Is Fixed deposit makes us financially free???

Fixed deposit is the oldest and safest investment options for everyone. This Fixed deposit service available in all types of banks and in Post office.
So, in my finance blog series i said already for emergency fund You can choose fixed deposit.

 

Here one question will arise in our mind.

 

Is Financially freedom possible only invest our money in fixed deposit!!!!!!

 

List of contents

1. Why peoples do fixed deposit
2. types of fixed deposit
3. Interest rate in fixed deposit
4. Taxation on fixed deposit
5. How to avoid taxes on fixed deposit
6. Fixed deposit vs inflation (calculation)
7. My opinion on fixed deposit

 

1. Why peoples do fixed deposit?

– Fixed deposit is the safest and risk less investment option. – – Fixed deposit are available in all banks and post offices easily.
– Fixed deposit means after we invest our deposit our money, we can get fixed interest rate on this. That fixed interest rate makes fixed deposit is riskless.

 

2. Types of fixed deposit

2.1. As per time period tenure, there are 3 types of fixed deposit.

 

2.1.1. Short term fixed deposit
Time period – 7 days to 211 days (less than 1 year)

 

2.1.2. Medium term fixed deposit
Time period – 1 year to less than 5years

 

2.1.3. Long term fixed deposit
Time period – 5 to 10 years

 

2.2. As per taxation, there are 2types of fixed deposit

 

2.2.1. Taxable fixed deposit
If we invest in this type of fixed deposit, we give tax on our interest rate.
Ex- short term fixed deposit, medium term fixed deposit.

 

2.2.2. Non-taxable fixed deposit
If we invest in this type of fixed deposit, we don’t give tax on our interest rate.

 

3. Interest rate in fixed deposit.

Fixed deposit interest rate is not fixed always. Change of interest rate on fixed deposit depends upon bank. Bank can change their fixed deposit interest rate as per their terms and conditions.

 

3.1. As per age group, Bank provide different interest rate for 2 category peoples.

 

3.1.1. General public (age below 60)
3.1.2. Senior citizens (age above 60)

 

3.2. As per money investment, bank provide different interest rate.

 

3.2.1. Less than 2crores
3.2.2. 2crores or more than that

Here is the link of latest SBI Bank fixed deposit interest rate.

 

4. Taxation on fixed deposit

 

1st case -:
There are 10% tax cut on TDS (who are not coming tax paying bracket) in this below cases
– For general public, interest rate higher than 40,000 rupees (in one bank) in a year. 
– For senior citizens, interest rate higher than 50,000 rupees (in one bank) in a year.

2nd case -:
If anyone’s annual income coming tax paying bracket.

 

5. How to avoid taxes on fixed deposit.

There are many types of ways to avoid taxes on fixed deposit

 

5.1. 1 5G/15H form

 

If anyone not coming tax paying bracket then he/she can fill-up 15G/15H form for avoid taxes.
– 15G form for general public.
– 15H form for senior citizen.
We can fill-up it starting week of financial year means April month 1st week.

 

5.2. Doing Fixed deposit in many banks

 

Means don’t do fixed deposit in one bank. Do fixed deposit other banks also if you have other bank account.
– If you do like this then the interest money of fixed deposit is not more than 40,000/- in a financial year.
– If you have only one bank account then do fixed deposit your family members name also.
– If your annual income is coming income tax bracket, then always prefer do fixed deposit your family members’ name.

 

6. Fixed deposit vs inflation

 

Now a days inflation increases up to 6%.
If now a days we can do fixed deposit, can we beat the inflation?
Let’s understand with a calculation,
For example I have one account in State Bank of India (SBI). I have 50,000/- money. I did fixed deposit for 1 year.
Now In SBI, interest for 1 year Fixed deposit is 6.80%
So, 6.8% of 50,000 is 3400/-
So after 1 year we will get 53,400/-
But will this amount beat inflation after 1year?
Inflation rate is 6%
Interest rate is 6.8%
Only 0.8% difference like negligible to beat the inflation.

 

7. My opinion on fixed deposit.

Fixed deposit is good. But we can choose fixed deposit, if we have that money which we can use in between 1 to 2years or 3 years also. Prefer always 5-year fixed deposit scheme for saving your tax.

Don’t choose Fixed deposit for a Long term investment because this investment put you in a huge loss in a long term which you can’t imagine.

 

Comment your opinion on comment section.