An investment that provides financial support with the least financial risk in the current situation is a necessity in your portfolio. Fixed Deposits are considered as one of the supportive investments for a periodic income and low-risk investment. On the other hand, gold in physical form is also a popular form of investment but considered for growth and not for income. The returns on gold depend on external factors and it fluctuates a lot in the short-term.
Benefits of Gold Investment
The benefits of investing in gold are:
- High Liquidity
You can sell your gold as and when you need. In the case of Gold funds, one can subscribe and redeem it easily.
2. Capital Gain Tax Benefits
Some of the gold funds are treated as a non-equity product when it comes to taxation. One can claim long-term capital gains tax benefit but after one year of investment.
3. Diversified Investment Portfolio
Gold is a convenient way to diversify investment portfolio in various forms i.e. Physical Gold, fund-of-fund (FoF), Gold ETF, Sovereign Gold Bonds (SGBs).
Benefits of Fixed Deposits
The
benefits of Fixed deposits are:
- Safe Instrument without Market Influence
Fixed deposits are highly creditworthy and independent of market fluctuations. A good Company FD such as Bajaj Finance FD has the highest safety ratings of FAAA/Stable by CRISIL and MAAA/Stable by ICRA. These ratings indicate the creditworthiness of the instrument.
2. Rate of returns
Fixed deposits provide assured returns for the entire locked-in term. The returns are guaranteed and higher for senior citizens as compared to other customers. FD rates in India with banks is between 5-6.5% but with Bajaj Finance FD the interest rate can go up to 6.85%.
3. Flexible Lock-in Period
Investors can choose a tenor of a fixed deposit as per their goals of investing i.e. children education, marriage, home etc.
4. Liquidity
Liquidity of fixed deposit depends on the terms of the financial institution. Premature withdrawals are allowed but subject to penalty.
5. Loan against investment
Loan against fixed deposits is easily available from banks and financial institutions at lower interest rates than the interest rates applicable to the personal loans. Investors can avail loan up to 75% of the fixed deposit value, depending on the financial institution's terms and conditions.
6. Additional income through periodic payouts
Fixed deposits provide regular interest to the investors. Investors, especially senior citizens dependent on interest on their investments, can choose the frequency to receive the interest payout periodically as per their needs. They can use the FD calculator monthly interest facility to get the estimate of the amount to be received.
For
periodic interest credit, one needs to invest in non-cumulative fixed deposits
instead of cumulative fixed deposits.
7. Taxation and deductions
Returns on FDs are taxable in the hand of investors. Investors can avail tax deduction for investments up to Rs.1.5 lakh in a financial year under Section 80C, Income Tax Act, 1961 if they invest in a tax-saving FD.
Tax
Deducted at Source (TDS) will be applicable under Section 194A of the Income
Tax Act 1961 if total interest earned, paid or accrued, on investments exceeds
Rs.40,000 (Rs.50,000 for senior citizens) for a financial year.
Under
Section 80TTB, senior citizens can claim TDS deduction up to Rs.50,000. And
under section 80TTA, investors other than senior citizens can claim TDS
deduction up to Rs.40,000.
8. Hassle-free online investment facility
One can invest in fixed deposits online. With Bajaj Finance, you can earn an additional interest rate benefit of 0.10% if you invest online. FD rates today with Bajaj Finance are lucrative i.e. up to 6.85% depending on investor type.
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While both types of investments have their benefits, you can consider FD as an ideal option for long term investments. As compared to gold, FD offers more stability and flexibility.