Bank FD: To avoid losses, definitely know about 5 risks, there is also a risk of losing money in this
Inflation affects every type of investment and also increases risk. Suppose, a bank is giving 8 percent interest on FD and at that time inflation rate is 7%, then you are getting only one percent actual return on a deposit. FDs are not affected by market volatility.
Fixed Deposits (FDs) have always been a popular means of investment in banks. In this, investors not only get assured returns but also reduce the risk. But, in reality, it is not so. Investment advisors believe that even though FDs are considered the least risky investment option, it also has their limitations.

In this, there is a risk of losing your money if the banks default. There is no facility to withdraw funds before maturity. Inflation also affects FD interest. There are five such risks, which should be kept in mind while getting an FD.
There have been cases of the sinking of some small cooperative banks. In such a situation, the risk on the investors' deposits increases. Under the new rule, in case of the sinking of a bank, insurance is available up to Rs 5 lakh on the total deposit. In such a situation, if you have made an FD of Rs 15 lakh in a bank and that bank sinks, then you will get a maximum of Rs 5 lakh only. The remaining Rs 10 lakh is in danger of drowning.
Interest earned on FD is taxable. It is taxed according to the slab by adding it to the earnings. However, if you are more than 60 years of age, then you get a deduction of up to 50,000 on the interest earned on FD under section 80TTB of the Income Tax Act.


Inflation affects every type of investment and also increases risk. Suppose, a bank is giving 8 percent interest on FD and at that time inflation rate is 7%, then you are getting only one percent actual return on a deposit. FDs are not affected by market volatility. But, the real return keeps on increasing or decreasing according to inflation.

You have two options when the FD matures. First... you withdraw the money. Second... invest again in the form of FD. If you want, you can also open a new FD, but it will get the same interest, which is applicable now. This move will increase the risk on your long-term financial goals as you will not get as much interest in this FD as before.
While making FD, definitely calculate inflation, default, return, and tax liability. Never put the entire amount in FD. Also, invest in such instruments from where you can get capital when needed.


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