Owing to the safety and steady returns that fixed deposits promise, this avenue has consistently been a darling investment option for Indians across age groups. While you may consider fixed deposits offered by banks and post offices, investing in those offered by companies and NBFCs can help you yield higher returns. The financial year 2019-2020 makes company fixed deposits a more favourable to invest in. Here are 5 reasons why.
Company fixed deposits offer higher interest rates than other issuers
The foremost reason to invest in a company FD is that it offers higher interest rates than those offered by other issuers. Top NBFCs like Bajaj Finance issue Fixed Deposit that offer interest of up to 8.75% for regular investors and 9.10% for senior citizens on FD started for at least 36 months with interest payable at maturity.
Also, these FDs have high credit ratings and are backed by CRISIL’s FAAA and ICRA’s MAAA rating. This makes them extremely safe and stable. Additionally, when you choose to renew your FD, you can earn an additional fixed deposit rate of 0.25% that adds to your maturity proceeds. In fact, you can use the fixed deposit calculator to ascertain the exact amount that you will earn on maturity, which helps in sound financial planning.
Repo rates have dipped and the fixed deposit rates are the highest now
The repo rate is the rate at which the RBI lends money to other financial institutions, who in turn, follow this benchmark to affix loan interest rates. Therefore, an increase in repo rates shoots up the lending rates and vice versa. However, interest rates on deposits have an inverse relation with repo rates. Therefore, knowing the movement of repo rates allows you to forecast a good time to invest in fixed deposits.
In 2019, the RBI has cut the repo rates twice in a row, once on 7 February 2019 by 25 basis points and then on 4 April 2019 by another 25 basis points. Thus, the repo rate currently stands at 6%. When you reflect on this, keep in mind that the FD interest rate hike that was brought into action towards the end of last year owing to repo rate hikes. Decreasing repo rates in future can bring down the FD interest rates too. So, it is prudent that you invest in company FDs now when the FD rates are still high to grow your savings.
Union budget has increased the TDS limit on FD interest income
Issuers are liable to deduct TDS on your FD interest income if it exceeds Rs.10, 000. However, the Interim Budget 2019 proposed a limit hike. As per the announcement, the TDS will now be applicable on interest earnings of at least Rs.40, 000 for regular investors. The limit remains unchanged for senior citizens at Rs.50, 000 and at Rs.5, 000 for company FDs. TDS is cut at 10% if you have submitted your PAN details to the issuer and 20% in case you haven’t. This increase in the TDS limit will add to your disposable income that you can route to company FDs and earn higher returns.
Union budget has proposed to offer tax rebate on income band of 5 lakh or less
The Interim Budget 2019 has also announced a tax rebate of Rs.12, 500 for taxpayers earning an annual income of up to Rs.5 lakh. Even if you earn a higher annual income of up to Rs.6.5 lakh, you can still be exempt from tax if you invest in specified investments under Section 80C. Also, the increased standard deduction for salaried taxpayers at Rs.50, 000 gives enough room to invest in company FDs and build wealth.
Investing in stocks is currently considered highly volatile
Election results can impact the economy in various ways like repo rate alterations, policy changes, financial modifications and other such adjustments. This year, owing to the Lok Sabha elections, experts are advising investors to choose long-terms investments over short-term investments due to market volatility. That’s why investing in company FDs is your best bet for now, as you can enjoy safety of your funds and also expect guaranteed returns.
These reasons make it extremely advantageous for you to invest in a company FD right now. Align your FD investments with your financial goals to be on top of your finances this year and in the future too.