Skip to main content

Tax Planning through Bank Fixed Deposits

This erstwhile plain vanilla product has been made attractive by banks through bundled deals and flexible options

Fixed deposits (FDs) have always been an integral part of every investor's portfolio, simply because they give an assured rate of return. And traditionally, FDs have been plain vanilla products. However, in this era of fierce competition, banks have started introducing packaged deals to attract investors. Here are some interesting deals available in the market:

Insurance: Some FDs come with insurance. In this case, the core product remains the same with an additional benefit. But these schemes depend on the deposit amount and tenure.

For instance, a bank may give free accident insurance cover worth Rs 5 lakh on a 3-year deposit of Rs 25,000 carrying an annual interest of 8 per cent. This directly increases the value of the product.

Most banks provide accident insurance only. The sum assured ranges between Rs 3 lakh and 7 lakh. However, it is likely that the accident cover will come with a lot of clauses. Importantly, such bundled policies should not be a part of your overall insurance needs.

Floating rate deposit and reinvestment of interest: Most FDs are given at fixed rates for the specified time period. But some banks and nonbanking finance companies (NBFCs) have deposits where the interest rate is floating in nature. For instance, HDFC has a floating rate deposit where the interest rate is declared every quarter.

Another facility some banks offer is reinvestment of interest amount at the prevalent rates. Let us say you are earning Rs 2,000 interest every quarter. The bank will start a new FD with this amount at the prevailing rates.

No penalty: FDs are meant for a certain period of time. At the same time, if the depositor withdraws before the maturity, the institution levies apenalty. In such a case, the overall return suffers. For example, if a three-year deposit at the rate of 8 per cent is broken after one year, the rate available could come down to as low as 5 per cent.

However, some banks have launched products that do not reduce the rate of interest if the FD is broken in the interim. For investors who are seeking flexibility, such deposits can come quite handy.

Time period flexibility: Many of us take an FD for aparticular goal. It could be anything from purchase of an expensive item to child's marriage. There could be a possibility that these plans are postponed and the depositor might need to extend the tenure of his/her investment. One option in such a case is to wait for the deposit to mature and then reinvest it. But there cannot be surety of interest rate in the future. There are banks that have started providing FDs that allow investor to increase the time period of investment without major changes in other conditions.

Adding and breaking deposits: FDs can lead to a large amount of paperwork if a person makes multiple deposits of smaller denominations. This is usually done by investors who require money at various stages in future. They do not want to deposit everything in bulk and then break the deposit.

Banks have introduced products where a bulk deposit is divided into deposits of smaller denominations according to the investor's needs.

Such deposits ensure a higher earning benefit. At the same time, there could be a facility to add investments easily so that administration does not become a very difficult task.

Popular posts from this blog

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...

L&T Long Term Infrastructure Bond 2012 Tranche 2 Application Forms

Application form for Tax Saving Long Term Infrastructure Bond     L&T Long Term Infra Bond Application form     Submit filled up application     Collection canter near you     --------------------------------------------- Invest Tax Saving Mutual Funds Online Mutual Funds Online   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   ---------------------------------------------   How to apply to PFC Bonds? Apply for PFC Tax Free Bonds forms below Download PFC TAX Free Bond Application Forms Submit the filled up form to Collection canter near you How to apply to NHAI Bonds? You can download the NHAI Tax Free Bonds forms below Download NHAI Tax Free bond Application Forms Submit the filled up form to Collection canter near you        

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...

UTI Equity Fund Invest Online

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   UTI Equity Fund   Invest Online UTI Equity is a large cap-oriented fund with assets under management worth Rs. 2,269 crore (as on June 30, 2013). The fund was originally launched in May 1992 as UTI Mastergain and is benchmarked against S&P BSE 100. A couple of years back the name of the fund was changed to UTI Equity Fund and many of the smaller funds of UTI were merged into this fund. Performance The fund has outperformed its benchmark as well as the equity diversified category average in the last one-, three- and five-year periods. It has repeated the same in 2013 (as on May 31). Since its inception the fund has delivered an impressive 26 per cent compounded annual growth rate which is superior to its benchmark performance in the same period. Y...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now