Bank Fixed Deposit

Bank Fixed Deposit

Bank fixed deposits and mutual funds are two distinct investment options that offer different benefits to investors. Bank fixed deposit is an investment scheme offered by banks where investors can deposit a sum of money for a fixed duration at a fixed rate of interest. The interest rate is determined by the bank and is generally higher than the savings account interest rate. The duration of the fixed deposit can range from a few months to several years. The investor receives the principal amount and interest on maturity. Bank fixed deposits are considered to be safe investments as they are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a certain limit.

On the other hand, mutual funds are investment vehicles that pool money from various investors and invest in different securities such as stocks, bonds, and money market instruments. Mutual funds are managed by fund managers who invest the money in different securities based on the investment objective of the fund. Mutual funds offer diversification, liquidity, and professional management to investors. Investors can choose from different types of mutual funds such as equity funds, debt funds, hybrid funds, and others based on their investment objectives.

Some mutual funds offer a fixed deposit scheme as one of their investment options. These funds invest a portion of their corpus in fixed deposits of different banks. The returns on these fixed deposits are generally lower than the returns on regular bank fixed deposits but offer the benefits of diversification, professional management, and liquidity. Investors can choose to invest in these funds based on their investment objectives, risk appetite, and investment horizon. The returns on these funds are subject to market risks and may vary based on the performance of the underlying fixed deposits.

A fixed deposit (FD), also known as term deposits, is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date.

As per section 194- A of the Income tax act 1961, income tax would be deducted at source from the interest on time deposits (deposits excluding Recurring deposits) with banks at prescribed rates if the amount of interest credited or paid during a Financial year exceed Rs. 10,000 branch wise. For calculating the cut-off point of Rupees Ten thousand, bank would also take into account the interest accrued during the accounting year in respect of the particular depositor.

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Tax Deducted at Source (TDS) / Withholding Tax
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