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Fixed deposit draws investors The stock markets have dropped and interest rates are rising. And fixed deposits (FD) have become the flavour of the month. In the recent months, the stock markets had an edge over fixed deposits, because of the booming stock indices. Also, the government's saving schemes, especially the post office saving schemes, had an edge over the FDs. However, the recent changes have again brought investments in FDs into the limelight . The contributing factors include the decision to give tax breaks in terms of coverage under Section 80C of the Income Tax Act. Another important factor has been the gradual increase in the interest rates on FDs. These deposits have been brought on par with the small savings schemes. Investments in term deposits offering a tax deduction will have a lockin period of five years. The government notification says that no term deposit can be encashed before five years from the date of investment. The ceiling on investments is Rs 1 lakh for tax deduction. The interest earned on these deposits will attract tax either on an accrual basis or on receipt basis. If the deposit is made with a joint holder, the tax benefit will be available only to the first holder. Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investors can include the option of fixed deposits to complete their investments under Section 80C. In case of investments in National Savings Certificates (NSC) the return is eight percent. The tenure is six years. However, you can pledge the NSCs as collateral for a loan. The accrued interest is considered as a further investment and hence, it is also eligible for Section 80C benefits. The investments are totally secured in nature. They constitute a medium term investment avenue. The income generated in the form of accrued interest is taxable each year. On the other hand, an investment in the Public Provident Fund (PPF) is for long-term investors. The investment is totally secure. The interest is exempt from tax. The deposits are exempt from wealth tax. The rate of return here is not fixed for the entire duration of the investment, but is announced regularly. The interest rate is revised by the government at intervals. The interest rates could change in the middle of the investment period. Further, the investment is for a fixed period of 15 years. The tax aspect needs to be factored in. The interest income from fixed deposits is fully taxable, without the benefit of any deduction in the hands of the receiver. This means that for all those who come under the highest tax bracket, the applicable rate will be 30 percent, plus cess. Investors go for fixed deposits only if the interest rates are high enough. FDs would have to still compete with these other investment avenues available to investors. Investors have to consider interest rates, returns, lock-in periods, liquidity and security, before taking an investment decision . Visit our site at – http://newsroom.investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Journal - http://research.investorline.co.in/ Latest News - http://investorline.co.in/blogger/?q=aggregator/categories/1 News Resources - http://investorline.co.in/blogger/?q=aggregator/sources Newscatcher- http://catcher.investorline.co.in/ Newsgroups- http://groups.google.com/group/india-investor --~--~---------~--~----~------------~-------~--~----~ Get latest market updates & search internet right from your browser-download our toolbar here- http://investorline.ourtoolbar.com/ Visit our site at – http://investorline.co.in/ Newsroom: http://newsroom.investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Journal - http://research.investorline.co.in/ Newscatcher- http://catcher.investorline.co.in/ Interested in Financial Planning-Let us Contact you- http://spreadsheets.google.com/viewform?key=pb_z4f1_zGMg4iBBFT3-SWQ&email=true If you like the site then promote it here- https://www.freetellafriend.com/tell/?url=http://investorline.co.in/blogs/news Create your own free blog on- http://investorline.co.in/blogger Visit this group at http://groups.google.com/group/india-investor -~----------~----~----~----~------~----~------~--~---
