The Fixed Deposit
Before you pick an investment option from mutual fund and fixed deposit it is better to have a financial roadmap. This will help you better divide your funds based on immediate needs or for future. You can check aggregator sites to learn more.
Let’s look at crucial differences between mutual fund and fixed deposit to help you take an informed decision.
Fixed deposit is a zero-risk investment as it is free from market fluctuations. It lets you earn interest on a fixed amount which you can withdraw before maturity or at maturity of the deposit.
Mutual fund is subject to market fluctuations even though the investment covers a range of stocks within a fund. So, eventual gains depend on existing market conditions and hence can be fluctuating.
#2 Return on Investment
Fixed deposit offers an appreciable fixed interest income on the deposited amount over the specified tenure.
Mutual fund income could be potentially higher or lower based on your judgement and investment in the market. Rising market results in good earnings while falling market
Fixed deposits will let the depositor make a premature withdrawal though there will be small charges. On withdrawal at maturity of the deposit the depositor can save tax by filling up Form 15G and Form 15H.
Mutual funds will let the investor make a premature withdrawal if the minimum holding period is complete. But, there will be an exit load charge (around 1%) in this case.
For so many years, you were only aware of those two to three investment options. Most of these neither give a higher return on investment nor they show you how much you are going to get in the end. Here is a list of some new investment avenues in 2018:
Cryptocurrency- Recently, this market is growing at an exponential rate, and more and more people are getting interested in investing in cryptocurrencies like Bitcoin and Ethereum. Cryptocurrency works on blockchain technology, so it secured, and it gives you the opportunity to become rich on daily basis.
Fixed Deposit- FD is the safest mode of investment, where you are assured to get a higher return on investment as the rate of interest is very high as compared to interest earned from any savings account. You can easily check and calculate the exact maturity amount of the FD by using Fixed Deposit interest calculator and remain assured that you are definitely going to get this amount after maturity.
Gold- It is considered to be the most robust form of investment. In 2018, many new forms of investments have evolved like Gold ETFs and Gold mutual funds within the category of gold investments.
Mutual Funds- The best way to start investing in mutual funds is through Systematic Investment Plans or SIP. Here you can invest a fixed sum either monthly or quarterly for a specific duration and later you may get the money along with the interest.
To know about the other options, read: http://whazzup-u.com/profiles/blogs/plan-to-save-in-2018-refer-to-these-new-age-investment-options
At the beginning of every financial year, almost all corporate employee has to fill an investment declaration form, declaring his investment plan for the year. Though it becomes annoying sometimes, if you take my words - it is no less than being gifted by your loved ones on valentines.
When your employer asks you to declare your investment plan, he/she never intends to discomfort you with the burden. They do so to help you save your hard earned money from being consumed by the Income-tax department. The same help them accurately file your income tax and to ensure you end up with a higher in-hand salary.
Therefore, rather than avoiding the declaration, proactively shoulder on the responsibility. But before you declare your investment plan for FY 2018-19, keep these things in mind.
Lastly, while filling the declaration form, ensure minimum chances of errors. Fill the form properly and manage an efficient investment plan declaration.
A well planned, stress free and well provided for retirement is something we all aspire to achieve. Until the appropriate age is reached, we work hard to save enough and invest in the right instruments that provide good returns with nominal to zero financial risk. To build the required corpus, the longest tenure is opted for. As the saved or invested sum earns interest at the rate specified and/or applicable based on market and economic conditions, the same is liable for taxation. These deductions can take a toll on the earnings and eventually affect the retirement corpus.
To avoid the harmful effects of taxation, there are several ways how these taxes can be avoided. Listed below are a few of such ways:
The maximum interest income can be earned by investing in a fixed deposit for senior citizens of NBFCs as they provide returns of the range of 8.10%.
So, by making the right investment choices, finances for retirement will take good shape until the time they will be required for use.
Learn more on this subject by following the resource given below: How Senior Citizens Can Make the Most of Tax Breaks on Offer
Retirement planning is mostly about saving and investing in the right financial instruments so that the lack of a regular source of income will not affect the lifestyle of the individual under question and those dependent on him/her. By making the right investment choices, an individual can make sure that after retirement, he/she is financially stable, independent and trouble-free.
Given below are a few important things that need to be taken care of when planning for retirement:
Reviewing Expenses and Calculating the Amount Needed
Budgeting is the starting point for any type of financial planning and retirement is no exception here. Individuals should make a budget, clearly listing the projected expenses of the future- here, both major and minor expenses should be listed. This will give an idea of the tentative amount to be saved until retirement in order to lead a convenient life.
Factoring in Risk
Whenever there is money, there is usually some amount of risk associated with it. This is why one should take utmost care to minimize the risk and work on ways to keep the funds safe and secure until retirement. Individuals should invest more in options like fixed deposits for senior citizens which are much safer as compared to market related investments.
Building an Emergency Corpus
Apart from the regular expenses, retirement could also bring unforeseen expenses. For these, an emergency corpus should be built so that the funds saved for regular expenses need not be used up. An emergency fund will help in avoiding situations that could make an individual financially vulnerable.
Also Read :- Protect your Retirement Funds from Tax
Availing Professional Advice Whenever Necessary
Tax savings, investment options, expenses- professional advice in these aspects will help in making financial planning for retirement more managed and effective.
By implementing these simple steps, an individual can work towards a comfortable retirement without having to worry about lack of funds and emergency situations.
The resource given below lists the additional ways how retirement planning can be made even better: Smart Financial Moves to Make if you Going to Retire
An investor who had invested in a fixed deposit scheme should and must appoint a nominee who could take the custody of the money till the maturity if something happens to the FD holder. Yes, a nominee will get FD money on your demise!
Yes, there are numerous cases in India where you would see brothers, sisters and children and other relatives of an FD account holder fighting for the claim of the money.
Usually, people think that they will appoint a nominee after a while after opening an FD (Fixed Deposit) and time flies. Months turn into years, and in such cases, if something happens to an FD holder, the flight for the claim of the FD money begins.
That’s where the importance of a nominee matters much. Appointing a nominee also means that an account holder need not worry much as even after his/her death, the money will be taken care.
Who is an FD nominee?
A nominee is the guardian or custodian of a fixed deposit account. The task of a nominee is to take charge of the account if anything happens to you.
The name of a nominee is mentioned at the time of opening of the fixed deposit account. It’s not important for the nominee to be related blood wise to an applicant, but should be a sensible person who can take charge of the FD in an un-favourable situation.
People usually make their wife, husband, mother, father, children, and siblings as nominees.
The importance and role of an FD nominee
Let’s provide you the importance and role of an FD nominee in brief:
1. He/she is a custodian
A nominee is the custodian, guardian or an in charge of the fixed deposit account in your absence. However, a nominee has no role to play whatsoever if you are still alive.
2. Responsible for an FD account in your absence
If any matter (legal or more) related to the fixed deposit happens when the FD holder is no longer present in the city of the conflict, a nominee can take charge in this regard. If an FD holder is no longer alive before the maturity has completed, a nominee needs to complete the documentation and collect the amount after the maturity.
3. He/she is also the ‘go to’ person
Anyone can contact a nominee regarding any matter related to an FD if the FD holder is unavailable. The unavailability of an FD holder could either be due to geographical constraints or due to the passing away of the fixed deposit account holder.
Why is an FD nominee so important?
Picture this! You are no longer in this world, and your relatives are fighting over a piece of money that you have in your fixed deposit account. Will you like this situation to happen in your house? No right?
That’s where the appointment of a nominee holds so much value as it helps in maintaining the peace in your family after your demise. Any tussle when it comes to the claims of the FD amount can lead to confusion and bitterness, and a nominee can nullify all such.
The Bottom Line
Life is unpredictable, and you never know what may happen to you next moment! Thus, for all your invested money to reach its correct hands should be your duty, if no longer survive. Appointing a fixed deposit nominee can solve all such issues with ease.
Thus, if you are set to open an FD, make it a point to appoint a nominee.
Even if you have invested in an FD some years back and yet not have a nominee, it is the time to do it right away!
Also Read :- Complete Guide to Investing
TDS or Tax Deduction at Source is a taxation done on the interest earnings of a Fixed Deposit. However, not all interest incomes qualify for TDS - when the interest earned from a fixed deposit exceeds INR 10,000 in a financial year, the financial institution taxes it at a particular percentage (usually 10%). This financial institution can be a bank or a Non-Banking Financial Company (NBFC). This tax tends to diminish the returns on investment of the FD.
With a little bit of planning, TDS can be avoided. Listed below are a few practical ways how one can enhance earnings from an investment in an FD of a bank or an NBFC:
Timing the Investment Right
The easiest way to save up on TDS is by opening an FD account at a time when the interest income gets divided over two financial years. In this manner, TDS is not done as the condition for the income exceeding the specified taxation threshold of INR 10,000 is not fulfilled.
Also check :- TDS on Fixed Deposit
Dividing the Corpus and Investing in Multiple FDs
The next way to save up on TDS is by dividing the amount to be invested and parking the same in multiple fixed deposits of different banks or NBFCs. The investor can also invest in multiple FDs of a single financial institution. In this way, the returns do not exceed INR 10,000 and TDS is thus saved. An additional benefit of investing in this manner is that the risk gets minimized.
Tax Deduction at Source can also be avoided by opening a joint fixed deposit account. Here, the individual with higher tax liabilities (i.e. higher income) should not be the primary holder of the joint FD account.
To know more about the remaining practical ways to save TDS, the resource given below should be followed: How to avoid TDS on Fixed Deposits?
Talking about investment, there are many choices available in the market and each one of them has its own pros and cons. Even then, most of the investors are stuck with the dilemma: fixed deposit or mutual funds. Honestly speaking, both of them are good in their ways owing to their distinct qualities. The decision depends on your nature and expectations from the investment. Hence, let's take a look at major differences between the two investment tools to determine the better one.
Fixed deposit VS Mutual funds: The Major Differences
Bottom line: If you have a low risk appetite and expect a decent return from your investment, invest in fixed deposit. Otherwise, mutual fund is also an option.
Visit: Fixed deposits vs Mutual Funds - Where to Invest?
A recent census put the count of senior citizens in India at 10 crores- in support of this group of individuals who are 60 years of age or older, financial and health related benefits have been introduced. Starting with dedicated insurance plans, there are several financial perks to look forward to. Finance related benefits can be grouped into two categories, which have been listed below:
About Specialized Investment Plans for Senior Citizens
In this category of financial benefits, the following investment vehicles are the top picks:
Fixed deposits for senior citizens are provided by most banks as well as Non-Banking Financial Companies (NBFCs). The rate of interest offered on such schemes are quite high when compared to similar schemes for non-senior citizen investors. The maximum interest income is of the range of 8.20%.
Senior Citizens Savings Schemes are another viable option wherein investors can invest as much as INR 15 lakhs for a period of 5 years to earn annual interest of 8.3%. The interest is paid on a quarterly basis. This scheme is provided by banks and post offices.
Read: Tips to Boost your Savings for Retirement
About the Income Tax Benefits for Senior Citizens
There are two income/age slabs defined when it comes to tax benefits for individuals who are 60 years or older.
A maximum yearly income of INR 3 lakhs for senior citizens (age between 60 years and 80 years) is exempted from income tax.
Likewise, individuals who are 80 years or older are considered super senior citizens- for such individuals, the maximum exemption limit for income tax is set at INR 5 lakhs.
Moreover, under the Income Tax Act of India, specific Sections like 80 D, 80 DDB and 80TTB provide exclusive tax benefits to senior citizens on their income that can be utilized with the investment income or other financial aspects such as insurance.
Read: Get Complete Investing Guide
Fixed deposit is provided assured returns, is highly stable and yields the highest returns; but the inimitable advantage that has sustained FD at no 1 is - tax benefits. But before proceeding with FD with a desire to obtain tax benefits, ask yourself - do you really know how to leverage the tax-reclaim provisions? A large number of investor who invests in FD (Fixed Deposit) to save taxes often end up disappointed, immediately regretting taking an uninformed decision. Proper planning and adequate understanding of the facts are inevitable prerequisites for people planning to invest in fixed deposit. So, to avoid regrets and turn fixed deposit into a prosperous decision, here are a few ways you can leverage the tax-deduction provisions.
Bottom line: Investing in the FD scheme provided by reputed financial institutions like Bajaj Finserv entitles you to dual benefits: higher return on investment owing to the high-interest rate, and on-request professional tax-saving tips by investment experts.
Read More : Save Tax on the Interest earned through Fixed Deposits
Confused? Visit Bajaj Finance Customer Care page to speak to our customer care representative.
Have any Doubt? Read unbiased Bajaj Finance Reviews to know more about Bajaj Finance Fixed Deposit.
Visit Bajaj Finance Terms and Conditions page to know all the T&C for Fixed Deposit in India.
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.