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The Goods and Services Tax (GST) is beyond doubt the most revolutionary tax-related reform to be seen in India in several decades, since it will eliminate the conflicting and cascading taxation structures which have confounded several industries over the past few decades. It will most certainly have a profound effect on India’s economic prospects.  

A single indirect tax which covers all goods and services will, in the long run, increase tax collection by making it easier for retailers and several other businesses to comply and also moderate overall taxation levels.

Impact on Residential Real Estate:

Under-construction real estate is covered under GST through works contract and classified as a service. The GST tax rate for under-construction real estate has been set at 12%. Also, it has been clarified that input tax credit will be available for developers to take advantage of and pass on the benefit to the buyers under the anti-profiteering clause of GST.

Impact on developers:

Tax is now 12% with full input tax credit available to developers on construction materials. The final bill is likely to be the same or marginally higher, varying across states as clarity on abatement rules has still not been provided. Some change in terms of changing market dynamics has already brought about a change in developers’ workings. 

Impact on Rental Housing:

Other doubts pertain to the rental housing market, which would naturally be impacted if the Government were to tax residential leases under GST. The common apprehension is that if this were to happen, the rental housing segment may see a huge slump over the medium-term, since residential leases are currently not taxed at all.

Rental yields in major cities are already at around 2-4% on average. Being already low, we would expect rents to hold or maybe decline due to an increase in housing stock. Most investors in the residential sector do not invest for rental yields but rather for the capital value appreciation, so even a drop in yields would not independently impact sentiment. ST is not applicable on rental housing.

Impact on Commercial Real Estate:

Under-construction real estate for sale purposes will attract GST at 12%. This likely to be tax-neutral to slightly negative depending upon states’ prevalent service tax and VAT rules.  For commercial leases, the GST does not talk expressly about this service and hence it is covered under 18% tax rate with full input tax credit and this should turn out to be neutral for this sector. 

Impact on Affordable Housing:

Affordable housing is currently exempt from service tax. It is likely that the government may come out with a clarification regarding the applicability or continuing exemption under the GST.

Impact on Affordable Housing:

Affordable housing is currently exempt from service tax. It is likely that the government may come out with a clarification regarding the applicability or continuing exemption under the GST.

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Many of us know that there are rules of Investing. We also know that Rules are meant to be BROKEN.

However whether you want to follow them or break them, there is no escaping knowing them! Here the aim is to warn YOU that  it is a complex world, and rules are not enough……

If you pick any book on investing you will find the following steps:

1. Have a plan

2. Make a budget

3. Save regularly, and then invest regularly

4. Know your risk profile, cover your risk. Take life and general insurance as per YOUR requirement.

5. Understand asset allocation – and stick to it like a discipline

6. Review regularly. I have no doubt that these are the golden rules.

However people who say this (other than trainers) have to sell you a product. And their life depends on how many people buy those products! So for all these rules to hold good commissioned products should do well. Financial Planners (by what ever name called) should be excellent in their integrity.

SEARCHING FOR A GOOD AGENT and knowing how to use him….sounds simple? ha!! try it.. Finding a good FINANCIAL PLANNER….?? what’s that?? Still searching? well join the gang….. Gimme a break.

That is too tough an assumption. So tomorrow I will give you the real Golden rules, happy investing!

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India has a rich tradition of passing down teachings and wisdom through oral communication. While in older times, it was sages passing down knowledge to their pupils, this tradition has now expanded to include everyone. Elders from all walks of life now pass on their learnings and wisdom to guide the next generation. They do so to help them navigate the world with ease and to live a safe, fruitful and prosperous life.

They are often communicated to you by your parents or other elders in the form of advice and suggestions. However, well-intentioned as they may be, there are many cases where your elders’ advice could actually end up being bad for you.

In this piece, I’m going to highlight three such outdated pieces of ‘investment wisdom’ that don’t hold good anymore:

  1. Physical gold is a good investment: Since time immemorial, gold has been coveted and prized as a ‘valuable’ metal. Even today, gold is considered to be a sign of prosperity. However, when buying gold you need to be clear on what you’re buying it for – if it is for ornamentation, jewellery, coins and the like, then sure, buy away. 

    Financial gold refers to instruments that derive their value from gold, and have gold as the underlying investment – but on paper. They are cheaper as there are are no making charges or wastage charges. You don’t have to worry about storage and theft, and they’re easy to buy and sell. Do note: Our experts recommend keeping your exposure to gold at around 8 to 10 percent of your investment portfolio. This will help you diversify among other asset classes so that one acts as a cushion when another under performs.

  1. Real estate gives superior returns: Another favourite of the old-guard is real-estate. Many people harp on about how their property fetched them massive returns on selling it. However, what these people fail to note is a) the time period over which they ‘earned’ these returns,  b) the other costs over and above their purchase price that went into maintaining their property and c) comparing the returns of the same investment made for the same time period in other investments such as the equity markets.

    If you factor these in, the returns don’t seem as impressive anymore. In fact, the equity market has given significantly higher returns than prime locations in Mumbai. The only reason people ‘earn more’ in real estate is the ‘discipline’ they show in holding on to their investments. Similar good investing habits – from proper research to the discipline to hold on – in equity investments could garner far superior returns. 

  2. Fixed Deposits (FDs) are the best way to invest: There was once a time, back in the 90s, when bank FDs were delivering double-digit returns – some as high as 12%. However, that time is in the past. Today, 3-year or longer FDs from banks such as SBIs have an interest rate of just 6.25% per annum before taxes (Source: SBI). After taxes, this comes down to just 4.3% for those in the highest tax bracket! This barely beats inflation, giving you scarcely enough growth to build any significant amount of wealth.

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Fixed deposits (FD) remain one of the most trusted investments in India. People of all ages and all backgrounds loves investing in fixed deposits. But there are ways to earn higher interest on FD?

FD promises a guaranteed interest. If we can also earn higher interest rates on it, FD becomes a very attractive investment option.

For those seeking safety and good returns alike, investing in FD is a reasonable alternative

There are not ways to earn higher interest on FD account. Lets have a look on those ways using which can enhance the potential of returns of FD.

Interest Rate: Research Multiple FD’s

It is essential to look at multiple fixed deposit interest rates before deciding on a particular scheme. One must also keep the tenure in mind. This is essential to check if it aligns with your requirements.

Fixed deposit interest rates may vary across different banks, and different schemes within those banks.

Fixed deposits are offered by banks; financial institutions (FI) and non-banking finance companies (NBFCs). It is worth researching interest rates offered by these institutions.

Generally nationalized banks offer lower rates than others. Hence, while doing research on multiple FD’s, keep note that if the rate offered is by a bank, financial institution or NBFCs. Final decision shall be taken accordingly.

Interest Calculation: Check how it is done

Interest rates is a fundamental prerequisite before settling for a scheme. But one cannot cannot discard the importance of how the interest is calculated on the deposit.

Interest rate on fixed deposit is calculated at different stages.
(a) Quarterly (interest calculated 4 times per year)
(b) Half-yearly (interest calculated 2 times per year)
(c) yearly or at the maturity (interest calculated only once per year)

Consider this example. Suppose we have a bank A and bank B.

Bank A offers 9% interest per year on a five-year fixed deposit and calculates the interest on a quarterly basis.

Bank B offers you the same 9% fixed deposit interest rate for the same duration. However, it computes the interest only once a year (yearly basis).

Therefore, Bank A will fetch more interest compared to Bank B.

The more often the interest is calculated in a year by banks on FD, the higher will be its effective net return.

Save on TDS and earn higher net return

A TDS (tax deducted at source) of 10% is charged on fixed deposits if the fixed deposit interest rate is more than Rs.10,000 per year. A good way to avoid TDS is by splitting the fixed deposit amounts.

Instead of opening one account and investing all your money in one FD, one can split the amounts in smaller amounts.

The split amounts can then be invested in FD’s between two or more lenders. The idea behind doing this should be to keep the interest generated by one FD below  Rs.10,000 per year.

One can also avoid TDS by opening fixed deposit accounts in different branches of the same lender.

Breaking a big amount into smaller FD’s has another advantage. If money is needed to manage an urgency, one may not need to break the whole FD. As there are several FD’s, braking one FD may meet the money need.

This way, during emergency, the desired interest income from FD will not get compromised a lot.

Reinvest the interest: Make it work harder

A defensive investor may have preference for FD over other investment options like equity. But this way the investor returns are only lower. But there is a way out. 

Without disturbing the defensive approach to investing, one can protect the principal amount and reinvest only the interest component in higher return generating options.

Lets see an example. Suppose one has invested a amount of Rs.100,000 in FD. Annual interest one can earn on this FD (9% p.a.) is say Rs.9,000/year.

Idea is, lets the FD mature and the amount of Rs.100,000+9,000 be credited in your bank account. Once the amount is credited, use the interest component Rs.9,000 to be invest in equity linked mutual fund.

One can invest in equity linked mutual fund through SIP route. Suppose this SIP yields a return of 12% per annum. The net effective return of FD plus SIP is higher. This way the same money earns higher returns as compared to the case where money is left stalling in FD alone.

A combination of FD with equity also ensured great investment diversification.

But important here is to note that, the principal amount (Rs.100,000 in our example) is completely safe. Only the earned interested from FD has been invested in riskier option like equity.

This is a nice bargain for those investor who wants to earn higher interest on FD investment without compromising the safety net offered by the FD’s.

Overdraft Facility: Prevent breaking the FD

Normally we do not want to break our FD’s. But when the situation changes, the priority may also change.

This change in priority may be due to an emergency situation one is facing in life. One such example of emergency condition is medical SOS.

In such cases what we do? We often break our FD, improve our liquidity, and manage the emergency medical need.

I know a person who invests heavily in FD’s. But he managers his FD very intelligently.

Considering that he has large FD’s with his banks, the banks also offer him additional benefits.

The benefits are not offered in terms of higher interest rates, but in term of overdraft facility. Hence, when he faces any emergency condition, he does not opt to break his FD. Instead, he uses the overdraft facility offered by banks and meet his emergency needs.

This way his FD remains intact and interest keeps compounding. This may look like a very elementary idea, but its long term impact on ones net worth is phenomenal.

Allowing ones money to stay locked in FD even under extreme emergency situation is also a good way to earn higher interest on fd.

I strongly recommend my readers, who invest heavily in FD, to consider activating overdraft facility.

But one must remember that this facility also works a double edged sword. If not managed property, it may hurt in more ways than one.

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So how a beginner can learn the process of investing money?

Beginners has plethora of questions in their mind regarding investment. Some questions are ‘important’ and some are result of mere lack of understanding.

When beginners read more about investing money, their understanding about investment increases. As result their questions start getting answered on their own.

But the important questions may not get the right answers just by reading reference books. The problem is, reference books are too detailed and can confuse the beginner.

Beginners have huge potential to take risks. Due to their young age they can take much higher risks. But they still feel afraid to invest money. The reason being, lack of clarity about risk management.

If beginners only know the right answers to the following ‘questions’, they will practice investment fearlessly.

1. What is my risk taking capability?

If a person knows accurately their risk taking capability, they will invest very wisely. Invariably, wise investments gives full satisfaction to its investors.

But how ‘knowing’ ones risk taking capability leads to ‘full satisfaction’?

Majority simply jumps into investments without doing this essential check. This they do in sheer ignorance, as they do not know the ‘power of investing within ones risk taking zone’.

Lets take an example to understand the concept of investing within ones risk tolerance.

2. How risky investments like stock give high returns?

Stocks are risky because their price fluctuate every second. As these prices are so volatile, hence a person who invests in stocks for short term, has very high chances of incurring loss.

But the same stock price, when viewed with long term perspective, will show a definite growth curve.

How this is possible? On one side its is risky in short term, but it gives high returns in long term? Is this judgement logical or its just a farce statement made to promote stocks?

By no means this statement is farce. Stock are not just any piece of paper, they are basically a business divided into its smallest entities.

3. How a beginner should invest in stocks

For a common man, stock investing is very exciting but they avoid it due to the risks involved with it. The risk associated with stock investing can be minimised by learning more about stock analysis.

But not many has time nor patience to learn the skill of stock analysis.

So what is the alternative?

There is a fantastic financial instrument available for common man using which they can invest fearlessly in equity market.

I am talking about mutual funds. Expert fund managers buy stocks on behalf of us. Hence we are spared the headache of doing complicated analysis and stock purchasing.

To make equity investing even more risk free, one can invest in mutual funds through systematic investment plans (SIP’s).

Through SIP’s one does not invest all the money at a time. Lump sum amount is distributed into smaller sums of money and invested gradually over several months.

4. How I can create a risk free investment portfolio

It is not possible to build a risk free portfolio and also earn high returns.

If one desires high returns, one must buy riskier investment options like stocks, equity mutual funds etc.

But do not worry, there is a way to build a balanced investment portfolio.

One must target to keep several types of assets in ones investment portfolio.

When one is buying stock, he must also buy bank deposits. When one is buying equity mutual funds, one must also buy gold. When one is buying bonds and debentures, one must also buy real estate property.

If this sounds too complicated, I will suggest a more understandable and implementable solution.

Generally people invest their money to gain capital appreciation. This is a more risky form of investing.

If idea is to minimise the risk, focus should be on buying “income generating assets” instead of capital appreciation.

Income generating assets are less risky and they also give decent returns.

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Today’s senior citizens definitely have more savings and investments compared to their parents, when they were retired, but the cost of living has multiplied manifold. Many of today’s retirees, unlike their parents, do not want to be financially dependent on their children’s earnings. While lifespan has increased, sky rocketing healthcare costs are also a serious concern for senior citizens. For senior citizens the four main investment considerations are:-

    • Protection of capital
    • Liquidity of investments
    • Reducing income tax
    • Keeping up with inflation

In this article we will discuss investment options for senior citizens keeping in these key investment considerations.

Senior Citizens Savings Scheme (SCSS):

This is one of best risk free investment schemes for Senior Citizen. The minimum investment limit in this scheme is 1,000 and the maximum limit is 15 lacs. This investment qualifies for deduction under Section 80C of the IT Act. From a liquidity perspective, the scheme has a period of 5 years and carries an interest rate of 9%, one the highest applicable rates for similar instruments.

A penalty of 1.5% per cent is levied on the amount deposited, in case the deposit is withdrawn before 2 years and 1% if the amount is withdrawn after 2 years, but before the expiry of the term of the investment. While the returns of SCSS are taxable, if the returns from this instrument do not exceed the basic exemption limit of 3 lacs, seniors stand to earn tax-free returns.

Seniors who have their immediate liquidity concerns addressed though other instruments, should try to maximise investments under this scheme using their surplus funds, since this offers attractive returns and capital safety.

Post Office Monthly Income Scheme (POMIS):

This has been a popular investment option with senior citizens for many years. POMIS offers guaranteed 8.5% annualized returns to investors. The maturity period of these schemes is five years. Premature withdrawals are subject to a deduction of 2% of the amount invested if such a withdrawal happens within three years of investment. After three years, the amount of deduction is 1% of the amount invested.

The maximum investment limit in POMIS is only 4.5 lacs in one account in POMIS or 9 lacs if the investor is investing in a joint account. There is no Section 80C benefit for POMIS investment. The interest income from POMIS is taxed as per the income tax slab of the investor. With rising cost of living seniors cannot rely on solely POMIS for their income needs. Nevertheless POMIS remains a good risk free investment option for senior citizens

Bank and Company Fixed Deposits:

Bank Fixed Deposits have always been seen as offering with safety and convenience. Currently the interest rate is in the range of 8 to 9.1%. However, the interest rates are likely to go down in the future as Reserve Bank India implements monetary policy easing. Investors should enquire about interest rates from multiple banks because it differs from bank to bank and can make a significant difference to the final return to the investor.

Interest earned by FDs is fully taxable at the applicable slab rate and tax is deducted at source. Fixed deposit issues from various companies offer higher interest rates than bank fixed deposits. However, such issues are limited and investors should note that they carry credit risk. Investors should check the credit rating of the companies before investing in the company FDs. Fixed deposits from companies rated AA and above are pretty safe and carry low default risk. Investors should be on the look for such issues, as these are good investment options.

Post Office Time Deposits:

Post Office time deposit is in many ways similar to Bank Fixed Deposits. The current annual interest rate for the five year time deposit is 8.4%. Minimum investment is 200, and there is no upper limit. Post Office Time Deposit qualifies for Section 80C deduction under Income Tax Act. The interest on Post Office Time Deposit is however fully taxable, as per the income tax slab of the investor

Mutual Fund Monthly Income Plans:

While capital safety is an important consideration when you are retired, with increasing life spans and high inflation, you cannot totally ignore equities. Mutual fund monthly income plans are excellent investment options for generating higher returns on your investment with limited risks. These plans invest 20 – 30% of their portfolio in equities, to boost the interest earned from debt investments with higher equity returns. 

Liquid funds:

Senior citizens should consider liquid funds as an alternative to savings bank. While having an emergency fund parked in savings bank is essential from a financial planning perspective, if you can wait for a day to withdraw the funds, liquid funds are an excellent alternative to your savings bank account. While savings bank interest is usually around 4%, liquid funds provide returns in the region of 8 – 9%. Every bit of extra income is very useful for senior citizens. 

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We are always biased towards the investments we make. Thanks to internet, one can access different investment avenues and gather all information related to it and also initiate the transaction. But investing is not always about ease of doing it. There are a lot of factors which needs to be understood before making a move.

HERE ARE SOME TIPS TO BECOME A BETTER INVESTOR:

1) WORK ON YOUR RISK MANAGEMENT

To begin with any investment plan , you should first ensure all the basic risk (Life, Health, Accidental and Job loss) is been taken care of. First buy a term insurance, health insurance and create an emergency fund to ensure that your investment plan does not go off track in any of these risk occur. Risk management should be the first step towards planning towards future goals and making an investment decision.

2) GOAL ANALYSIS

Goals are just your dreams with a deadline. It’s vital to know why you are investing before you start. Either you want to retire early? Want to plan for Kids education? Want to travel for vacation? Want to plan for marriage? Think about your financial dependants and financial commitments you have while investing. These goals would define the investment options. For example, if the objective is to buy a car in 1 year then the investment would be debt based instead of equity. Other factor relating to goals is evaluating it. Car worth 5 lakhs today would cost different after 2 years. So one should also ensure the goals are rightly evaluated before planning.

3) RISK APPETITE

Risk is subjective. A 25 year old professional may not be aggressive whereas a 55 years old Retired person may want to take higher risk. There is a traditional mindset that the more younger you are, the more aggressive you should be. But every young guy may not be an aggressive investor. Some may want to have a need of safety and stable growth in the investments. There are various risk appetite analysis tool which can help you identify the risk capacity.

4) DIVERSIFICATION

Key to a successful investment is to diversify it so that the risk can be managed effectively. We often make a mistake in diversification of investments and end up overlapping in similar type of investments. For example, using PPF and EPF as a retirement tool. Now both has similar returns, are a fixed income savings schemes, has specified returns and tenure. So investing in these instruments is not diversification. Diversification means investing in various asset classes (Debt, Equities, Commodities, International Markets) to make your investments more effective and less risky. Spreading your investments would reduce the chance of one investment sinking in your entire portfolio.

5) BE PATIENT, STAY FOCUSED.

Rome wasn’t built in a day, same goes for your investments. Power of compounding works but it takes some time to show its effectiveness. The investments made for long term may not start yielding returns in one or two years. It may take 4-5 years for them to show results. It’s all about waiting for the investments to grow. The more patient you are, more richer you would be.

Often people are tied up with their work routine and do not have enough time to focus on their finances and end up making financial mistakes. Hire a Financial Advisor or a Certified Financial Planner(CFP) who can take care of overall financial aspects and recommend you right option to deploy your savings.  

A On-Call Financial Advisor like Moneymindz can be an ideal bet for you if you are a busy working professional.

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India First Free Online Financial Advisory,  India First Free On-call Financial Advisory, Best Free Financial Advisory

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We generally have a misconception that I have saved enough for my retirement age and that is enough for me to survive a healthy lifestyle after my regular income is not in place. If you too fall in this category, this blog will debunk your delusion. As a salaried individual or even as a self-employed with decent income and good amount of savings you cannot dream a retirement life which is free of financial snuffs.

The ultimate amount that you save throughout your employment days may not be adequate to bank on for a comfortable retirement.

There are two factors that cannot be avoided and are purely responsible for diminishing your savings

  • INFLATION and
  • VALUE of MONEY.

There are other influencers too, such sharp rise in health care cost and medical emergencies that comes with age but it can be smartly avoided by opting for a health insurance plan.

To give you a better understanding, let’s have a look at the future value of your money. If we assume the inflation rate at 8 percent and your savings is Rs. 10 Lakh-

 ➡ In 2025 it would be worth Rs. 4,63,193
 ➡ In 2035 it would be worth Rs. 2,14,548
 ➡ In 2045 it would be worth Rs. 99,377
 ➡ In 2055 it would be worth Rs. 46,001

The fact and in future too inflation will keep rising and that is something beyond our control but we can definitely beat it by investing in right schemes. Equity mutual fund is one of the best schemes you can opt for. Investing in equities for a longer duration helps you stay ahead of inflation.

Over the last 10 years, the Nifty has returned 16.7% annually compared to the 7% average inflation rate. You can either invest directly or through mutual funds. But for small investors we would suggest to invest through mutual funds, as they are supervised by expert fund managers.

This independence week, attain freedom from your retirement worries and give wings to your desire by taking our 360 degree financial assessment. Financial assessment tool is a unique, proprietary and scientific method that takes a holistic view of all your future financial needs in life, so that funds for your goals like your child’s education, buying a home or your own retirement are available when the need arises.

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In the era of digitization, we pay, shop, order food, book tickets and do a lot more using our mobile phones.  There has been significant rise in the comfort level and life style demands but the change has not been the same with spending pattern of an individual. Rising standards and the hassles of daily life has taken a form of debt. A person earning Rs. 100,000 a month and a person who earns Rs. 5 Lakh a month, both are equally stressed with financial burden.

There are several methods, which can help you overcome debts and become financially stress-free. Here, we are sharing few of the time-tested methods that could help you.

Always keep a record of your expenditures:

None of us would want to spend more than what we have. So, it is always important to keep a record of your monthly expenditures. It helps in cutting back when we have unexpected bills. We do not go over our budget. It is a very good exercise for starting savings and to become a frugal as we have the record of our all the expenditures at a glance. Also keep track of your credit card transactions, so you can stay within your limit.

Understand the Right use of Credit Card:

Plastic Money is now the in-thing and people do not believe in keeping a wallet full of currency notes, rather then they are happy to shop just by swiping the Debit or Credit Card. This new credit card culture has given the leverage to the people to buy whatever they desire. Right use of credit card means, you should use different credit cards for your expenses instead of constantly making transactions using a single card. Make it a point to use each credit card you have once in every six month.

Not all loans are for you:

You must be getting a call from Banks and related agencies for Pre-approved personal/home/car loan. This is generally offered to people who have a clean track record of loan repayment history. You get it even if you had pre closed your earlier loan amount. You should consider opting for such loans only if you are in grave need.

Don’t become Impulsive Buyer:

Impulse buying is a common behavior today. Our culture of consumption forces us to surrender to our temptation and we end up purchasing something without considering the consequences. Is it a bad thing? In my view, yes, it can be. To understand impulse buying from a psychological perspective, we should ask the question What motivates us to impulsively buy products?” There are in fact a number of answers to this question, and knowing them will help you make smarter, more rational decisions the next time you go shopping.

A little saving is also important:

Our savings depends upon one of the most important factor and i.e. what we earn. People often make excuses of not earning enough to go for any kind of saving. But remember, even a 100-rupee note can be useful at times. It’s not necessary to start savings with huge amount. Savings can be started with even a smaller amount as in emergency; small savings can be very helpful.

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Once a husband asked his wife to check his ‘balance.’ She walked to him and gave him a big ‘push’ to check his balance. Shocked, the husband replied balance as in ‘Account Balance.’ 

Perhaps, today’s women know it well what ‘balance’ means but still there are many financial concepts and products that are still unknown or less known to women. Any women striving to enhance their personal finance knowledge aiming financial independence, must learn these financial products and jargon related to them. This blog will talk about FD, which is Fixed Deposits. It is a great and safe investment product for risk-averse women investors.

Fixed Deposits

A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date.

  •  They are considered to be very safe investments.
  •  The longest permissible term for Fixed Deposits (FDs) is 10 years.

Benefits of Fixed Deposits :

  –  It encourages a savings habit as the money you deposit needs to be in the account for a period of time without you making any withdrawal.

  –  Investing in a fixed deposit account earns you a higher interest rate than depositing your money in a savings account.

  –  You are assured of returns for your investment

  –  The account helps to act as a fall back for your business in the event of a cash flow squeeze or can be used to meet your future cash requirements.

  –  Interest is payable at maturity; annually or monthly depending on the term you chose or you could use the money to buy assets if you want.

  –  You get to choose how long you want to invest your money in a fixed deposit account ranging from 30 days to ten years.

  –  You can choose to have more than one fixed deposit account if you want to save for different goals.
 

Major Types of  Fixed Deposits :

1. Regular Fixed Deposits

–  You deposit your money with a bank for a fixed time period called tenure of the fixed deposit.

–  You get a higher interest on the money which you deposit in your fixed deposit than in a savings bank account.

  –  On maturity of your fixed deposit you are paid back your principal with interest. You are not supposed to touch the money in the fixed deposit for the time you make the deposit.

  –  If you are in urgent need of money you can break your fixed deposit (withdraw money from your fixed deposit).

  –  You have a penalty of 0.5-1% lower interest on your fixed deposit than promised if you do so.

2. Flexi Fixed Deposit

  –  In Flexi Fixed Deposit your fixed deposit is linked to a savings bank account. Your money moves between fixed deposit and savings bank account.

  –  Flexi fixed deposit is also called the sweep in – sweep out fixed deposit.

  –  You deposit INR 2 lakhs in a flexi fixed deposit and your bank pays you an interest of 8.5% compounded quarterly.

  –  There is a sweep in of money to your savings bank account and a sweep out of money from your fixed deposit.

3. The 5 year tax saver fixed deposit

  –  You enjoy a deduction of INR 1.5 lakhs a year under section 80 C of the income tax act if you deposit your money in a 5 year tax saver fixed deposit. Not all fixed deposits enjoy section 80 C benefits.

  –  You have to invest your money in a 5 year tax saver fixed deposit to avail the tax saving benefit.

  –  This fixed deposit is non callable (you cannot break the fixed deposit before 5 year).

  –  The interest paid to you on the maturity of the fixed deposit is taxed as per the income tax slab you fall under.

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