Please find here few Passive income avenues
Rental from residential property
Interest from deposits
Interest from Post Office Monthly Income Scheme
Monthly pension
Proceeds from Life insurance Annuity plans
Dividends
Capital gains (Property, shares etc)
Royalty payments received
Monthly income plan (MIP) of mutual funds
Systematic withdrawal plan
However in order to get passive income in most cases mentioned above, you need to have big money in your pocket in order to invest in these instruments. Your money works for you to earn more money without any incremental effort on your part. And if invested smartly, one can have enough money through these passive sources to make a down payment on something as big as an apartment or to buy something that one dreams of.
One can start it as early as possible or even today. All that is needed is a regular source of salary income and the discipline of setting aside a part of this salary, even if it is a small amount, towards investment purposes before you start spending your money on your lifestyle or your living costs. And all these sometimes depend on one's state of personal finances and family situation too, how skilfully a person can manipulate his finances.
Also, if you are just starting out your career, you might not have the flexibility to invest immediately. To add to these is the peer pressure to spend money on items of conspicuous consumption like the latest mobile phone or a cutting edge flat screen LCD TV.
The choice whether to invest or not is of course yours, but please bear in mind the tradeoff in the long term - you can either consume today, or save up to consume for later.
But if in middle age, you might not be left with much of a choice and your key goal should be to use as much of your income as possible from your remaining peak earning years to create a source of passive income, that may later benefit after retirement.
Alike the salary income, any passive income generated by you also bring along tax liability. Depending upon the source of the income there might be different tax treatment applied. For instance, dividends from equity instruments such as stocks or equity mutual funds are tax free in the hands of the investor, however, dividends distributed by a debt or a liquid fund will be subject to a dividend distribution tax paid out by the fund.
Further, the tax treatment also depends upon the time duration that you hold an asset or an investment. If you make a gain on a capital market investment, but hold it for less than 12 months, short-term capital gains tax rules will apply. And if you hold the investment for more than 12 months then long-term capital gains tax rates will be applicable. Likewise, for property too the holding period that determines a short or long-term capital gain is whether you have owned the asset for more or less than 3 years.
