Saving Schemes: Choose FD or Small Saving Scheme? Which one will give better returns..

FD Vs Small Savings Schemes: Fixed Deposit (FD) will be better than or Small Savings Scheme, not only does it give guaranteed returns but also keeps the money safe. If you want to invest, then you must be thinking about whether a Fixed Deposit (FD) will be better or a Small Savings Scheme. Before investing in it, you should compare the returns and other benefits.

Usually, FD gives investors an interest of 6.7 to 7 percent per annum, while other tax-saving schemes give slightly higher returns. As per the current interest rates, the Public Provident Fund (PPF) gives a return of 7.1 percent per annum. Investors get an interest of 8.2 percent per annum on the Senior Citizen Savings Scheme. Sukanya Samriddhi Account gives a return of up to 8.2 percent per annum. National Savings Certificate (NSC) gives a return of 7.7 percent and Kisan Vikas Patra (KVP) gives a return of 7.5 percent.

Tax Savings
One thing investors should keep in mind is that the new tax regime – which is now also the default regime – does not allow taxpayers to claim exemptions on their investments. This means that when you invest in PPF and other small savings schemes, the income from the investment will not get any special exemption and will be taxable just like an investment in a term deposit.

Investment Instrument Interest Rate
Fixed Deposits Average 7 per cent
Public Provident Fund 7.1 percent
Senior Citizen Savings Scheme 8.2 percent
Sukanya Samriddhi Account 8.2 per cent
National Savings Certificate 7.7 percent
Kisan Vikas Patra 7.5 per cent

However, the income earned from these investments in subsequent years will be tax-free, which does not apply to interest on fixed deposits. If you fall in a lower tax bracket or zero tax bracket, it does not make much difference. But those who fall in the 30 percent income tax bracket lose almost one-third of their interest income by locking money in fixed deposits. Those in the 20 percent tax bracket will lose one-fifth of their income in taxes in case of FDs. Speaking to Mint, Preeti Zende, founder of Apna Dhan Financial Services, said that every investment product has its features and benefits and should be chosen accordingly.

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.