1. Fixed Deposits
Fixed deposits (FD) as the term suggests are financial instruments in which you deposit a certain amount of money for a fixed tenure. Fixed deposits form a crucial part of any savings. The FD returns are attractive when compared to other forms of savings available. The longer the tenure the more attractive the interest rates are. A Fixed deposit provides you with the safety of your deposit and also the choice for planning short-term and long–term saving goals. Hence, fixed deposits are the preferred choice for those looking for low-risk savings options.
In this era of volatile financial markets, fixed deposits are sought after for a variety of reasons. The most crucial amongst them is the assured returns on your hard-earned money while the capital remains safe. Fixed Deposits of reputed institutions are provided with the highest ratings by credit agencies like CRISIL. Companies also offer flexible tenures from 12 months to 60 months. Senior citizens get added benefits in the form of enhanced interest rates and thereby higher FD returns.
2. TDS on Fixed Deposits
The FD returns attract TDS or Tax Deducted at Source. The Income Tax Act 1961 mandates every individual to pay taxes if their income crosses a certain threshold. TDS is simply the income tax that is deducted from the amount of money that is paid towards salary, interest, etc. The liability of TDS falls on the person receiving the payment. The TDS helps the government to ensure that the income tax is collected in advance. The FD returns are added to the gross income of the beneficiary and taxed as per the applicable slab rates. The banks deduct this TDS when they credit the FD returns in the form of interest. Form 26 AS provides a detailed picture of all the TDS deducted from an
3. Advantages of Investing in Fixed Deposits
With prudent planning and a bit of research, one can save a lot of money from reduced interest rates on FD returns. The best option is to avail the benefits of tax-saving fixed deposits. As per Section 80C, an individual can invest up to 150000 Lacs in a financial year in tax-saving fixed deposits. This means that an individual can claim tax exemption for 150000 in a financial year. This amount will be deducted from the gross income calculated for income tax. However, most of these investment schemes do not permit premature withdrawals and have a lock-in period of 5 years.
4. Other strategies to save interest on FD returns
Availing a loan against FD
Loans against fixed deposits are one of the many options available during a financial emergency. Securing short loans against Fixed Deposits is comparatively easy. In this type of loan, the beneficiary pledges the fixed deposit as the collateral for the loan. This is more prudent than withdrawing their FD. The amount of eligible loans is determined by the amount of the Fixed Deposit. Most institutions provide up to 95 % of the Fixed Deposit as a loan. The advantage of this type of loan is that the interest rate is low this being a secure loan. The bank has the option to effectively recover the amount from the FD in case of non-payment by the customer. Thus this option provides a win-win situation.
Post Office Fixed Deposits
Investing in Fixed Deposits in post offices has its advantages. No TDS is withheld on post office Fixed deposits. Post office Fixed Deposit schemes also offer the tax-saving advantages of Section 80 C. It is pertinent to note that interest rates offered by post offices on their Fixed Deposits are attractive than those offered by banks.
Bajaj Finance Fixed Deposit Calculator
Use the Bajaj Finance Fixed Deposit Calculator to get a clear picture of your expected FD returns.