All about Sukanya Samriddhi Account

Keeping in the theme of “Beti Bachao Beti Padhao” i.e. all round development of Girl child, the Government of India has launched Sukanya Samriddhi Account – a long term deposit scheme for girl child.

The post covers everything you wanted to know about the new investment avenue.

1. Who can open the account?

This account can be opened only for girl child who is below 10 years of age (as of account opening date) by their natural or legal guardian. One year relaxation is available for this year, which means even if the child has turned 10 anytime in 2014, you can still open this account in her name.

The account can only be opened for 2 girl children. Third account can be opened in exceptional cases where the depositor was blessed with 3 girl children at the first birth or twin girl children at the second birth.

Also Read: PPF – A Must Have Investment

2. Where can the account be opened?

The account can be opened in most public sector banks and Post offices.

I personally would advise going to large public sector banks like SBI as they are more advanced in terms of online access etc. As this is new investment avenue most banks would not have online access in place, but going forward larger banks would be first to bring those accounts online thereby giving convenience as it happened in case of PPF.

Moreover, the account can be transferred anywhere in India.

3. How much interest would be paid?

The interest would be paid annually and would be notified every year by Government of India like in case of PPF.

For Financial year 2014-15 its 9.1%.

4. What are the documents required?

You would require the following documents for opening of account:

1. Date of Birth proof for the child
2. Your Identity Proof
3. Your Address Proof

These are regular KYC documents that you require for opening a new bank account.

5. Rules for Deposit?

The account can be opened with minimum deposit of Rs 1,000 and multiples of Rs 100 thereafter. The maximum amount that can be deposited in the account is Rs 1.5 lakhs every financial year.

The deposit has to be made in cash, cheque or demand draft. Online option might be available in future as banks connect this with core banking.

Also minimum deposit of Rs 1,000 needs to be made every financial year; else a penalty of Rs 50 would be levied.

Also Read: All abount Pradhan Mantri Sneh Bandhan Yojana

6. Premature withdrawal?

Depositors can withdraw 50% of the balance after the girl child turns 18 for higher education or marriage only.

7. Account Maturity?

The deposit has to be made for first 14 years from the year of account opening. The account matures either from 21 years from the date of account opening or when the girl is married, whichever is earlier.

Account would be closed prematurely in event of death of the girl child.

8. Loan Facility?

There is NO loan facility under this scheme.

9. Taxation?

Budget 2015 has made taxation of Sukanya Samriddhi Account EEE – i.e, “Exempt”,”Exempt”,”Exempt”. This means that the amount deposited up to Rs 1.5 lakh gives tax exemption u/s 80C.

Moreover there is no tax on interest received in the account and also there is no tax on withdrawal at maturity.

Recommendation:

Sukanya Samriddhi Account is a good initiative from Government to secure the future of girl child. Also the offer of higher interest rates than PPF is a welcome proposition.

Also Budget 2015 has made the product tax free at the time of maturity which is similar to PPF. So in most cases Sukanya Samriddhi Account is better alternative to PPF for girl child. This said you should also look to equity mutual funds for planning your child’s future.

Best Company Fixed Deposit Schemes – Feb 2015

Last month RBI had cut its Repo rates which lead most banks to reduce their interest rates on fixed deposits. An alternative to lock in higher interest rate is to invest in fixed deposits offered by companies.

But before you get excited at getting higher interest rates here are some points to keep in mind:

Evaluating Corporate FDs:

You can evaluate Corporate FDs based on following 4 points:

Credit Rating: Companies are rated by rating agencies like CRISIL, CARE, FITCH which tells us how credit worthy is the company. “AAA” is the best ratings possible which indicate excellent credit worthiness and almost no concerns regarding timely interest and principal repayment. Ideally retail investors should not invest in low rated companies (i.e. Invest only in AA and AAA rated companies).

Also Read: Credit Rating for NCDs and FDs – What it Means?

Liquidity Needs: The deposits you make in a company have certain terms and conditions. So it’s not always easy to withdraw prematurely as in case of Bank FDs. Most companies have a minimum lock-in for 3 months from the date of deposit.

Penalty Clause: Premature withdrawal may not only yield you lower interests but companies can also subtract the prorated commission they paid to their agents.

Promoters and Management of the company: Government owned companies are much safer to invest as it won’t let the company default in most of the case (at least to retail investors). So investors can also invest in government companies with ‘A’ rating. Also never invest in companies who themselves or companies belonging to that group have ever defaulted on interest/principal payments.

Options Offered?

While investing in Company FDs you will need to choose two things:

Tenure of Deposits: The FDs are offered for 1 to 10 years duration. Keep in mind that longer term duration are more risky as the company credit rating can change with time.

Interest Payments: Companies have option to pay interest monthly, quarterly, half-yearly, annually and at the time of maturity. You need to select when you want interest to be paid depending on your financial goals.

List of Corporate FDs:

The table below has the details of interest rates offered by different companies. The best interest rates have been shaded in Green.

The table also has the fixed deposit interest rates offered by two biggest banks – SBI and ICICI, so that you can benchmark the returns.

Company Fixed Deposit Interest Rate as of Feb 2015

• Dewan Housing Finance (DHFL), Gruh Finance and PNB Housing Finance offer FDs up to 10 years duration.
• Companies offer additional interest rates up to 0.5% for Senior Citizens, Shareholders and employees.
• Companies also offer Loan on these deposits with certain conditions.
• Some companies like DHFL also offer Recurring Deposits.

How to invest in Company FDs?

In case you decide to invest in the above companies you have 3 options:

1. Visit the company branch in your city with cheque and KYC documents and complete the formalities
2. Download FD forms from the respective company website, fill it and deposit it along with cheque and KYC documents
3. Invest through intermediaries like Bajaj Capital, FundsIndia or your neighborhood agent

Documents Required:

You would need to submit documents for identity and address verification for KYC. PAN card is mandatory and also serves as proof for identity and signature. You also need passport size photograph.

Tax on Company FDs:

The tax treatment for company FDs is same as Bank Fixed Deposits. The interest income is added to the income of investor and taxed at marginal income tax rate.

Company deducts TDS (Tax Deduction at Source) in case the annual interest paid is more than Rs 5,000. You can attach Form 15G/15H during the application stage, in case you want the company not to deduct TDS.

Recommendation:

As you can see in the table above that companies like Bajaj Finance, Dewan Housing Finance (DHFL), Shriram City Union Finance and Shriram Transport Finance FDs offer interest rates that are higher by 1% from bank deposits for different tenures.

You might want to evaluate these companies for your fixed deposits. But keep in mind that pre mature withdrawal may not be as easy as banks FDs.

Budget 2015 – TDS on FD, RD and EPF

Along with changes in income tax, budget 2015 has also made some changes in TDS (Tax Deduction at source) for Fixed Deposit, Recurring Deposit and EPF (Employee Provident Fund).

The post discusses these changes:

TDS on Recurring Deposit (RD)

Until now recurring deposit was not subjected to TDS. Budget 2015 has amended this and now banks would deduct TDS at 10% in case the interest on RD is more than Rs 10,000 in the financial year. This interest would be added across all branches of a bank and across all RDs for a customer to calculate the TDS.

This would not lead to any loss to investors as interest paid on RD was anyway taxable. This would only ensure better compliance.

TDS on Fixed Deposit (FD)

There has also been change in the way TDS was deducted on Fixed Deposits (FD). Until now only interest across a bank branch was added to arrive at the interest paid. These leads to some people avoid TDS by making FDs in multiple branches of the same bank. Going forward this would change, for calculating interest all FDs across all branches of a bank would be considered for calculating TDS.

For example:

You made two FDs or Rs 1 Lakh each in 2 branches of HDFC Bank @ 9% per annum.

As of today the interest would be Rs 9,000 each in both the branches and hence bank would not have deducted any TDS.

Now with this change the bank would add the interest paid on FD across all its branches to a customer. So the total interest now becomes Rs 18,000 and hence bank would deduct TDs @ 10% i.e. Rs 1,800 and pay the remaining.

Also co-operative bank deposits will also be subject to TDS.

TDS on Premature withdrawal of EPF:

Budget 2015 has also proposed to levy TDS at 10% for premature and taxable withdrawal of funds from EPS, if the payment is more than Rs 30,000.

In case the PAN information is not furnished the TDS would be deducted as 20%.

How to avoid TDS?

In case your total annual income does not exceed the tax limit, TDS becomes painful as you need to file Income Tax return to claim it back. But there is a solution to this. You would need to submit Form 15H (for Senior Citizens) and 15G (for everyone else with total annual income below taxable income limit) as the case may be.

The 15G/15H forms need to be submitted to all the bank branches where you have made deposits. Also keep in mind that giving incorrect information in these forms to avoid TDS amounts to Tax evasion and a penalty up to Rs 1 lakh can be imposed in such cases.

Budget 2015 has also made provision to submit Form 15G/15H for non-deduction of TDS for the amount paid on maturity of life insurance.

TDS Change Effective date:

All the above changes would be effective from June 1, 2015.

Sukanya Samriddhi/ PPF Interest Rate for FY 2015-16

Government has declared the interest rates to be paid on small saving schemes for FY 2015-16. These interest rates are revised at the start of every Financial Year.

The interest paid on Sukanya Samriddhi Account has been raised to 9.2% from existing 9.1%. The investors of Senior Citizens Savings Scheme (SCSS) would also get increased interest rate of 9.3% from 9.2% offered presently.

All the other interest rates including PPF (Public Provident Fund), KVP (Kisan Vikas Patra), NSC (National Saving Scheme) and fixed deposits have been kept unchanged.

Also Read: Download Excel based PPF Calculator

Both PPF and KVP would offer 8.7% interest for FY 2015-16. The interest on 5 year NSC has been fixed at 8.5% while 10 year NSC is 8.8%.

Interest Rate on Small Savings Scheme for FY 2015-16

The fixed deposit in Post Office would offer 8.4% for 1 to 3 years tenure and 8.5% for 5 years tenure. The 5 year recurring deposit would offer interest rate of 8.4%.

Savings account at post office would offer 4% while the MIS (Monthly Income Scheme) at post offices would offer interest rate of 8.4%.

All the interest rates would be effective from April 1, 2015.

The Surprise?

All the above Small Saving Schemes are linked with 10 Year Government Bond yields which has reduced by more than 1% in last 1 year. But government has kept most of the rates unchanged and in fact increased the interest rate on Sukanya Samriddhi Account and Senior Citizen Saving Scheme.

This is more of a political move and will push banks not to reduce their interest rates. While this may seem good move for the savers but Government should not play with the system as it creates imbalances and ultimately harms the common man!

Credit card against Fixed Deposit

With the wider acceptance of Credit cards and the convenience it offers, it sometimes become necessary to have credit cards. But not everyone is eligible to have one and banks may deny credit card due to reasons like poor credit score, no regular income, and low salary among many others. Credit card against Fixed Deposit is a product which is specially made for such people.

The product:

The banks ask the applicant to open a fixed deposit account with auto renewal feature in the bank. The bank marks lien over this fixed deposit and generally offers credit limit up to 85% of the FD amount. The credit card works like normal credit cards while the FD continues to earn interest. In case the customer defaults and does not pay his dues for 60/90 days, banks reserve the right to adjust the amount against the FD.

The FD amount can be as low as Rs 20,000 and varies as per banks and the credit card type (Gold, Platinum, etc) opted for. Also in most cases the tenure of the FD should not be less than 180 days. Tax Saver FDs, Flexi-Deposits (Auto-sweep FDs), FDs in the name of HUF/society/trust/companies do not qualify for credit cards.

Also Read: How RBI Rate Cut Impacts your Investments and Loans?

What’s on offer?

Most big banks are offering Credit card against Fixed Deposit in different names. We have listed features of some of the offerings:

• ICICI Bank Coral Credit Card Against Fixed Deposit
• SBI Advantage Plus Card
• Axis Bank Insta Easy Credit Card
• Kotak Mahindra Aqua Gold Card
• Central Bank Aspire Credit Card

 The table below compares the features of these cards from different banks:

Credit Card Against Fixed Deposit – Comparison across Banks

The Good part:

1. You can get credit card which you would not have in normal circumstances
2. The processing for card is quicker than regular card. Also the documentation required is lesser
3. Regular spending and payment on this card can help build/improve one’s credit score
4. The fixed deposit continues to earn regular interest while you enjoy interest free credit for 45-55 days
5. Get all the reward points, discounts valid for the card provider bank

Disadvantages:

1. The fixed deposit is not liquid. You cannot break the FD until you have the card
2. If you do not pay your dues till 60/90 days, the banks can adjust the balance against the FD
3. Credit card is double edged sword – while it offers convince, if not handled carefully can let you to overspending resulting in debt trap.
4. The interest on credit card varies from 18% to 36% per annum. So in case of default be ready to pay hefty interest along with other charges.

Conclusion:

Credit card against Fixed Deposit is a win-win product for both banks and customers. This is a great product for someone who is looking to build or improve his credit score and for people who would not be eligible for card in normal circumstances. But as stated earlier Credit card is double edged sword – if not handled carefully and can lead to over spending resulting in debt trap.

High Credit Rated Companies offering 9% + on FD

The banks have started lowering their interest rates on fixed deposits. This hurts people who invest in them. However you can look into fixed deposits offered by companies.

Below are the details of 5 companies which have highest credit rating (AAA) and offering interest rate of more than 9% on their fixed deposit schemes.

In comparison SBI is offering 7.5% to 7.75% for 1 to 10 years fixed deposits while ICICI Bank is offering 7.75% to 8.00% on their FDs.

1. DHFL Aashray Deposit Plus

DHFL is one of India’s leading housing finance companies.

Credit Rating: “AAA” by CARE and “FAAA” by BWR

Also Read: What does Credit Rating Mean?

Salient Features:

• 0.25% Additional interest rates for Senior Citizens, Widows, Armed Forces personnel, DHFL Home Loan/SME Loan/Mortgage borrowers
• Minimum Deposit Amount: Rs 2,000 and multiples of Rs 1,000 thereafter
• Loan up to 75% of the FD Principal and accrued interest is available

Interest Rates:

DHFL Aashray Deposit – Interest on Fixed Deposit

DHFL Swayamsidha Deposit for Women:

This FD is especially for women offering higher interest rates:

DHFL Swayamsidha Deposit for Women – Interest Rates

2. Bajaj Finance Ltd Fixed Deposit

Bajaj Finance Ltd is a NBFC (non-banking finance company) dealing in all kinds of loans like Personal, Two/Three wheeler loans, car loans etc.

Credit Rating: “FAAA” By CRISIL and “MAAA” By ICRA

Salient Features:

• Additional 0.25% interest for Senior citizens
• Additional 0.10% interest for Bajaj group employees and existing customers for deposits up to Rs.1 Crore
• Can access FDs online through their customer portal

Interest Rates:

Bajaj Finance Ltd – Interest on Fixed Deposit

3. KTDFC Ltd. Fixed Deposit

KTDFC (Kerala Transport Development Finance Corporation Ltd) is NBFC wholly owned by Government of Kerala and deals in Personal and Vehicle Loans among other things.

Credit Rating: KTDFC Fixed Deposits are fully guaranteed by Government of Kerala

Interest Rates:

KTDFC Ltd – Interest on Fixed Deposit

4. Mahindra and Mahindra Financial Services Ltd FD

Mahindra and Mahindra Financial Services is leading NBFC with focus on rural areas and is top tractor financier in India.

Credit Rating: ‘FAAA’ by CRISIL

Salient Features:

• 0.25% additional rate for senior citizens.
• 0.35% additional interest for all Mahindra group company employees and Employees Relatives

Interest Rates:

Mahindra and Mahindra Financial Services Ltd – Interest on Fixed Deposit

5. Shriram Transport Finance UNNATI FD Scheme

Shriram Transport Finance is NBFC mainly dealing in Commercial Vehicle Finance.

Credit Rating: ‘FAAA’ by CRISIL and “MAA+” by ICRA

Salient Feature:

Fixed deposits are accepted in multiples of Rs.1000/- subject to a minimum amount of Rs.10000/- per deposit account.

Interest Rate:

Shriram Transport Finance UNNATI Fixed Deposit Scheme – Interest Rate

TDS on Company FDs:

Companies would deduct TDS at the rate of 10% of interest, if the interest earned is more than Rs 5,000 in a financial year.

Tax on Company FDs:

The interest received on Company Fixed Deposit is fully taxable. The interest would be added to your annual income and taxed at marginal tax rates.

Key Points before Investing:

Premature Withdrawal is possible on the above company fixed deposits but it requires much more paper work and follow ups. Even the penalty may be more severe as compared to banks

Opening Fixed Deposit is more tiresome as you need to fill forms, visit company branch or get hold of their agents.Also have to give fresh documents for KYC. Bank FDs can be opened online, which is much more convenient.

To Conclude:

The above companies are offering have the highest credit rating (which means very low chances of default) and are offering interest rates 1% to 2% higher than the bigger banks. You must look into them for your fixed income portfolio especially if they have easy approachable branches or agents near you.

have you invested in these companies FDs before? How was your experience? Please share in comments section…

Highest Interest Rate on Bank Fixed Deposits – November 2015

The post lists down the rate of interest on Bank fixed deposits as of November 3, 2015.

You might want to bookmark this page as the FD interest rates would be updated every month. Would help you in better decision making.

Fixed Deposit Highlights:

• Most banks offer FDs for tenure of 7 Days to 10 Years.
• Some banks like The Ratnakar Bank, IDBI Bank and State Bank of Patiala do offer fixed deposits up to 20 years too.
• For very short Term Deposits the interest rate is similar to that of Savings Account and so you should not worry about FD. Also Interest up to Rs 10,000 in Saving Account is Tax free.
• Most banks compound interest quarterly
• Banks offer Loan/Overdraft against the amount available in Fixed Deposit. The interest is generally 0.5% to 1% more than that offered to FD.
• TDS (Tax deduction at source) at the rate of 10% is deducted, if the interest income is more than Rs 10,000 in financial year per bank
• There might be penalty for pre-mature withdrawal of Fixed Deposits

Fixed Deposit Interest Rates:

The highest interest rate is offered by The Ratnakar Bank at 9.0% for 24 to 36 months Fixed Deposit.

For comparing the best interest rates on fixed deposits over different duration of investment, we have it divided into following 4 slabs:

• FD for Less than 1 Year
• FD for 1 to 2 years
• FD for 2 to 5 Years
• FD for More than 5 years

We show the highest interest rates on fixed deposits for the above duration buckets. We have also compared the best interest rates on offer by that being offered by State Bank of India (SBI) and ICICI Bank.

Click for Best Tax Saving FDs u/s 80C

Interest Rate for FD of Less than 1 Year:

The highest interest rate is offered by Indus Ind Bank (270 days to to below 61 months) and The Ratnakar Bank (241 days to 364 days) at 8.25%.

Interest Rate for Fixed Deposit of 1 – 2 Years:

The highest interest rate is offered by The Ratnakar Bank (12 months to less than 24 months) at 8.50%.

Click for Best Interest Rate on Recurring Deposits

Interest Rate for Fixed Deposit of 2 – 5 Years

The highest interest rate is offered by The Ratnakar Bank (24 months to less than 36 months) at 9.0%.

Interest Rate for FD of More than 5 Years

The highest interest rate is offered by The Ratnakar Bank (36 months to less than 120 months) at 8.75%.

Source: Bank Websites                                          Last Updated: November 3, 2015

Disclaimer: The Fixed Deposit Interest Rates keep on changing. You are advised to check the interest rates with banks before making your FD.

Helpful Posts on FD:

It would be helpful for you to look at following posts before you choose your fixed deposits:

1. How Safe is Your Fixed Deposit in Bank?
2. How are you loose Money in Fixed Deposits?
3. Recurring Deposit – A Good option to Save Money!

Highest Tax Saving Bank Fixed Deposit Rates – 80C – November 2015

Tax Saving Fixed Deposits one of the most popular way to save taxes u/s 80C of income tax. These are like normal Fixed Deposit with banks but is labeled as “Tax Saving FD” while making the deposit.

Why you Should Invest?

1. Convenient to invest. ICICI Bank, SBI, HDFC Bank, etc offers online facility for Tax Saving FD
2. Redemption on maturity comes directly to your bank account
3. High Safety – FD up to Rs 1 Lakh is insured

Why you Should Not Invest?

1. There are lot of competing products like EPF, PPF, ELSS to exaust the investment of Rs 1.5 Lakh u/s 80C
2. The interest earned is taxable
3. Cannot be withdrawn prematurely
4. Cannot be pledged to secure loan or as security

Whats on Offer?

As of November 3, 2015 banks are offering 6.75% – 8.75% for general public and 7.25% – 9.25% for Senior Citizens.

1. The best Tax Saving Fixed Deposit Interest offered is 8.75% for General Public byThe Ratnakar Bank
2. The best Senior citizens Tax Saving Fixed Deposit Interest offered is 9.25% by The Ratnakar Bank

The table below lists the banks in alphabetical order with their respective interest rate offer on Tax Saving FDs for General and Senior Citizens.

Click for Best Interest Rate on FDs for General public

The highest Interest Rates have been highlighted:

 Source: Bank Websites                                                     Last Updated: November 3, 2015

Taxation & TDS – Tax Saving Fixed Deposits:

The interest received on tax Saving Fixed Deposit is fully taxable. The interest income is considered as “income from other sources” for Tax filing and taxed at marginal tax rates applicable.

TDS would be deducted at the rate of 10% of the interest paid, if the interest paid exceeds Rs 10,000 in a financial year. You can see the same in Form 26AS.

In case your income does not exceed taxable slab and so want to avoid TDS, you can submit Form 15G or 15H  when making the deposit. You would also need to submit the form at the start of every financial year to the concerned bank branch.

Key Points – Tax Saving FD:

Below are some of points to keep in mind while investing in Tax Saving Deposits:

1. As the Tax Saving FD scheme was introduced in Budget of 2006, it’s also known as Tax Saving Deposit scheme 2006 (Notification Number 203/2006 and SO1220 (E) dated 28/07/2006)
2. Most of the banks accept deposit of 5 Years only. However there are banks with deposit tenures of more than 5 Years
3. You can deposit on either Single or Joint name. However benefit of tax deduction is available for first holder only.
4. Most banks offer interest rate which is similar to their 5 years term deposits. Only a few banks give slightly higher interest rate for their Tax Saving Fixed Deposits
5. Most banks give Senior citizens and their staff members additional interest of 0.25% to 0.5%
6. Depositor can opt for either cumulative or non-cumulative way of crediting periodical interest
7. Don’t be mislead by banks advertisements about their yield on Tax Saving FDs. Those are manipulative calculations
8. Be cautious of small co-operative banks as they have higher risk than bigger private and public sector banks
9. Depositor gets benefit U/s.80C of the Income Tax Act. 1961
10. Minimum deposit is Rs.100 and in multiples thereof
11. Maximum deposit in a Financial Year Rs.1,50,000/- [i.e., 1 st April to 31 st March of the following calendar year]
12. Deposits cannot be withdrawn prematurely
13. Deposits cannot be pledged to secure loan or as security

Disclaimer: We have tried to keep interest rates up to date, but as these change frequently you are advised to check with the bank before investing. Also it would be great if you can point out any errors through comments or email!

Direct link for Interest Rates on FDs of Banks:

Below is the direct link for Interest Rates of Major Banks. You might want to check the interest rates before doing your FD.

High Rated Company FDs Offering Higher Interest than Bank Fixed Deposit

The interest rates offered by banks on their fixed deposits have come down significantly in last few months. Most banks are offering interests in the range of 7.25% to 7.75%. This has created problem for people who depend on bank fixed deposit for their income.

However some best rated companies and institutions are offering interest rates higher than banks. Below are the details of 7 companies which have high credit rating and offering interest rate more than banks on their fixed deposit schemes.

SBI is offering 7.0% to 7.5% for 1 to 10 years fixed deposits while ICICI Bank is offering 7.5% to 7.9% on their FDs.

1. DHFL Aashray Deposit Plus

DHFL is one of India’s leading housing finance companies.

Credit Rating: “AAA” by CARE and “FAAA” by BWR

Also Read: What does Credit Rating Mean?

Salient Features:

• 0.25% Additional interest rates for Senior Citizens, Widows, Armed Forces personnel, DHFL Home Loan/SME Loan/Mortgage borrowers
• Minimum Deposit Amount: Rs 2,000 and multiples of Rs 1,000 thereafter
• Loan up to 75% of the FD Principal and accrued interest is available

Interest Rates:

DHFL Aashray Deposit – Interest on Fixed Deposit

DHFL Aashray Deposit Plus:

It doubles the money in 95 months which means interest rate of approximately 9.1% compounded annually.

DHFL Aashray Deposit Plus – Double My Money – Interest Rates

DHFL Swayamsidha Deposit for Women:

This FD is especially for women offering higher interest rates:

DHFL Swayamsidha Deposit for Women – Interest Rates

2. Bajaj Finance Ltd Fixed Deposit

Bajaj Finance Ltd is a NBFC (non-banking finance company) dealing in all kinds of loans like Personal, Two/Three wheeler loans, car loans etc.

Credit Rating: “FAAA” By CRISIL and “MAAA” By ICRA

Salient Features:

• Additional 0.25% interest for Senior citizens
• Additional 0.10% interest for Bajaj group employees and existing customers for deposits up to Rs.1 Crore
• Can access FDs online through their customer portal

Interest Rates:

Bajaj Finance Ltd – Interest on Fixed Deposit

Also Read: How to Fill Form 15G and 15H?

3. KTDFC Ltd. Fixed Deposit

KTDFC (Kerala Transport Development Finance Corporation Ltd) is NBFC wholly owned by Government of Kerala and deals in Personal and Vehicle Loans among other things.

Credit Rating: KTDFC Fixed Deposits are fully guaranteed by Government of Kerala

Interest Rates:

KTDFC Ltd – Interest on Fixed Deposit

Also Read: 13 Investments to Generate Regular Income

4. Mahindra and Mahindra Financial Services Ltd FD

Mahindra and Mahindra Financial Services is leading NBFC with focus on rural areas and is top tractor financier in India.

Credit Rating: ‘FAAA’ by CRISIL

Salient Features:

• 0.25% additional rate for senior citizens.
• 0.35% additional interest for all Mahindra group company employees and Employees Relatives

Interest Rates:

Mahindra and Mahindra Financial Services Ltd – Interest on Fixed Deposit

5. Post Office Time Deposit

Post office Time Deposit (Fixed Deposit) Account can be opened in any post office. The interest rates are reset at the start of every financial year. As of today they are offering higher interest rates than most of the banks. Once you have deposited the money, the interest rate is locked.

Also Read: Impact of RBI Rate Cut on Your Investments and Loans

Credit Rating: backed by Government of India

Salient Feature:

• Fixed deposits are accepted in multiples of Rs.200/- and in multiples thereof
• No maximum deposit limit

Interest Rate:

Post Office Time Deposit – Interest Rate

6. Shriram Transport Finance UNNATI FD Scheme

Shriram Transport Finance is NBFC mainly dealing in Commercial Vehicle Finance.

Credit Rating: ‘FAAA’ by CRISIL and “MAA+” by ICRA

Salient Feature:

• 0.25% additional rate for senior citizens.
• Fixed deposits are accepted in multiples of Rs.1000/- subject to a minimum amount of Rs.10000/- per deposit account.

Interest Rate:

Shriram Transport Finance UNNATI Fixed Deposit Scheme – Interest Rate

7. Shriram City Union Finance Ltd FD Scheme

Shriram City Union Finance is NBFC mainly dealing in retail consumer finance and offers various secured and unsecured loans like home loans, personal loan, business loan.

Credit Rating: ‘FAA+’ by CRISIL and “MAA+” by ICRA

Salient Feature:

• 0.25% additional rate for senior citizens.
• Fixed deposits are accepted in multiples of Rs.1000/- subject to a minimum amount of Rs.5000/- per deposit account.

Interest Rate:

Shriram City Union Finance Ltd – Interest Rates

Download: PPF Calculator for Maturity, Loan and Partial Withdrawal

Company Fixed Deposit List:

The table below gives a list of company fixed deposits along with other details.

Company Fixed Deposit List – February 2016 (Click to Enlarge)

TDS on Company FDs:

Companies would deduct TDS at the rate of 10% of interest, if the interest earned is more than Rs 5,000 in a financial year.

Tax on Company FDs:

The interest received on Company Fixed Deposit is fully taxable. The interest would be added to your annual income and taxed at marginal tax rates.

Also Read: 21 Hidden Charges in Saving Bank Account

Key Points before Investing:

Premature Withdrawal is possible on the above company fixed deposits but it requires much more paper work and follow ups. Even the penalty may be more severe as compared to banks

Opening Fixed Deposit is more tiresome as you need to fill forms, visit company branch or get hold of their agents.Also have to give fresh documents for KYC. Bank FDs can be opened online, which is much more convenient.

To Conclude:

The above companies are offering have the highest credit rating (which means very low chances of default) and are offering interest rates 1% to 2% higher than the bigger banks. You must look into them for your fixed income portfolio especially if they have easy approachable branches or agents near you.

Have you invested in these companies FDs before? How was your experience? Please share in comments section…

Changes in Small Saving Schemes

Ministry of Finance has come out with additional guidelines and new rules the way interest rates are determined for small saving schemes. These small saving schemes cover the following investments:

1. PPF (Public Provident Fund)
2. Sukanya Samriddhi Scheme
3. Post office Monthly Income Scheme
4. Senior Citizen Savings Scheme
5. KVP (Kisan Vikas Patra)
6. NSC (National Savings Certificate)
7. Post Office Time (Fixed) Deposits – 1, 2, 3 and 5 years
8. Post Office 5 years Recurring Deposits

Changes: Small Saving Schemes

1. Delink Post Office RD/FD and KVP interest rates from Government Bonds

The interest offered on small saving schemes is linked (with small mark up) to the yield of government bonds of similar maturity. For e.g. Senior Citizen Savings Scheme (SCSS) has markup of 1% to the government bond yield. So if the government bond yield is 8.3%, the interest on SCSS would be 9.3%.

Also Read: PPF – A must have investment

With new rules, the government has delinked the Post Office Fixed Deposits (1, 2 and 3 years tenure), Recurring Deposits and Kisan Vikas Patra from government bond yields. The interest rate on these investments would be market determined and would be similar to that of banks. For other long term or socially important small saving schemes like PPF, SCSS, Sukanya Samriddhi Scheme and NSC the mark up has not been changed. The table below summarizes the change in markup.

Interest Rate Markup on Small Savings Scheme from April 1, 2016

Impact: With the multiple rate cuts on bank fixed deposits last year post office RD and FD had become very attractive. It is offering 8.4% while most banks are offering interest in the range of 7.25% to 7.75% on their RDs and FDs. This would change now. As there is no benchmark for setting interest rates on Post Office RD/FD and KVP, expect rates similar to that offered by SBI. These schemes would surely become unpopular in coming times.

2. Quarterly Interest Resets

Until now the interest rates on the Small saving schemes were reset at the start of every financial year i.e. on April 1. Going forward the interest would be reset every quarter as per the schedule below.

Quarterly Interest Reset Schedule for Small Savings Schmes

Impact: This is good step as it would help the interest rates more aligned with the markets and would capture any sudden movement in interest rates.

Also Read: All about Senior Citizens’ Savings Scheme

3. Premature closure of PPF

Premature closure of PPF would be allowed in special cases such as cases of serious ailment, higher education of children etc. This shall be permitted with a penalty of 1% reduction in interest payable on the whole deposit and only for the accounts having completed five years from the date of opening.

Impact: This is good move and would provide more liquidity for PPF investors in case of emergency.

4. Annual Compounding for NSC & KVP

Until now the interest compounding on KVP and NSC was biannual. From April 1, 2016 the compounding would be annual. This means loss for the investors of these instruments. For 10 year NSC which offered 8.8% the maturity value would change from Rs 2,36,597 to Rs 2,32,428.

The other problem is this is retrospective in nature i.e. the rule is applicable even for your existing NSC & KVP.

All the changes are effective from April 1, 2016

Wrong Media Reports:

A lot of newspaper are reporting that there would be no cut in interest rates of SCSS, PPF, SSA, etc. This is not true. According to the official notification only the spread is unchanged and still linked to Government bond yields. The new interest rates would be declared on March 15, 2016 in accordance with the government bonds yields and then reset every quarter.

Also Read: What is the Maximum Income Tax You can Save for FY 2015-16?

Reasons for above Changes:

As per the press release by Ministry of Finance, the above changes were done to make the operation of National Saving Schemes market-oriented in the interest of overall economic growth of the country. Banks along with RBI were of the view that due to higher interest rates on these investments, people are avoiding bank deposits and so they are not able to cut interest rates further.

My view is this was just another excuse by banks to keep the lending rates high. The main reason for higher lending rates is the ever growing NPAs of the banks and their inefficiencies. With these changes only the savers would lose further!

Small Saving Schemes Interest Rate for FY 2016-17 (April to June)

The government has finally cut the interest rates offered on small savings schemes like PPF, Senior Citizen Savings Scheme, Post Office Fixed and Recurring Deposits and Sukanya Samriddhi Account by 0.4% to 1.3%.

The much publicized Sukanya Samriddhi Yojna would have 8.6% interest as compared to 9.2% earlier. Similarly for Senior Citizens Savings Scheme the interest rate has been cut to 8.6% from 9.3% earlier.

The interest rate on popular Public Provident Fund (PPF) has been cut to 8.1% from existing 8.7%. All the above interest rates are linked to yield of government bonds of similar tenure.

The worst impacted are the Post Office fixed and recurring deposit. The interest rates would now be almost at par with that of banks, in fact some private banks would offer more. The 1 year Post office would now give 7.1%, 2 year FD would give 7.2% and 3 year FD would give 7.4%. The 5 year post Office Recurring Deposit would pay 7.4% as compared to 8.4% earlier. In comparison ICICI Bank, HDFC bank are offering interest rates of 7.5% to 7.75% on their RDs.

Also Read: Highest Interest Rate on Bank Fixed Deposits

The 5 year post office fixed deposit would have interest rate of 7.9% while the 5 year Post Office Monthly Income Scheme (POMIS) would give 7.8%. The interest rate on Kisan Vikas Patra (KVP) has been reduced from 8.7% to 7.8% while the 5 Year National Saving certificate (NSC) would pay 8.1% from 8.5% earlier. The interest on KVP & NSC would be compounded annually from earlier practice of biannual interest payment.

The Post Office Savings Account would continue to offer 4%.

Interest Rate on Small Savings Scheme for FY 2016-17 (April to June)

As we had written in an earlier post, these interest rates would be reset quarterly (Read: 4 Changes in Small Saving Schemes).

What Savers can Do?

There is nothing much savers can do. Sukanya Samriddhi Yojna and PPF are still attractive mainly because of tax free treatment on maturity. Senior Citizen Savings Scheme is still offering higher interest rates than banks for senior citizens.

Post Office Fixed and Recurring deposits are no more superior to banks. So they would only be used by people who do not have access to banks. NSC which is comparable to Tax saving fixed deposits by banks is still offering marginally higher interest rates.

If you have money you can still lock-in in the higher interest rates (if invested by March 31, 2016) offered by Post Office Fixed Deposits, Recurring Deposits, POMIS, KVP, NSC and Senior Citizen Savings Scheme. Once invested these schemes would give interest rates offered as of today. The new interest rates are effective April 1, 2016 – so you still have 10 days time.

Bank Deposit Insurance

I have often been asked about the safety of bank fixed deposit by savers and if their deposit is insured against default. In this post we tell you about Bank Deposit Insurance and discuss tips and tricks to use the deposit insurance the best way.

1. Bank Deposit Insurance is covered by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is subsidiary of RBI.

2. The maximum deposit insurance cover is for Rs 1 lakh per customer per bank.

3. The insurance premium is paid by banks and depositors are not charged for the same.

4. The Deposit insurance was introduced in 1962 and the maximum cover was Rs 1,500.

Also Read: Highest Interest Rate on Bank Fixed Deposits (FD)

5. The Rs 1 Lakh limit was set in year 1993 and has not been revised for 23 years. Assuming modest 6% inflation the insurance amount should have been raised to Rs 4 Lakhs. I hope RBI is listening!

6. Earlier the insurance amount was revised regularly. Here is the deposit Insurance over the years:

• 1962: Rs. 1,500
• 1968 : Rs.5,000
• 1970 : Rs.10,000
• 1976 : Rs.20,000
• 1980 : Rs.30,000
• 1993 : Rs.1,00,000

7. Understanding 1 Lakh limit: The 1 lakh limit covers all your deposit with the bank in form of savings account, fixed deposit, current account, recurring deposit, etc. and any interest accrued. For e.g. If you have Rs 10,000 in your savings account and Rs 85,000 in fixed deposit and Rs 9,000 as interest due on your fixed deposit – you would still get Rs 1 Lakh even though your total amount due was Rs 1.04 lakhs (10,000 + 85,000 + 9,000).

Also Read: 21 Hidden Charges in Saving Bank Account

8. The Rs 1 lakh deposit insurance covers each bank and it does not treat different branch of the same bank separately. So if you have Fixed deposit of Rs 90,000 in SBI, Delhi and Rs 75,000 in SBI, Gurgaon – in case of bank default you would be paid Rs 1 Lakh only – as the deposit insurance is at bank level and not branch level. In a different scenario if you have Rs 90,000 FD with SBI, Delhi and Rs 75,000 FD with ICICI bank, Delhi – in case of both bank defaults – you would be paid separately for both i.e. Rs 90,000 for SBI and Rs 75,000 for ICICI.

9. The amount paid to depositor would be net of any dues payable to the bank. For e.g. as in the case above if you had to pay bank Rs 20,000 personal loan. You would be paid back Rs 1,04,000 – 20,000 = Rs 84,000 only.

10. The DICGC is liable to pay the insurance amount within two months of receiving the depositors list from the bank.

11. As of today all banks including commercial banks, local area banks, rural banks, foreign bank branches and co-operative banks in India, are covered under this scheme of DICGC except the co-operative banks of Meghalaya, Chandigarh, Lakshadweep and Dadra & Nagar Haveli.

12. There are some banks which are de-registered. You can get the list on DICGC website. Almost all these banks are co-operative banks which is a huge risk.

Also Read: Which bank offers highest interest rate on savings account in India?

13. The insurance is based on “same right and same capacity” as on the date of bank default.

Understanding “Same Right and Same Capacity”

This is an important concept and can help you enhance the deposit insurance legally.

As stated above all deposits i.e. savings, current, FD, RD, etc. across various branches of the bank, held by you in your individual name, would be treated as in “same right and same capacity” and considered as one total amount for insurance purposes.

But would be treated as held in “different right and different capacity” in following cases:

• Account held in the capacity of a partner of the firm
• As a guardian of a minor
• As a director of a company
• As a Trustee
• As a Joint Account

And so each of them would be separately insured as shown in the example below.

Illustration – Different Right and Different Capacity for Deposit Insurance

Deposit Insurance for Joint Accounts:

If you hold joint account, the sequence of name is considered as different entity. So if you have two joint accounts with your spouse where in one case you are first holder and in second case your spouse is the first holder, both accounts would be considered as 2 entities and separate deposit insurance would apply.

Also Read: Where to Park Money for Very Short Term?

How can you enhance your Deposit Insurance?

Taking example of 3 people in the family – husband, wife and child (H, W, C) – how much can be the max deposit insurance cover?

1. Individual accounts – H, W, C – 3 entities possible
2. Joint accounts for 2 (H,W) (W,H)  etc – 6 entities possible
3. Joint account for 3 (H,W,C) (W,H,C) etc – 6 entities possible

Theoretically if you use all combinations within family of 3, you can get deposit insurance up to 15 lakhs in one bank. If you use multiple banks, it would increase manifold.

The table below gives an illustration of the possibilities:

Illustration – Joint Account for Deposit Insurance

But here is the word of caution – it would be nightmare to maintain so many accounts. In case of joint account the tax liability is of the first account holder and tax clubbing provisions would apply if it’s your money in all the accounts.

Also Read: How safe is your Bank Fixed Deposit?

Also there have been cases where the defaulting bank does not send depositor information to DICGC on time and so depositors keep on waiting.

So even though there is a safety net, you should choose the right bank so that you do not struggle if there is a default.

Latest Small Saving Schemes Interest Rate

Government of India announces interest rate on small saving schemes like PPF, Senior Citizen Savings Scheme, Post Office Fixed and Recurring Deposits and Sukanya Samriddhi Account every quarter effective April 2016.

This is done to keep these interest rates in sync with the market rates.

The table below shows the interest reset schedule:

Quarterly Interest Reset Schedule for Small Savings Schemes

Interest Rates for Q2 FY 2016-17 (July – September)

The interest rates for July to September quarter have been left unchanged. The table below gives the details:

Interest Rate on Small Savings Scheme for July to September 2016

How are Interest Rates Determined?

For long term and socially important small saving schemes like PPF, SCSS, Sukanya Samriddhi Scheme, NSC and 5 Year post office fixed deposit the rates are fixed as slight mark up to the government bond yields.

For other small saving schemes namely Post Office Fixed Deposits (1, 2 and 3 years tenure), Recurring Deposits and Kisan Vikas Patra the interest rates would be market determined, which means would be similar to that offered by banks on corresponding deposits.

Learn all about PPF, Sukanya Samriddhi Scheme & Senior Citizen Savings Scheme

The table below gives the markup factor:

Interest Rate Markup on Small Savings Scheme from April 2016

Small Saving Scheme Interest Rates History:

You can click on relevant links to go to historical interest rates:

• Interest Rates for Q1 FY 2016-17 (April – June)
• Interest Rates for FY 2015-16
• Interest Rates for FY 2014-15
• Interest Rates for FY 2013-14
• Interest Rates for FY 2012-13
• Interest Rates for FY 2011-12

Some Pointers:

The interest offered are locked-in for Post Office Fixed Deposits, Recurring Deposits, POMIS, KVP, NSC and Senior Citizen Savings Scheme and so the interest offered is as on the date of investment for the entire tenure.

However for Sukanya Samriddhi Account and PPF the interest is offered as declared every quarter irrespective of the time of opening of account.

You can bookmark this page as we would update this every quarter as and when the new interest rates are declared.

Sukanya Samriddhi/ PPF Interest Rate for FY 2015-16

Government has declared the interest rates to be paid on small saving schemes for FY 2015-16. These interest rates are revised at the start of every Financial Year.

The interest paid on Sukanya Samriddhi Account has been raised to 9.2% from existing 9.1%. The investors of Senior Citizens Savings Scheme (SCSS) would also get increased interest rate of 9.3% from 9.2% offered presently.

All the other interest rates including PPF (Public Provident Fund), KVP (Kisan Vikas Patra), NSC (National Saving Scheme) and fixed deposits have been kept unchanged.

Also Read: Download Excel based PPF Calculator

Both PPF and KVP would offer 8.7% interest for FY 2015-16. The interest on 5 year NSC has been fixed at 8.5% while 10 year NSC is 8.8%.

Interest Rate on Small Savings Scheme for FY 2015-16

The fixed deposit in Post Office would offer 8.4% for 1 to 3 years tenure and 8.5% for 5 years tenure. The 5 year recurring deposit would offer interest rate of 8.4%.

Savings account at post office would offer 4% while the MIS (Monthly Income Scheme) at post offices would offer interest rate of 8.4%.

All the interest rates would be effective from April 1, 2015.

The Surprise?

All the above Small Saving Schemes are linked with 10 Year Government Bond yields which has reduced by more than 1% in last 1 year. But government has kept most of the rates unchanged and in fact increased the interest rate on Sukanya Samriddhi Account and Senior Citizen Saving Scheme.

This is more of a political move and will push banks not to reduce their interest rates. While this may seem good move for the savers but Government should not play with the system as it creates imbalances and ultimately harms the common man!

Credit card against Fixed Deposit

With the wider acceptance of Credit cards and the convenience it offers, it sometimes become necessary to have credit cards. But not everyone is eligible to have one and banks may deny credit card due to reasons like poor credit score, no regular income, and low salary among many others. Credit card against Fixed Deposit is a product which is specially made for such people.

The product:

The banks ask the applicant to open a fixed deposit account with auto renewal feature in the bank. The bank marks lien over this fixed deposit and generally offers credit limit up to 85% of the FD amount. The credit card works like normal credit cards while the FD continues to earn interest. In case the customer defaults and does not pay his dues for 60/90 days, banks reserve the right to adjust the amount against the FD.

The FD amount can be as low as Rs 20,000 and varies as per banks and the credit card type (Gold, Platinum, etc) opted for. Also in most cases the tenure of the FD should not be less than 180 days. Tax Saver FDs, Flexi-Deposits (Auto-sweep FDs), FDs in the name of HUF/society/trust/companies do not qualify for credit cards.

Also Read: How RBI Rate Cut Impacts your Investments and Loans?

What’s on offer?

Most big banks are offering Credit card against Fixed Deposit in different names. We have listed features of some of the offerings:

• ICICI Bank Coral Credit Card Against Fixed Deposit
• SBI Advantage Plus Card
• Axis Bank Insta Easy Credit Card
• Kotak Mahindra Aqua Gold Card
• Central Bank Aspire Credit Card

 The table below compares the features of these cards from different banks:

Credit Card Against Fixed Deposit – Comparison across Banks

The Good part:

1. You can get credit card which you would not have in normal circumstances
2. The processing for card is quicker than regular card. Also the documentation required is lesser
3. Regular spending and payment on this card can help build/improve one’s credit score
4. The fixed deposit continues to earn regular interest while you enjoy interest free credit for 45-55 days
5. Get all the reward points, discounts valid for the card provider bank

Disadvantages:

1. The fixed deposit is not liquid. You cannot break the FD until you have the card
2. If you do not pay your dues till 60/90 days, the banks can adjust the balance against the FD
3. Credit card is double edged sword – while it offers convince, if not handled carefully can let you to overspending resulting in debt trap.
4. The interest on credit card varies from 18% to 36% per annum. So in case of default be ready to pay hefty interest along with other charges.

Conclusion:

Credit card against Fixed Deposit is a win-win product for both banks and customers. This is a great product for someone who is looking to build or improve his credit score and for people who would not be eligible for card in normal circumstances. But as stated earlier Credit card is double edged sword – if not handled carefully and can lead to over spending resulting in debt trap.

Where to Park Money for Short Term?

Whenever we reach close to goals, it’s always recommended to shift the investment from risky avenues to safer options. In this post we talk about which is the best option to park your money if you investment horizon is less than 6 months.

Where to Park Money for Very Short Term?

You can choose to park your investment in any of the following for short term:

1.Saving Bank Account – You can keep the money in savings bank account. The interest offered is 4% to 7% depending on bank to bank and the account balance.
Taxation – Interest up to Rs 10,000 is exempted from tax. Any additional amount is added to the income and taxed at marginal tax rate.

2.Bank Fixed deposit – You can do short term fixed deposit. Most banks offer fixed deposits from 7 days on wards. The interest offered is 4% to 6% for 90 days deposit and 5% to 7% for deposit up to 180 days. Please note many many banks do not offer increased rates for senior citizens for deposit of less than 1 year.
Taxation – the interest received is added to the income and taxed at marginal tax rates.

Also Read: Highest Interest on Bank Fixed Deposit compared across 51 major banks

3.Debt Mutual Funds – You can choose either Liquid Funds or short term FMPs. The returns of both are marginally higher than prevailing 1 year bank Fixed deposits – albeit with higher risk.
Taxation – the gains made on redemption within 3 years of investment is termed as short term capital gains. The gains are added to the income and taxed at marginal tax rates.

4.Arbitrage Mutual Funds – These funds leverage arbitrage opportunities in stock market to generate returns. As they are primarily invested in equities, they are treated as equity funds. The returns are similar to Debt Mutual Funds.
Taxation – the gains made on redemption within 1 years of investment is termed as short term capital gains. The gains are taxed at 15%+3% education cess (=15.45%).

Also Read: How are your Investments Taxed?

If you compare the taxation part, the saving bank account gets the most favorable tax treatment followed by Arbitrage Mutual Funds. Debt Mutual Funds and Fixed Deposits have the same taxation.

Comparison: Saving Account, FD, Arbitrage & Debt MFs

The table below compares the above 4 instruments on different parameters:

Comparison of Saving Account, Fixed Deposits, Liquid & Debt Mutual Funds

Also Read: 25 Tax Free Incomes & Investments in India

Returns after Tax:

The table below shows the returns at different tax slabs when you invest Rs. 1 lakh and Rs. 5 Lakh for 3 months and 6 months.

The cells with best returns are shaded in green.

Returns after Tax when Invested for 3 Months – updated March 2017

Also Read: 7 High Rated Companies Offering more than Bank Fixed Deposits 

Returns after Tax when Invested for 6 Months – updated March 2017

As you can see for Arbitrage Funds are good for parking higher amounts for people in 20% tax bracket. 

Also Read: Why should you Choose Dividend Reinvestment for Arbitrage Fund if Investing for less than a Year?

Significant Points for Short Term Investment:

1. The arbitrage fund gives the best returns for people in higher tax bracket of 20% or more. This is because Arbitrage Funds are taxed at 15.45%

2. The debt funds have the potential to give the best returns for investors in lower tax slab or whose income is below taxable limit but this comes with some risk!

3. Savings bank account offering higher interest rates can be better option than investing in Fixed deposits especially for people in higher tax bracket. However as the amount invested goes up the advantage of saving account in terms of tax treatment is reduced. 

Also Read: 21 Hidden Charges in Saving Bank Account

4. In the short term (for 90/180 days) liquid funds and arbitrage funds have the potential to offer superior absolute returns as compared to fixed deposits. On longer duration (for more than 1 year) the returns for debt mutual funds and fixed deposits are comparable.

5. There are also FMPs of 90 and 180 days duration. You can invest in them if you are sure that you do not need money before maturity though I do not see any major advantage over Liquid Funds.

6. As mentioned, go for fixed deposit or saving bank account if you want 100% guaranteed returns. Though rare but there have been instances when Debt Mutual Funds (on July 16, 2013) have given negative returns for few days. Also in case of Arbitrage Mutual Funds, there have been cases of marginal negative returns even in a quarter. For e.g. – JM Arbitrage Advantage Fund gave negative 0.88 returns for July 07, 2008 to Oct 06, 2008 quarter.

Also Read: Investment Risks and How to deal with them

7. If you withdraw before maturity from Fixed Deposits, there would be penalty for that. So be careful to match investment duration with Fixed Deposit tenure.

8. Look out for exit loads in case of mutual funds. Some liquid/ arbitrage funds charge exit load of 0.25% to 0.5% if you exit the fund within 7/90/180 days of investment. So match your investment duration and exit load timing.

9. If you invest direct in Mutual Funds you can expect 0.2% to 0.5% extra returns on an annualized basis. It does not hurt to get extra returns but you may have to do a little extra work for that. 

10. The advantage of investing in arbitrage fund is in case you did not need money in the short term and keep it invested for more than 1 year, the entire return would be tax free.

Also Read: Where should you Invest your Emergency Fund?

Conclusion:

The decision to park very short term money can be done based on your liquidity needs, amount to be parked, potential of returns, taxes and risk tolerance.
If you are not very finance savvy and are in the higher tax bracket (of 20% or more), the best option would be to get a saving account with banks offering higher interest. If you are financially more aware invest in arbitrage funds or liquid funds or FMPs, you would not be disappointed by the gains. The first time investment might be a bit taxing due to KYC formalities but subsequent transactions can be done easily through internet. Also the redemption request can be placed from internet.

Go ahead and do your calculations on finding the best short term investment for you.

Highest Interest Rate on Bank Fixed Deposits for Senior Citizens – May 2017

The post lists down the rate of interest on Bank fixed deposits for Senior Citizens as of May 1, 2017.

Best NRE Fixed Deposit Interest Rates for NRIs – May 2017

NRE (Non-Resident External) Fixed Deposits are one of the best investments for NRIs/PIOs/OCIs because of two reasons:

1. The interest rate is on the higher side as compared to their country of residence and
2. the interest earned on NRE FD is tax free in India

This post compares the best interest rates on NRE FDs.

Best NRE FD Rates:

The table below compares the interest rates offered on various NRE fixed and recurring deposits along with the penalty on pre-closure of FD/RD across 45 major banks in India.

Deutsche Bank offers the highest interest rate with 8% for 5 years NRE FD.

DCB Bank, The Ratnakar Bank and Yes Bank offer highest interest rate across most tenures.

For comparing the best interest rates on fixed deposits over different duration of investment, we have it divided into following 3 slabs:

• FD for 1 to 2 years
• FD for 2 to 5 Years
• FD for 5 to 10 years

Also Read: 8 Mutual Funds that accept Investment from Canada/USA based NRIs

Interest Rate for NRE Fixed Deposit of 1 – 2 Years:

The highest interest rate is offered by The Ratnakar Bank (24 months to less than 36 months) at 7.65%.

Also Read: 21 Hidden Charges in Saving Bank Account

Interest Rate for NRE Fixed Deposit of 2 – 5 Years

The highest interest rate is offered by Deutsche Bank (5 Years) at 8.00%

Also Read: Which bank offers highest interest rate on savings account?

Interest Rate for NRE Fixed Deposit of 5 – 10 Years

The highest interest rate is offered by The Ratnakar Bank (36 months to less than 240 months) at 7.50%.

NRE FD/RD – Rules:

Before you invest in NRE FDs you must be aware of following rules:

1. The minimum tenure for NRE FD/RD is 1 year (as per RBI Directives from July 17, 2003).

2. The maximum deposit tenure offered by most banks is 10 years.

3. The interest earned on NRE FD is tax free in India but it can be taxed in country of your residence. For e.g. USA taxes worldwide income and hence NRIs from USA may have to pay tax in USA.

4. NRE Fixed Deposit makes excellent investment opportunity for NRIs from lower or NO income tax countries like UAE, Singapore, etc.

Also Read: NRE Vs NRO – Which is the right account for NRIs?

5. The principal and interest from NRE FD/RD is freely repatriable.

6. Most banks offer higher interest rate on lower deposit amount (less than Rs 50 lakhs/1 crore). It makes sense to split your FD in multiple smaller FDs to get the highest interest rate.

NRE Fixed Deposit – Lower Interest on Higher Amount – Bank of Baroda Example

7. There is NO additional interest for Senior Citizens or bank staff for NRE deposits.

8. Premature closure of FD/RD is permitted for with some penalty on the interest (usually 1% lower interest than applicable rates). Some banks waive off this penalty. However there would be NO interest in case the NRE deposit remained invested for less than 1 year.

9. The interest is compounded quarterly for most banks

10. Only funds from overseas income (in foreign currency) can be deposited for NRE FD/RD account. The amount is converted to Indian Rupee on deposit.

Best FCNR Deposit Rates for SGD – Singapore Dollar – May 2017

FCNR (Foreign Currency Non Resident) account is fixed deposit account offered by banks in India to non resident Indians (NRIs) and is operated in foreign currency. FCNR deposits are good investment option for NRIs in Singapore as the interest rate offered by banks in India are way higher than that offered by banks in Singapore.

For instance one of the biggest bank DBS Bank, Singapore have interest rate in the range of 0.35% for one year deposit to 1.20% for five year deposit. In comparison ICICI Bank offers 2.03% for 1 year deposit and 2.83% for 5 year term.

The second advantage is Singapore taxes only income generated in the country and not worldwide income. Hence for NRIs in Singapore the interest earned on FCNR deposit is tax free as its neither taxed in India nor in Singapore!

FCNR Deposit – Tax in Singapore

The third benefit is the principal and interest earned is fully repatriable, which means NRIs can transfer their money back without much formalities.

Also Read: Best NRE Fixed Deposit Interest Rates

The fourth advantage is the investor has NO currency exchange risk as you deposit in foreign currency, the interest earned is in foreign currency and when you withdraw you get back the amount in currency in which the deposit was made.

This post compares the interest rate offered on SGD (Singapore Dollar) FCNR Deposits.

Singapore Dollar (SGD) FCNR Deposit Rates:

The table below compares the interest rates offered on SGD FCNR deposits across various tenures. The highest FCNR rates have been highlighted. Also We have DBS bank and OCBC Bank Singapore as benchmark for comparison.

As can be seen Lakshmi Vilas Bank, Karnataka Bank and City Union Bank pays highest interest on FCNR deposits in Singapore Dollars. 

Also Read: NRE Vs NRO – Which is the right account for NRIs?

FCNR Account Rules:

The minimum deposit tenure for FCNR FD is 1 year and maximum tenure is 5 years.

In most cases there is NO penalty for pre-mature closure of FCNR deposit account. However in case of premature closure before completion of 1 year, no interest would be paid.

Best FCNR Deposit Rates for US Dollars – May 2017

FCNR (Foreign Currency Non Resident) account is a fixed deposit account offered by banks in India to non resident Indians (NRIs) and is operated in foreign currency.

These are quite popular investments for NRIs because of the higher interest rate offered by banks in India as compared to their country of residence. For e.g. As of today State Bank of India offers 3.06% interest on its FCNR (US Dollar) deposit for 5 year term; in comparison Wells Fargo offers 0.7% for 58 months CD Deposit (Fixed deposit).

The second benefit is the principal and interest earned is fully repatriable, which means NRIs can transfer their money back without much formalities.

The third benefit is the investor has NO currency exchange risk as you deposit in foreign currency, the interest earned is in foreign currency and when you withdraw you get back the amount in currency in which the deposit was made.

Also Read: Best NRE Fixed Deposit Interest Rates

The fourth benefit is the interest earned on FCNR deposits are tax free in India. However it may be taxable in their country of residence.

Most banks accept deposit in USD (US Dollar), GBP (Pound), EUR (Euro), AUD (Australian Dollar), CAD (Canada Dollar), CHF (Swiss Franc), SGD (Singapore Dollar), JPY (Japan Yen). A few banks also accept deposit in HKD (Hong Kong Dollar), NZD (New Zealand Dollar) and SEK (Swedish Krona).

This post compares the interest rate offered on US Dollar FCNR Deposits.

US Dollar FCNR Deposit Rates:

The table below compares the interest rates offered on US Dollar FCNR deposits across various tenures. The highest FCNR rates have been highlighted.

As can be seen Tamilnad Mercantile Bank, Indian Overseas Bank and Vijaya Bank pays highest interest on FCNR deposits in US Dollars.

Also Read: NRE Vs NRO – Which is the right account for NRIs?

FCNR Account Rules:

The minimum deposit tenure for FCNR FD is 1 year and maximum tenure is 5 years.

In most cases there is NO penalty for pre mature closure of FCNR deposit account. However in case of premature closure before completion of 1 year, no interest would be paid.