Fd vs small saavings schemes: Fixed deposit (FD) will be better or the small savings scheme, it not only gives guaranteed returns but also keeps the money safe. If you want to invest, then you must be wondering whether fixed deposits (FD) will be better or small savings scheme? Before investing in it, you should compare returns and other benefits.
FD usually pays 6.7 to 7 per cent annual interest to investors, while other tax saving schemes give slightly higher returns. According to the current interest rates, the Public Provident Fund (PPF) gives 7.1 percent annual return. Investors get 8.2 per cent annual interest on Senior Citizen Savings Scheme. Sukanya Samriddhi account gets 8.2 per cent annual return. 7.7 percent on National Saving Certificate (NSC) and 7.5 percent on Kisan Vikas Patra (KVP).
Tax savings
Investors should keep in mind that the new tax system – which is now the default system – does not give taxpayers the right to claim exemption on their investment. This means that when you invest in PPF and other small savings schemes, investment income will not get any special discount and it will be taxable like investment in term deposits.
Investment instrument interest rate
Fixed deposit average 7%
Public Provident Fund 7.1%
Senior Citizen Savings Scheme 8.2%
Sukanya Samriddhi Account 8.2%
National Savings Certificate 7.7%
Kisan Vikas Patra 7.5%
However, in later years, the income earned from these investments will be tax free, which does not apply to interest on fixed deposits. If you come into a low tax bracket or zero tax bracket, it does not matter much. But those who come in 30 percent income tax bracket, they lose about one-third of their interest income on investing money in fixed deposits. People coming to 20 percent tax bracket will lose the fifth of their income in taxes in case of FD. Talking to Mint, Preeti Zande, the founder of his money financial services, said that each investment product has its own characteristics and benefits and should be chosen accordingly.
