Personal Finance Beginner

Explained Passive Income and Its Options

What is passive income

Key Takeaways

  • Passive income is a way to generate money without actively getting involved in the investment process.
  • Passive income can come in handy during unforeseen situations such as the Covid-19 pandemic.
  • Mutual funds, real estate, trading, and staking crypto are some of the popular ways of earning passive income.

Simply put, passive income is the money you generate without getting actively involved in the project you have invested in or putting in the labor. It is the income that you earn passively in that sense.

Revenue-generating investments, such as real estate and cryptocurrency, can give you a continuous flow of passive income.

Why do you need passive income?

Here are a few reasons why you should consider creating a source of passive income:

1. Reduced reliance on paychecks: Living from paycheck to paycheck is stressful. Using your savings and investing them wisely in passive income-generating sources can ease your dependence on a monthly salary. A passive income also creates the opportunity to save money, which in turn may be reinvested.

2. Improved financial stability: Financial stability is critical in today’s world. With many uncertainties such as the pandemic looming over us, worrying about keeping up a flow of income has become pretty common. Passive income eases those worries to some extent as it could serve as a safety net when times are dire.

3. Achieving goals becomes easier: Most of us have many goals tied to our finances. When we generate some extra money through passive income, achieving these goals becomes easier. A passive income gives you more financial independence, allowing you to follow your passions.

4. The possibility of remote work: Most sources of passive income do not require you to be physically present. A passive income will usually flow in irrespective of where you are. All you need is a smartphone and a stable internet connection.

How to earn a passive income

Creating a passive income stream could take time. The amount of money you earn as active income is proportional to the time you devote to investing. But passive income is likely to flow in long after the task of investing is done. So, you may or may not generate income to sustain yourself immediately but you might eventually earn enough to save up for a rainy day. If you want to earn a passive income, you need to thus think long-term.

You do not need to quit a job in order to make a passive income. What you can do is, start by identifying potential sources of passive income. Let us take a look at some attractive passive income ideas you could use in India.

Passive income options in India

Here’s a list of passive income ideas for you to check out. We have created this list keeping Indian needs in mind.

Mutual funds

Investing in mutual funds is a popular way to generate passive income in India. A sizable income can be earned through annual dividends if you invest for many years at a stretch. However, we recommend you do your own research before investing, as mutual funds may be volatile.

Real estate

You could buy property under construction when it is cheap and sell it for a higher price once the construction is complete. Fully constructed properties sell for much more, thus, giving you higher returns.

Rental property market

Rental properties are among the best options to generate passive income today. People prefer to rent instead of buying a property because property rates are skyrocketing worldwide. So, renting or leasing out property for a fixed time can earn you guaranteed income with minimal effort.

Crypto trading

Do thorough research and identify reliable and predictable assets that you can invest in as a beginner. Consistent price moves are what make cryptos a safe, long-term investment.

Crypto lending

Crypto lending service providers let users earn interest by lending crypto to other users. If you own crypto, you could earn interest by lending your crypto using this kind of service provider for a fee. The precise manner in which the debt is handled varies based on the platform selected. Crypto lending services are available on both centralized and decentralized platforms, but the fundamental concepts remain the same.

Crypto staking

If you own crypto, staking is an option you could consider. Staking cryptocurrency is pledging your crypto assets to support and confirm transactions on a blockchain network. Not all cryptos allow staking but some like Ethereum, DeFi coin, and Solana do. Users with the highest stakes get to verify transactions. Staking does not require expensive mining hardware. As an incentive for staking coins, users are given interest.

Monetizing blogs

Blogs, too, can be a source of passive income. However, you need to put in efforts consistently if you intend to monetize them. You need to sign up as an affiliate marketer for brands you identify with and incorporate their website and product links on your blog. If visitors make a purchase, you will earn a commission. Brands such as Amazon and eBay offer commissions of up to 7%.

Investing in start-ups

Start-ups need venture capitalists or investors to kickstart their business operations. Investing in a start-up could secure you a regular passive income. You could opt for profit-sharing and stay away from the day-to-day running of the start-up if that is what you prefer, or you could partake in its decisions and get involved in the everyday activities of the company.

Pension plans

Invest a fixed sum every month that contributes to a retirement plan. When you retire, you can choose to get paid monthly or receive the entire lump sum at once. You may reinvest this money in other investment plans if you so desire.


Royalties are a great way to earn passive income in India. A royalty is a contractual payment made by one person for the use of another person’s assets. You can earn royalties when you invest in a company and earn a share for every product they sell. You can also earn royalties in exchange for letting people use your work through copyrights and trademarks if you are an artist.

So, to sum it up, what’s the best passive income option? Well, that completely depends on many factors including your risk appetite, and investment amount, among others. You should always diversify your investments to keep them safe and growing.


What is passive income, and how does it differ from active income?

Passive income is money earned with minimal active effort or direct involvement. It comes from investments, rental properties, or businesses with automated systems. Active income requires active work or time spent to generate earnings, such as salaries or wages from a job.

Is passive income risk-free, and what are the potential risks involved?

Passive income is not entirely risk-free. While it may require less active effort, it still involves risks like market fluctuations, investment volatility, property damages, business risks, and regulatory changes. Diversification and due diligence can help manage some of these risks.

How can I track and manage my passive income earnings effectively?

Record transactions, use financial software, set goals, monitor investments, automate payments, track tax obligations to effectively manage passive income earnings.

What is staking, and how can it generate passive income in the crypto space?

Staking is locking and holding cryptocurrencies to support a blockchain. Users earn passive income by validating transactions and contributing to network security in a proof-of-stake consensus mechanism.

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