FD Vs Small Savings Schemes: If you are thinking of investing in FD or any small savings scheme, then you should compare their returns and other benefits.
FD Vs Small Savings Schemes: Fixed Deposit (FD) will be better or Small Savings Scheme, not only does it give guaranteed returns but also keeps the money safe. If you want to invest, then you must be thinking whether Fixed Deposit (FD) will be better or Small Savings Scheme? Before investing in it, you should compare the returns and other benefits.
Usually FD gives investors an interest of 6.7 to 7 percent per annum, while other tax saving schemes give slightly higher returns. As per the current interest rates, Public Provident Fund (PPF) gives a return of 7.1 percent per annum. Investors get an interest of 8.2 percent per annum on Senior Citizen Savings Scheme. Sukanya Samriddhi Account gives a return of up to 8.2 percent per annum. National Savings Certificate (NSC) gives a return of 7.7 percent and Kisan Vikas Patra (KVP) gives a return of 7.5 percent.
Tax Savings
One thing investors should keep in mind is that the new tax regime – which is now also the default regime – does not entitle taxpayers to claim exemptions on their investments. This means that when you invest in PPF and other small savings schemes, the investment income will not get any special exemptions and will be taxable just like an investment in a term deposit.
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, the income earned from these investments in subsequent years will be tax free, which does not apply to interest on fixed deposits. If you fall in a lower tax bracket or zero tax bracket, it may not matter much. But those who fall in the 30 per cent income tax bracket lose almost one-third of their interest income if they lock money in fixed deposits. Those in the 20 per cent tax bracket will lose one-fifth of their income in taxes in case of FDs. Speaking to Mint, Preeti Zende, founder of Apna Dhan Financial Services, said that every investment product has its own features and benefits and should be chosen accordingly.
