things means, based on the merit of the scheme you will be asked to refer 2 or 3 more people. The chain keeps going and you will be paid a certain amount for their referrals.

If you are able to identify this pyramid model, exit their place as you will lose money at end.

Checklist for creating Passive income in your Life

  1. Identify the need for passive income
  2. Look at investment and other options
  3. Decide to give enough time to master that passive income option
  4. Automate the process
  5. Check the process at regular intervals for any mistakes & stay relevant
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