There were times when fixed deposits were considered as a good passive income with no risk. Every elder around us would advise putting a fixed deposit for a safe return with less risk. But today if you see the fixed deposit rates, it makes us look beyond for other investment options.
Previously fixed deposits rates used to be more than the savings bank interest, so many people who had cash in their savings bank opened fixed deposits at good rates like 12%,9%, and the last was 8%. These rates were good for people who were looking for less risky investments and they were happy with returns.
But, after the pandemic, the fixed deposits rates went to a low up-to of 5.5%. which is closer to the normal savings bank interest rate before COVID-19.
So, currently, if you invest in a fixed deposit of Rs 100,000 at 5.5% per annum, the interest amount you earn is Rs 5500/year.
And earnings from fixed deposits are taxed according to your tax slab, consider you are under a tax slab of 10%, there will be a deduction of Rs 550.
There is one more factor which we never calculate during our investments, the inflation rate %.
If you are wondering what is inflation rate % , it is nothing but the price change which happens year on year .Like last year you would have purchased a kilo rice for Rs 50, but the same rice would cost Rs 53 the next year or in the next 6 months.
So currently the inflation rate in India is 5.5%
So returns from your FD investments would be 4.95% – 5.5% = – 0.55%
Actually by this FD investment you are making a loss of 0.55%
This is the current scenarios of Fixed deposits in India.
By the time you get your returns, you would have made a loss with your returns.
Your returns should always be on the positive side or else it will feel as if you made an investment, by the time your returns come the tax and inflation would have eaten up your returns.
Any investment option which has returns more than 8% is good investment options. Like LIC and mutual funds where the rate of returns seems to be more viable. The awareness of these calculations will helps you to calculate your investments.
Stay tuned….
