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What Matters Most In Fixed Deposit Schemes?

By Expert Author: Aishwarya Mahurkar

When you plan to invest in fixed deposits, you need to understand the facets that will be vital to this investment. For most people, it is all about the interest rates of the fixed deposit schemes or the convenience of the FD investments online. But, if you consult a personal finance expert, he will tell you that there are three crucial factors to fixed deposit investments.


Interest rate:


Most investors opt for a fixed deposit scheme by the interest rates available in the Indian finance market today. But, the interest rates for fixed deposits are the composition of multiple aspects rather than a single number. Higher returns from fixed deposits will depend on a higher risk. The company FDs and cooperative bank FDs are the high risk, high returns fixed deposits while nationalized banks represent low risk, low returns FDs on the spectrum of interest rates. So, vet your personal risk appetite and importance of the disposable funds that you are about to invest before you select the FD scheme.


Return on investment:


Most people believe that the entire returns on investment can be easily calculated by using the fixed deposit calculators available online. But, it is a bit more complicated as you will need to consider the taxation, reinvestment option of fixed deposit account, overdraft facility, etc. There are several ways to optimize the funds invested in a fixed deposit account. For example: Use the monthly interest returns for FD investment in recurring deposit or mutual fund SIPs (systematic investment plan) and you will enjoy even larger amount of returns on your investment. So, calculate the investment with due attention to detail and you will select the perfect fixed deposit account .


Taxation:


Whether you earn a small amount or a huge sum from the fixed deposit interest, it is taxable according to the Indian Income Tax Act. So, you will need to include it in your income tax returns. However, the people who invest heavily in FDs need to understand the TDS well enough too. If you earn more than Rs. 10, 000 from FDs in a single financial year from a particular branch of bank or finance institution, they will deduct the tax at source. Then, you will need to reclaim it in your tax returns. Hence, it will be much smarter to invest so that your earnings do not exceed Rs. 10,000. Then, you will be at liberty to pay the taxes or invest in tax saving FDs, ELSS mutual funds or PPF for the same.

Author Bio :

An experienced writer on finance topics, the author articulates of investment choices such as opt for a fixed deposit scheme & recurring deposit schemes. She writes about a variety of topics including the benefits of recurring & perfect fixed deposit account and how to make the right investment choice.

Total Views : 67Word Count Appx. : 473See All articles From Author

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