Investing in bank FD was the best and the most obvious choice for people around a few decades ago. But today, owing to the ever-increasing number of banks and NBFCs competing with each other, bank FDs no longer remain a fruitful option. With the banking institutions still offering somewhere between 6% p.a to 7.25% p.a; corporate Fixed Deposit seem like a more conducive alternative. Having said that, with an increased rate of interest increases the risk of the principal amount and hence, gauging the credibility becomes inevitably essential. That said, a much more important question is, how to gauge the credibility of a lender or of a particular investment scheme? The answer is ICRA ratings. ICRA is an Indian independent and professional investment information and credit rating agency. Now, being an early entrant, ICRA is one of the most credible and trusted credit rating agency in India, and its prime responsibility is to analyze and evaluate the credit risks associated with the rated debt obligations/issues. Summing up, ICRA rates the short-term and long-term investment plans offered by various financial institutions in India. ICRA’s rating can give you an idea of how safe your money is posted investing in a particular scheme. ICRA’s Rating for Fixed Deposit MAAA indicates highest credit quality of the investment. Fixed Deposits from reputed financial institutions like Bajaj Finance comes under MAAA rating of ICRA. Such investment carries the lowest possible risk of default.
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Fixed Deposits are widely known for their safe and secure nature. It also provides a lot of liquidity as it is easy to create or break. Therefore, besides being safe it is also said to provide good liquidity measures for its depositors. So far it is good, but there is a small issue with FDs and that is it is not tax efficient. You need to pay taxes as per your income bracket on the interest earned through FDs. However, you can reduce tax liability by transferring the income on somebody’s name who has a lesser tax liability. Tips to know how to avoid tax paying on FD For example, a person falls in 30% tax bracket. But his mother falls under 0% tax bracket her income being zero. If the person transfers money to his mother’s name and she deposits the money in a FD. In the first case the person is levied tax but in the latter case no tax is levied as his mother falls under 0% tax bracket.
There can be some additional gains too as his mother is a senior citizen. But there are some ifs and buts to this rule. |
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About Author:Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment and Fixed Deposit marketplace. He is an avid blogger in the domain of Investment management. you can also find him on social networking platforms. Archives
August 2022
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