Planning Your Next Investment? Consider These Options, Instead Of FDs, For Higher Returns – News18

In India, many people take the route of investment. There are various investment options available in the market, like fixed deposits, mutual funds, stocks and more. Even though fixed deposits (FDs) are considered one of the safest options, they are still not able to offer better returns. This is mainly because of the inflationary pressures that affect the return rates on FDs.

In the last year, even though the return rates have increased to up to 7 per cent on FDs of 3 to 5 years, there has also been an increase in the retail inflation rate. This affects the returns that are offered after the deduction of tax.

According to reports, the Reserve Bank of India has estimated an average retail inflation rate of 5.4 per cent. In this way, despite getting interest up to 7 per cent, your real return reaches below zero compared to inflation. Currently, HDFC Bank, ICICI Bank and PNB are giving interest up to 7.1 per cent on FDs. But after paying tax on this, the actual return rate falls to 5 per cent. Similarly, currently, the interest rate on FDs in SBI is 6.5 per cent, but after paying tax, the actual return comes down to 4.63 per cent.

The return rate after the tax deduction is much lower than the retail inflation figures. This means that whatever interest rate one gets from the FDs, is not beneficial as the inflation rate is also the same.

According to financial experts, investing in FDs is not beneficial for people who fall into the high tax-paying slabs. For example, a taxpayer falls into the 30 per cent tax slab and the returns from their FD are up to 5.16 per cent. As the current retail inflation rate is 5.5 per cent, it means that the return they will be getting will be less than zero about inflation.

Financial advisors suggest that such people should invest in A-rated corporate bonds and debt mutual funds. A-rated corporate bonds are a top-rated debt obligation. Investors who buy corporate bonds lend money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal amount invested. On the other hand, debt mutual funds (DMF) are a type of mutual funds that generate returns by lending the invested money to government or private companies.

As compared to FDs, the risk in these investment options is also less, and the returns are also higher than in normal FDs. Corporate Bonds are better than FDs because their interest rates keep on changing because of the market. On the other hand, DMFs can be easily withdrawn with minimum charges as compared to FDs.