7 min read • Published 23 Aug 24
Passive Income Ideas in India
Table of Contents
Diversifying the income sources can help combat uncertainties with financial support. This can be done through some smart passive income ideas. These are earning sources that do not demand an individual to actively work towards or be involved in a specific task.
These days, growing digitalisation has highlighted the importance, and availability of these income sources. However, finding these sources may not be easy and individuals can get confused regarding how to generate passive income in India.
Here is the list curated with some of the unique and easy passive income ideas in India. Explore them now!
What is Passive Income?
As it implies, passive income is the earnings which do not require active or full-time employment. The core logic behind such income sources is to create a viable revenue stream that can help combat and provide financial support in uncertainties. Creating a diverse mix of passive income ideas can help an individual generate potential side income.
However, curating these suitable sources can be a tough and time-consuming task. Individuals may seek answers to how to generate passive income from a varied range of sources. Let’s explore some of these sources.
How to Generate Passive Income in India?
There are varied passive income ideas in the market. Moreover, evolving digital horizons have expanded this scope to generate significant earnings through online passive income ideas. Here are some activities and instruments that can provide desired passive income ideas in India.
- Freelancing
It is one of the most efficient ways for working professionals and students to leverage their specific skills through freelancing platforms and earn fees-based income. In this, one can work with flexibility on the desired projects. Moreover, it can allow expanding an individual’s network.
Freelancing can be one of the potential passive income ideas with little money or investment as a skill or expertise, once earned, can be helpful for a long time. Freelancing skills include content creation, art projects, teaching, return filling, research projects, and more.
- Investments
Saving a part of money may not suffice an individual against the growing inflation. They may need potential market returns to combat the same. Therefore, investing in financial assets instruments is one of the most significant passive income ideas. There are different instruments such as fixed deposits, fixed-income instruments, pension schemes, P2P lending, etc., which can be a solution for issues regarding how to generate monthly passive income. Some assets also provide facility to invest or withdraw systematically over a period.
Here are some of the potential investment opportunities which may not require investors to put in active efforts and earn required passive income:
- Stocks
Equity markets can be a crucial avenue to earn significant market returns. Undervalued stocks in the market can provide returns in the long term. However, their risk level is higher due to direct market exposure. Investors can consult their financial advisors before investing.
- Mutual Funds
It has become one of the most favourite investments for Indians in recent years. There are more than 21 crore active mutual fund folios in India as of October 2024. They also offer gradual investment with Systematic Investment Plans (SIPs).
Over a period when a fund earns substantial returns, an investor can access them in the form of regular passive income with Systematic Withdrawal Plans (SWPs). Moreover, its diversification can provide varied passive income ideas.
- Fixed-Income Instruments
Debt instruments like bonds and debentures can be a significant fixed-income source with regular interest rollouts. Some of these instruments provide the facility to earn interest based on the investor’s flexibility. Traditional investments like Fixed Deposits (FDs) may also be a suitable alternative for risk-averse investors. Banks and other financial institutions offer these instruments.
- Social Media Creator
These days, social media has become a crucial source of entertainment for mass. A person can create content such as travel vlog, beauty tips, educational topics, societal issues, etc. If the video and its content is unique, one can earn recognition and passive income together. Moreover, the field is still in the growth stage and prospective individuals have scope to dive deeper into many topics based on viewer’s choice. Due to its reach, brands also sponsor such videos which can create potential income sources.
- Rental Income
In the wake of the modern scenario of rising inflation, real estate is a significant avenue. If an individual has residential or commercial property, they can rent it to earn regular income without facing opportunity cost. Apart from property, one can also rent vehicles like cars, vans, buses, etc., to earn part of their fare as rent. These are lesser-known but smart passive income ideas.
- Patent
A professional can create unique products, prototypes, software, etc., which can be registered with the authorities as a patent. Further, such patents can earn a passive income for that professional.
- Other
Creating a small home business, service setup, tutor kids online, affiliate marketing, retail products delivery, crowdfund the real estate projects, etc., are some sources for passive income generation.
Why is Passive Income Important?
Earning a side or passive income with little money as an investment can make a potential difference to an individual’s overall financial planning. It provides potential support in times of crisis and against uncertainties. It can help in several ways, as follows:
- During retirement planning, a stable passive income can help attain desired goals.
- Individuals can attain financial freedom or even retire early with a planned income source in hand.
- Depending solely on the passive income in the early stage may not be suitable.
- Such incomes also go the extra mile to catalyse the wealth-building process.
However, every coin has two sides and passive income ideas also have some disadvantages and risks which should be kept in mind while opting for them.
Things to Keep in Mind Before Starting a Passive Income
Here are some of the details that investors should mind while planning their passive income source:
- Investors should identify their goals and risk appetite to decide on such aspects as one plan or asset may not suit all.
- Research and analysis are the solution for such tasks.
- Also, some sources may require little or more investment, such as in business or product creation.
- Different activities or assets will have distinct tax implications, and if not planned well, the taxes can contribute a significant chunk of your income. Therefore, the passive income ideas should be first well researched.
Conclusion
Exploring different passive income ideas in India can provide a wide range of available opportunities. Individuals should seek the suitability of this before selecting one. Passive income can provide significant support to attain financial freedom and goals and combat uncertain situations.
Q: How to earn ₹1 lakh passive income?
An individual can diversify their passive income source based on their risk appetite to earn ₹1 lakh. Such passive income can be from freelancing, investment, rental property and so on. Diversifying investment avenues like stocks, debt, AIFs, etc., can also help generate significant income without requiring constant efforts.
Q: How to generate monthly passive income for students ?
During education, students may generate side or passive income by leveraging their skills in the part-time of their studies. Freelancing services and investments can be prominent sources for earning a monthly income. Investing with the help of experts and gradually learning about the markets can be potentially helpful even in the long term.
Q: What are some passive income sources in India?
In India, digitalisation has opened up many avenues for passive income generation. An individual can access a diverse range of investments such as stocks, mutual funds, modern assets like REITs and InvITs, rental property, etc. Apart from investing, one can freelance online and create patent products like mobile apps and so on.
Q: Is passive income taxable in India?
Passive income is not separately taxable, but based on the source of such income, taxation applicability is decided. Individuals should check the classification of their investment product and its taxation norms under the capital gains head. Apart from this, some sources can also be included under ‘income from other sources’.
Q: What are the limitations of passive income?
Investing for passive income may not offer a stable source due to its vulnerability to market conditions. Moreover, some sources may be accompanied by structural weaknesses like employment conditions, government norms, taxation rules, etc.
