Mutual fund vs Fix deposit | what is the difference between the mutual fund and Fix deposit (FD) | benefits of mutual fund | how to calculate mutual fund and FD value | best way to invest | Interest rate of Fix deposit and mutual fund
Most Indians, which have a very large number of retired citizens, still rely heavily on fixed deposits compared to other investment instruments. In the last three years, the earnings of such investors have fallen to around 25 per cent. Is there any solution? Surely it is.
Today there are mutual fund products in the market that are most suitable for such investors. Not only do these products provide more interest than banking products, but the amount of tax on interest is relatively low. This gives returns and more attractiveness. The truth is that if you use mobile app specially designed by many fund companies to invest in mutual funds, then there is convenience and money exchange is also quick.
Capital market regulatory body The Securities and Exchange Board of India (SEBI) has recently made changes in the category of mutual funds, has changed radicalization of funds so far. In this case, liquid funds and ultra-shot tenure funds have emerged as the most accurate options of bank accounts. Returns on these funds are approximated according to the forecast and volatility is also not equal. The kind of definition that SEBI has made mandatory for such funds, has made things even better. During the last one year, liquid funds have given an average of 6.85%, while ultra-short duration funds ie extremely short-term funds have given returns of 6.47%.
It is a matter of monetary benefits from choosing such funds against banks' deposit schemes. The actual feature of these funds is that they are very easy to operate and the tax on them is extremely low. Investments and earnings in liquid funds can be paid through smartphone based apps only. Currently, many fund companies are offering this kind of service through the app. Through these apps, you can invest directly in such funds from your bank account. Not only this, through these applications, you can transfer funds from your funds to your bank account in more than 10 minutes without any hassle. Overall, in that these funds, which provide one and a half times interest to savings accounts, your capital is just outside your reach for a few minutes.
Investing in mutual funds is not limited to mere comparison of returns. We have many structures of taxation ie taxation. Many structures have a direct meaning that even after tax deduction, there is a big difference in earnings. This difference is because the returns earned from fixed deposits are considered as interest income, whereas returns received from mutual funds are counted as capital gains. Every year the interest earned is taxable. If your interest income from the bank (earning from the accounts and deposits) is more than Rs. 10,000, then the bank deducts 10 percent TDS on it.
If the bank does not have your PAN number, then it takes 20 per cent TDS deduction. It means that every year a portion of your earnings goes into tax and it is not linked to income. But if you invest in mutual funds, if you invest in the same fund again, then there is no tax on it, i.e. earnings increasing.
If your mutual fund investment period is more than three years, then there is another benefit. It is that such investment is counted in the Long Term Capital Gain (LTCG). In such a situation, it is taxed only on inflation-adjusted returns. But this facility is not available in fixed deposit. If compared to all these aspects, then in the fixed deposit, for a period of three years, in a scheme of mutual funds, there will be almost twice the income on investment of the same amount for three years.
Earlier, such a calculation and such a comparison could only be expected from a simple and knowledgeable investor. But today the funds giving good returns are also readily available, and the tools available for them and their investment benefits are also available in abundance. Now the time has come to increase trust in new funds of mutual funds against older instruments like fixed deposits for investment.
In the last few years, interest rates on Fixed Deposit (FD) have come down drastically and for the next several years this is going to be the situation. In this case, there are many schemes for mutual funds for those who invest in FD, which can be invested very easily on a better and near-fixed interest for very short period. This investment can be done only in a few minutes by mobile phone. The good thing is that now investors are becoming aware of such investments and its benefits.