Fixed deposit schemes are popular among Indian investors as they are risk-free, easy to apply for and guarantee high returns. In India, FDs in banks and non-banking companies constitute approximately sixty percent of the household finances.
Considering all the above benefits and the high-interest rates offered by the financial companies, it is natural for anyone to think of investing in a fixed deposit. However, you must also take inflation rate, taxation, and some other factors into consideration before investing in a fixed deposit as they can have a significant impact on your returns.
Here are a few aspects that you must evaluate before investing in a fixed deposit:
1. Inflation rate:
The inflation rate has a direct effect on your fixed deposit rate. Currently, the interest rates offered by banks fall in the 6.5-7.5 percent bracket. Suppose, your fixed deposit is gaining the interest of 6.5% per annum, and the inflation rate is 4.5%. In this scenario, your final returns will just be 2% which is much lower than your estimated returns.
The effect of inflation cannot be monitored directly as it depends on your FD’s purchasing power at the time of maturity. For example, a fixed deposit was capable of purchasing ‘X’ number of services when you applied for it, but due to inflation, it is no longer able to purchase them at maturity. This implies a negative growth for that FD.
Therefore, for meeting long-term goals, you must opt for FDs that gain real positive growth over the tenor.
Corporate fixed deposits offered by Bajaj Finance attract interest rates up to 8.75% which further goes up to 9.10% for senior citizens. You can also utilize their Online FD Calculator India to predict your real earnings in advance.
The interest earnings on FDs are taxable, and yearly returns above Rs. 40,000 are subject to TDS as well. The tax amount depends on your tax bracket. Therefore, if your income lies in the 32 percent bracket or above, then the income tax will be levied at that rate.
You need to fill 15G/H form in order to avail TDS exemption if your income does not fall in the taxable limit. If you do not take the taxes and inflation into account, then your actual earnings can be low or even negative.
Fixed deposits are risk-free investments as the chances of losing your capital due to market risks are negligible. However, recently some PSU (Public Sector Undertakings) banks have suffered due to their faulty lending policies and this has put the money of stakeholders at stake. Therefore, one needs to access the performance and history of a financier before investing in an FD.
Fixed deposits from Bajaj Finance are highly credited for their safety and stability and are accredited by third-party organizations like ICRA and CRISIL. As a result, your FD investments are not only safe but also immune to fluctuating market conditions.
4. Premature withdrawal
Premature withdrawal of a fixed deposit is possible, but for that, you will be charged with a penalty. Usually, banks charge 0.5 to 1 percent of the interest rate as a penalty, but it depends on the bank or financial company in which you have opened an FD account.
Some NBFCs like Bajaj Finance allow you to use your FD as collateral for availing loans in the time of crisis. These loans are offered at low rates and therefore, you need not to break your FD before maturity.
5. Diversification of investment profile
An investor tends to diversify his profile especially when he has a large chunk of money to invest. However, it is not easy to monitor the interest rates, date of maturity, taxes, etc. when you split your savings across different FD schemes of banks or financial companies. Investment options such as debt funds provide convenience to the investors as a single amount gets invested in various instruments such as bonds, govt. schemes, etc.
Bajaj Finance FDs provide you with the flexibility of choosing the tenor between 1 to 5 years. Therefore, you can invest in different FDs, ladder your savings and enjoy greater liquidity as well. Moreover, features like online account management help you to monitor your investments easily.
Apart from these factors, you need to evaluate the application process, documents required, interest payout frequency and some other factors before investing in an FD. With Bajaj Finance FD, you can choose periodic interest payouts (monthly, quarterly, yearly or six-monthly) or you can collect all your earnings at the end of your FD tenor. Moreover, you can invest anywhere between INR 25000 to INR 5 crores as per your convenience. Also, senior citizens can avail interest rates up to 9.10 % which assists them in consolidating their retirement plans.
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