These are five big disadvantages of investing in FD, know before investing money

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These are the five major disadvantages of investing in FD

FD Rate: ‘Investment’ is such a word after hearing which only one name comes to mind and that is FD, i.e. Fixed Deposit. Usually people also invest money in it, but they have no idea about the loss caused by it. Today we are going to tell you about five major disadvantages of FD investment.

1. Tax has to be paid on interest

You cannot directly credit the interest received on FD to your account. The interest received is fully taxed. When you file your ITR, the interest you get from FD is counted as an income and the government charges tax on it.

2. Tax on TDS

TDS is also applicable on the interest earned on FD. Banks deduct this from the interest earned at the end of each year. However, the depositor has the option to opt out of TDS and pay all the interest on maturity. Form 26AS is linked to the PAN card of the depositor and shows all the TDS deductions made for the FD.

tax conditiontax rate
When interest from all FDs in a given bank is less than Rs 10,000nothing
When interest gain exceeds Rs.10,000 10%
When FD maker does not provide his PAN card data 20%
When the total income of the FD holder and his income from all sources does not exceed 2,50,000 in a yearnothing

Note that no TDS will be deducted from FD interest if the annual income of the FD depositor does not exceed Rs 2.5 lakh. Submit Form 15G and Form 15H to the concerned bank branch to ensure that the bank is aware of your low income.

3. Low Interest Rate

While FD can offer you a maximum interest rate of 10%. Sometimes not even that much interest is earned, while other investment avenues including mutual funds offer returns that can exceed 20% or even 30%. But one problem with Mutual Funds (MFs) is that they are associated with high risk, those who have the ability to take more risk can earn more profit by investing in Mutual Funds.

4. Interest rate can be less than inflation

Sometimes the inflation rate can be higher than the interest rate of FD. Not only this, if you withdraw your amount from the bank before the fixed limit, then not a single penny is given to you by the bank more than the deposited amount.

5. No increase in interest rate

In FD, you get the same interest throughout the tenure, that is, you do not get a single rupee more than the percentage promised by the bank.

FDs were earlier only good for short term savings, but now they have longer durations. While the same cannot be counted for the tax-free option. But investment in PPF comes out of the tax net.

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