Best Fixed deposit investment Scheme in India – February 2015

The shocks of the stock markets are not for the faint-hearted. Mutual Fund schemes are subject to market risks, as is any investment whose performance is linked to the market upheavals. Even if the Sensex is rallying, your investment might give negative returns, because of the portfolio allocation done by your fund manager. If you want rock-solid steady returns, then stick to the age-old FD investments. You just need to fill in the KYC (Know-Your-Customer) Form, deposit the money, and then sit back with your feet up. It is called a FD investment because the Rate of Interest at which you deposited remains fixed throughout the duration of the deposit. Your investment is totally shielded from any rate changes that may be effected later on. Like clockwork, your investment would grow by the miracles of Compound Interest. And if you are a Senior Citizen, the Rate of Interest is marginally higher. Ask about Special Categories of Rate of Interest before investing.

Where to open a FD?

There are multiple institutions that offer you FD investment schemes. You could open a fixed deposit with:

• Banks
• Post office
• Non-Banking Financial Companies

What will be the taxes?

• There is Income Tax to be paid on the interest earned by FD investments. This interest will be added to your IT Assessment under ‘Income from other sources’, and taxed as per the slab applicable on your annual income.
• Banks can also deduct TDS (Tax Deducted at Source) @ 10% on the interest earned by your fixed deposit. If the Bank has deducted TDS, you still need to pay the remainder tax as per your income slab. If you are a Senior Citizen, you can avoid TDS by submitting Form 15H. If you have no other income source, then you’ll have to submit Form 15G for the bank not to deduct TDS.

Is duration the most important factor?

It is, mostly. Normally, Rate of Interest goes higher as the duration of your fixed deposit rises. Indian banks tweak this methodology though. Their interest rates rise up to 1 year deposits, and thereafter taper off. So, do read their Rate of Interest Tables before investing.

What you could do with such bank Fixed deposit investments is that you make a 1-year deposit and then take a call on reinvesting after that duration- your annual make-more-money ritual.

However, if it seems that in future the Rate of Interest might dip lower, then it makes sense to make a fixed deposit investment of a longer duration.

Is Rate of Interest the most important factor?

Not really. There are a variety of FD investments on offer, and you must understand the terms before putting your money down for investment. If you have two Schemes with Rate of Interest and all parameters same, the only difference being the Compounding Frequency, then the one which compounds more frequently will give you a better return.

We simplify your choices for the Best Fixed Deposit Scheme for different durations.

8.8% is the highest rate of interest on a Fixed Deposit for 3 or 6 Months, and is offered by ING Vysya Bank. For 1-Year duration DHFL offers you the maximum at 9.73%, and for 2 Years it offers the most at 10.49%.

If you want to invest for longer durations, then your best bet is Shriram Transport Finance, which offers 11.65% for 3 years, 12.28% for 4 years and 12.96% for 5 years.

It’s your call now which fixed deposit scheme you choose for a safe investment.