Passive income can be best defined as earnings generated from alternative sources of income at times with minimal effort. Today, more than half of Indians have a passive income as a YouTube-er, blogger, vlogger, social media influencer, etc. It’s something that’s considered as a side hustle – an alternative to the primary job – to help people earn extra cash above and beyond their regular earnings. Other examples of passive income would include rental income from a property, dividend income from investments in stocks or mutual funds, interest income from savings accounts or bonds, and income from royalty payments for books or music.
Let’s learn about some of the best passive income ideas in India for additional income.
Fact Not to Miss
In India, 62% Gen Zs and 51% Indian millennials have side jobs or passive income, according to the Deloitte Global 2022 Gen Z and Millennial Survey.
Here are some of the popular passive income ideas you need to know about:
Income from renting out a house or property in India is pretty common. Also, it’s one of the least laboursome side income generators among other streams. All you need to do is rent out your property and ensure that the tenant is paying your rent on time. You can increase your rent annually or as per the rent agreement.
If you have some following on social media or have a popular blog up and running, you can leverage your follower base to earn additional income by promoting products of different companies. Let’s say you have a blog which generates decent traffic. Product companies could reach out to you to list your products on your blog as an ad. You can earn a commission from the concerned company for every click or purchase made via your blog.
Ideal for hustlers having a capital base and the ability to take risk, peer-to-peer lending allows investors loan money to creditworthy borrowers who will subsequently repay the loan along with interest in the form of EMIs. You can profit from the interest payments. However, there is significant risk in losing money if the borrower defaults.
When you invest in dividend-yielding stocks, you earn dividends depending on the number of shares you hold. If you are familiar with the stock market, you can also consider dividend exchange-traded funds (ETFs), which combine the benefits of an ETF with the passive income offered by dividend stocks.
Blogging and YouTube, especially YouTube have become one of the most popular social media channels to generate passive income. Anyone with a decent follower can indirectly promote a particular product or brand on their channel and charge a significant compensation for the same. In India, many YouTubers, commonly referred to as influencers, earn in lakhs and crores.
One of the popular passive income sources, social media content has become a staple for many online content creators seeking an alternative income stream. We are all a part of the social media boom. Capturing this opportunity, many content creators have shifted their base to social media channels like YouTube, Facebook and Instagram. You can do so too. Start a YouTube or Instagram channel and post content daily targeting your customer base. If your content clicks with the audience, you would see a gradual increase in the number of subscriptions. Once you have reached a significant subscriber base, as a social media influencer, you could start accepting brand promotion requests and charge a fee for the same.
Since the onset of pandemic, the concept of online teaching has increased by leaps and bounds. The compensation is quite attractive too. You can use YouTube for free teaching so as to build followers and subsequently promote your subscription-fee based teaching module. Other than that there are free online teaching platforms that connect students with teachers. You can subscribe to those platforms to get quick access to a large pool of students. However, such platforms could charge a commission from you.
There are tons of platforms where you can sell your photos and earn money in return. By regularly uploading high-quality stock images, you can gradually build an impressive portfolio that will earn you up to thousands or lakhs of rupees per month.
Property rentals are another way to make passive income. Assume that you’d want to avoid the substantial down payment or up-front time commitment that comes with owning real estate property. In that case, you might think about investing in a real estate investment trust.
Real Estate Investment Trust (REIT) lets you invest money into a business that owns and manages real estate. Commercial real estate, such as offices or other commercial spaces, usually involves an upfront investment that covers both the cost of the real estate and the time spent finding reputable tenants.
Dropshipping is great for new entrepreneurs to start an ecommerce business. Dropshipping allows an entrepreneur to sell products online without having to carry inventory. When a customer places an order, the store purchases the product from a third party and has it shipped directly to the customer. It can be an attractive business model for entrepreneurs who want to start an online store without the upfront costs and risks of managing inventory. However, there are challenges associated with dropshipping like finding reliable suppliers, managing shipping times and costs, and ensuring quality control.
You can create products like ebooks, music, photos, plug-ins, templates, etc., and sell them online through reliable channels and platforms. There are a lot of creators who have successfully built businesses through this process. You can do so too – but first treat it as a side income channel.
Any passive income source that catches your interest or matches your skills could be ideal for you. There are tons of passive income streams, all you need to do is choose the one that is aligned with your skillset.
The number of passive income sources you should have depends on your financial goals, personal circumstances, and risk tolerance. There is no one-size-fits-all answer to this question. However, having multiple sources of passive income can help diversify your income streams and provide a more stable financial foundation.
It’s important to consider the time, effort, and resources required to generate passive income from each source.
The following table highlights the tax structure on passive income in India:
|Long-Term Rentals||Yes – Income from house property||Section 24– Standard deduction of 30% of Net Annual Value|
Section 80C – Rebate of up to Rs.1.5 lakh per annum on interest repayment
|REITs||Yes – Income from other sources||Only for the interest incurred to earn dividends – 20% of the total dividend|
|Dividend Income||Yes – Income from other sources||Not applicable|
|Interest Income||Yes – Income from other sources||Interest earned up to Rs.10,000 is exempt from taxation|
|PPF Interest and Maturity||Not taxable||Tax exempt|
|NPS||Partially Taxable on maturity||Section 80CCD1 – Yearly contributions to NPS up to Rs.1.5 lakh per annum (10% of basic salary)|
Here are a few crucial points to keep in mind if you are a beginner to passive income:
Though you don’t have to put in much active work, you would still need to put in some investment or work upfront. Once you start earning passive income in the form of interests, dividends, etc., you achieve financial security over time.
You might still have to put in some additional labor to earn that extra income. For example, if you have rented a property, your rental property must be maintained-well throughout.
Passive income is subject to taxation, though it’s taxed differently than your regular income.
It’s likely that you already possess the resources or skills to generate passive income. However, you should keep in mind that passive income is not quite literally passive. The initial analysis and effort involved in purchasing the assets, setting it up and passively managing it is significant. You can earn more in the long run with little to no effort if you set up passive income investments, whether investing in a new business idea or purchasing income-generating securities.
Passive income calls for passive investments. Invest in Navi Mutual Fund’s ELSS Tax Saver Nifty 50 Index Fund and save taxes up to ₹46,800. Start investing today!
The most common passive income ideas include owning a business, renting a property, private equity, holding shares in a stock market and peer-to-peer lending.
People generally generate passive income in three main ways: investing, asset building and asset sharing.
As discussed above, there are multiple ways of earning passive income, including investing in stocks, writing a book, renting a property or car, affiliate marketing programs, etc.
You can earn passive income with little to no investment by building a Passive Income business, investing in stocks, investing in real estate, investing in cryptocurrencies, becoming an online creator, building single-use software and apps, affiliate marketing and owning digital real estate.
The passive income you earn is taxable in India under Section 80C, Section 24 and Section 80CCD1. Check the table mentioned in the article to get the full picture.
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