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FIXED DEPOSITS & BONDS
FIXED DEPOSITS & BONDS
Fixed Deposits (FDs) are a popular investment option in India, providing a secure and stable way to earn returns on savings. Here are key aspects to understand about Fixed Deposits in India:
Definition
A Fixed Deposit is a financial instrument where an individual deposits a lump sum amount with a bank or financial institution for a fixed period at a predetermined interest rate.
Types of Fixed Deposits
These have a fixed tenure, and the interest rate is determined at the time of deposit.
These have a lock-in period of 5 years and offer tax benefits under Section 80C of the Income Tax Act.
Interest Rates
- Interest rates on Fixed Deposits vary among banks and financial institutions.
- Senior citizens often receive higher interest rates on FDs.
Tenure
- FDs have a fixed tenure, ranging from a few days to several years.
- The interest rate may vary based on the tenure, with longer tenures often offering higher rates.
Tax Implications
- Interest earned on FDs is taxable as per the individual's income tax slab.
- TDS (Tax Deducted at Source) is applicable on interest income exceeding a certain threshold.
Bonds are debt instruments that represent a loan made by an investor to a borrower, typically a government or a corporation. In India, bonds play a significant role in the fixed-income investment landscape. Here are key aspects to understand about bonds in India:
Types of Bonds
Issued by the central or state governments. Examples include Government of India Savings Bonds and State Development Loans (SDLs).
Issued by private companies to raise capital. Companies issue bonds to investors, and in return, promise periodic interest payments and return of the principal amount at maturity.
Issued by local government bodies (municipalities) to fund infrastructure projects.
Issued by private companies to raise capital. Companies issue bonds to investors, and in return, promise periodic interest payments and return of the principal amount at maturity.
Bonds pay periodic interest to bondholders, and the interest rate is known as the coupon rate. It's expressed as a percentage of the face value of the bond.
Bonds have a specified maturity period, after which the principal amount is repaid to the bondholder. Maturity periods can vary from short-term (less than one year) to long-term (10 years or more).