The year 2017 has become a turning point for the Indian economy. As announced in the Budget 2017, incomes exceeding the threshold of INR 3 lakhs are liable for a tax payment which is a relief for people who come under this income bracket. Previously, the threshold was INR 2.5 lakhs which has currently increased by INR 50,000. However, the situation for taking a fixed deposit (FD) is quite different. Besides the income, you are also charged with tax on the FD returns which exceeds over INR 10,000 annually.
Since fixed deposit is the most preferred investment option, many people often end up parking their surplus income in FD rather than saving it. However, fixed deposit comes with a lot of benefits; it still has a drawback when it comes to taxation. The tax deduction levied on it can be a disappointment for many investors who are willing to invest a huge amount. A solution for this can be investing in a tax saving FD.
Investing in tax saving FDs can help you claim a tax deduction on an amount which is invested up to INR 1.5 lakhs, according to the current tax law. The amount invested is deducted from the total gross income. You can avail this tax deduction under Section 80C, according to the Income Tax Act. The Act also sets a limit of investment for which you can claim a deduction. If the amount invested exceeds the limit, there are chances you cannot benefit with a tax deduction. The current limit is INR 1.5 lakhs.
Here, are some points you should be aware of when applying for a tax saving investment:
- You can only invest in tax saving instruments if you are an individual or an HUF.
- The investment amount here is limited, which can vary from each lender.
- The tenure of the fixed deposit should compulsorily be of five years. Withdrawal before the maturity cannot benefit with tax saving.
- Investments done in Post Office Time Deposit for five years can also apply for a tax deduction under Section 80C.
- You can also transfer your account from one lender to another.
- The fixed deposit can either be a single or a joint account. If the account is joint, the tax benefit is available only for the first FD holder.
- Returns earned are taxable as per the tax bracket of the Income Tax Act.
- The FD interest is either payable monthly or on a quarterly basis.
- The returns earned on a fixed deposit can also be reinvested.
- The FD provides a nomination facility too.
The aforementioned points should be considered while availing a tax benefit FD. Besides this, there is one more solution to escape from the tax deduction. You can invest the lump sum amount by splitting it into different fixed deposit accounts. To earn higher returns on these FD investments, you can park your funds in a company fixed deposit. There are many Non-Banking Financial companies which offer you a FD with higher interest rates in comparison to banks. These fixed deposits are known as company FDs.
Concluding with, there is an above-mentioned way to save tax deduction over your FD account instead of opting a high-risk investment option.
How to Cope up with Declining Interest Rates Affecting Citizens
In recent times, there has been a considerable amount of fall in fixed deposit interest rates. Since the last couple of years, investment in fixed deposit has stalled. The unchanged repo rate has affected the fixed deposit market seriously. However, this initiative taken by the government was opted to keep a long-term goal in mind. It took drastic measures which brought about major changes in the past one year. A favourable home loan environment has come at the expense of the fixed deposit investment.
Just a couple of years ago, banks were offering a rate of interest up to 9%. As per the current market scenario, the majority of the banks offer a rate of interest only up to 7%. This difference is a major one. Furthermore, the current inflation rate in the market is between 4-5%. Thus, it is essential that the return on investment is more than 5%. In case if it does not top the inflation, your investment is of no use. In such a situation, where the interest rates are declining and affecting citizens, you can opt to invest in Non-Banking Financial Companies (NBFCs). These companies are offering a higher rate of interest than that of banks and other lenders.
People who are most affected by lower interest rates are senior citizens. These investors are mostly retired, and a few are close to retirement. This investor segment is completely confused as to where should they park their surplus funds.
Discouraged by the rate of interest, they end up investing in mutual funds, equity funds and other risk related avenues. However, for a senior citizen, it is essential that the safety of investment should be taken into consideration first. For the younger generation, they can opt for risk-related investments as they can recover in case if it does not work out. Thus, in such a scenario, you must invest in fixed deposit offered by the Non-Banking Financial Companies like Bajaj Finserv.
Here are several reasons why you should choose Bajaj Finserv:
The high rate of interest: As mentioned above, the rate of interest offered by this NBFC is higher than any other lender in its category. They offer an interest rate of 7.85-8.10% to senior citizens.
Credibility: As a senior citizen, the most important thing you should look forward to while investing is safety. Bajaj Finserv offers safety of the highest order as it has been awarded ICRA’s MAAA Rating and CRISIL’s FAAA for its stability.
Easy online process: Investing in a fixed deposit has never been this easier. You can simply fill the application form, and an agent will follow it up by calling you and collecting the documents.
Attractive Minimum Deposit: Many investors when they have a surplus amount of INR 50,000 to INR 70,000, they feel that it is not sufficient to get an FD with it. However, Bajaj Finserv offers a minimum deposit of INR 25,000.
Flexible Tenure: You have the flexibility to choose a tenure between 12-60 months. One of the most attractive parts is that if you change your mind and decide to close your FD for any personal reason, Bajaj Finserv still considers your new application.
These are just a few of the most noteworthy points of this highly rated NBFC. In an overall scenario, where declining interest rate is affecting senior citizens, you can select this option which offers stability along with higher returns