If you want a safe and intelligent investment, fixed deposit is the one to go for. These days, fixed deposits are high on popularity after the increase in interest rates in the last few years. A huge sum of money deposited for a certain period of time can earn a pre-determined rate of interest. These schemes are offered by both banks and companies, but it is wise to opt for banks, because of safety reasons. Here are few things that you should keep in mind about fixed deposit accounts in India.
12. Tax Deduction – You’ve got some News Here
Fixed Deposits up to Rs. 1 lakh taken for a period of 5 years are eligible for deduction of taxable income under Section 80C. This should be good news for small investors who are looking for some investment as well as tax redemption.
11. Tax in FD is adjusted, it’s not Free
The interest you earn from Fixed Deposits is tax adjusted, not tax free. The interest income is taxable under the head “Income from Other Sources” and you pay tax depending on the tax slab you belong to. Interest income from Fixed Deposits up to Rs. 10,000 is exempted from tax.
10. Benefit for Senior Citizens
Interest rates are generally quoted higher for senior citizens. Now that’s a huge relief! Grannies and Grandpas should have a smile on their faces now.
9. Public Sector Banks – Always Prefer
Public sector banks offer highest returns rather than the private ones. High returns and security – these are strong features which should move you towards the public sector. If you want to be completely sure that nothing should go wrong, don’t think twice, and invest in public sector banks.
8. Split Investment, Lessen Taxes
If there is a 5lakh investment plan, it will be profitable if you split it into 1lakh Fixed Deposits and deposit them in different banks. This is because, deposit insurance is there up to rupees 1lakh. This should be your go-to strategy to lessen your tax burden.
7. Breaking the Investment – Be Careful
Breaking the Fixed Deposit means withdrawing the money before the maturity expires. This might be due to certain urgent requirement of funds or you might come across a better investment opportunity. However, there will not be any terrible loss, but, for example, you might receive 1% lesser interest rate than what was slated. An alternative to breaking a Fixed Deposit is by taking a loan against the Fixed Deposit. It is very easy to obtain such loans with amounts ranging up to 90% of the principal and accumulated interest.
6. Effective Returns from your FD
You will be interested to know that the effective returns on Fixed Deposits are more than the interest rates offered. However, it is only relevant, if you choose to reinvest your interest every year. This means that you will be earning compound interest.
5. Check the Interest Rates on FDs
The rate of interest on Fixed Deposits varies according to the maturity with longer deposits generally earning a higher interest rate. Also the Fixed Deposits vary from bank to bank, so you should research properly before investing.
4. No Protection from Inflation, but, who Can?
Fixed Deposits will not save you from inflation. During the maturity of a Fixed Deposit, if there is a steep rise in inflation, the returns will fall. Then again, hardly anybody can save you from inflation. Even if it is the stock market, there will always be an uncertainty.
3. Regular Income Returns
There is an opportunity of receiving regular income through the interest payments you make every month or quarter. For the retired, nothing van be more beneficial. What do you think?
2. Say No Company FDs
Bank Fixed Deposits are the safest. At least you will not run the risk of losing all your money. This might happen if that particular company suddenly goes bankrupt, then you will have to give up hope of any kind of return. And be careful of companies that offer very high interest rates to attract your investments.
1. Safety First
Fixed Deposits are the safest investment policies in today’s economy. If it is a reputed bank, you can be rest assured, because these are all controlled carefully by the Reserve Bank of India. In today’s world what more do we want? Safety should determine how one invests one’s money. It is the ultimate.