Finance

Life is a progression. You could never stop it with the taxes. How about a Tax-free Fixed Deposit?

Is there a Future in Fixed Deposits?

Investment is the core of the future. Turn your investments into your weapons using Fixed Deposits (FD). FDs are offered not only by banks but also the non-banking financial companies. FDs work for a fixed period. We invest money for a specific period or tenure. When the maturity has been reached, we get back the sum invested with higher interests; the interest rates here are much greater than in a savings account.

Fixed Deposit Deposits also have various names in various countries. However, it is called a term deposit in multiple countries – countries like Canada, Australia, and New Zealand. It works the same as Fixed Deposit, just like the one in India and the United States, which is again similar to the term bond or as it is called in the United Kingdom.

Depending on the bank and economic status, the interest rates are fixed. Some banks require us to create a separate account. The interest rates may vary from 3 to 8 percent (subject to change based on the bank and country). The tenure varies from days to years.

However, we can choose the period and amount to be invested from the options that are available – it will usually range from 7 days to 10 years. As the name says, the money cannot be withdrawn or removed from the account for a fixed period that was predetermined by you.

After the period ends, you will receive the amount as a lump sum which includes the investment and interest given by the bank.

There are many features of a fixed deposit. But, before we dive right into that – you need to know that you must spend money wisely. Let your cash rotate around investments when the world revolves around money.

Let the investments build your future. The future in Fixed Deposits is as safe as a good savings plan.

Note: Please always consult your financial advisor before making any financial decision. 

Wondering If Fixed Deposits Are Taxable In India?

According to the Income Tax Act – of 1961, interest on Fixed Deposits is also treated as income from other sources, and hence, it is fully taxable. So, if this is what you were thinking about all along, you can be sure of it now.

But there is the perk of Form 15G and Form 15H – for some tax benefits, which we will talk about later in this article.

The taxes are based on our gross annual income. Similarly, the Fixed Deposit interest earnings are included in our gross yearly income, and the tax liability is estimated, following the prevailing tax laws.

How to check If we are liable to pay Tax on our Fixed Deposit?

Taxes and Conditions change frequently based on our economic conditions and the working of the banks. Always have a PAN account before having a bank account, as it serves as proof and saves us from heavy taxes. However, from April 2019 onwards, if the interest on Fixed Deposit is more than 40,000 rupees, then the PAN users would be liable to pay supposedly 10% tax, and non-PAN users would be responsible for paying 20% tax on the total interest earned.

This interest would be deducted as TDS (Tax deducted at source) at the time of credit of annual interest. The upper limit of 40,000 rupees is not applicable on aggregate earnings but is for the individual Fixed Deposits.

How does Tax Deducted At Source (TDS) on Fixed Deposit work?

The Tax on Fixed Deposit Interest is deducted as Tax Deducted at Source (TDS) at the time of annual interest credit. The bank will automatically charge TDS (Tax Deducted at Source) on the interest earned on your Fixed Deposit in a given year. To distribute the burden of tax payment – the Tax is imposed every year on the interest earned. The issuer deducts the TDS (Tax Deducted at Source) when a claim is made but not when the appeal is received.

However, the total Tax on FD is calculated according to the income tax slab of that particular year.

Can You Avoid Taxes on your FD? 

Tax is collected for the welfare of our society. But the Tax is not imposed as a burden on the society. Still, it could become exhaustive and tiresome sometimes; that’s why you can use some perks along the way.

• Tax Deducted at Source (TDS) applies to all the interest income earned in India, including the Fixed Deposits. In every financial year – if the income that is earned by a person through interest exceeds 10,000 rupees, the applicant or the account holder will have to pay the Tax, and it is mandatory. However – if the interest earned is less than Rs. 10,000, the account holder will not have to pay any tax.

• If the interest earned from Fixed Deposits and the total taxable income earned by a person during the financial year is not more than the prescribed taxable limit, you need to submit form 15G or 15H, which is applicable.

Differences between form 15G and 15H – Form 15G is for the public other than senior citizens, while Form 15H is for senior citizens. The applicant for form 15G must be a resident of India for 60 years or less, and their income should not be more than the prescribed tax limit. Form 15H could only be filled by an Indian resident above 60 years of age and must fall below the prescribed tax limit.

• Good Managing skills can save us from taxes by making investments so that it does not exceed 10,000 rupees in one year. For example, one could invest in a one-year Fixed Deposit in the month of October – in such a manner; that the financial year would be split into two as the financial year ends on 31st March. You can save TDS on your investment.
  

The Bottom Line

A person is liable to pay Tax only when the interest is above ten thousand rupees. On the contrary, the schemes and amounts can change every financial year depending on the societal income. So by avoiding the higher Fixed Deposits, we can avoid paying taxes.

The Covid-19 pandemic has made people aware of the importance of having life insurance. Also, as several people exhausted their savings during the pandemic, they searched for investments that offered better returns than traditional ones. The financial uncertainties have made people reflect on their choices and revamp their financial choices. One such financial product that gained popularity during and after the pandemic is the Unit Linked Insurance Plan (ULIP).

A ULIP is a financial instrument that provides life coverage and returns on investments. The premiums you pay are partially used towards life insurance and partially used towards investments. There are several types of ULIPs you can choose from based on your risk appetite and financial goals. When the ULIP matures, you receive a maturity amount that includes your investment and the returns you earned on it. Here is what made ULIP the perfect scheme to invest in during and after COVID-19:

Provides life coverage

ULIP is a type of life insurance, and hence, the core benefit is providing you with life coverage. It ensures that during the tenure of the policy, if the policyholder loses their life, the insurance aspect will financially protect their loved ones. The nominee that you have mentioned in the policy will receive the sum assured in case of your sudden demise. Also, there are additional riders you can choose to get financial coverage for specific conditions, like, the critical illness rider. Ensure that your ULIP plan offers enough coverage to suffice your dependents andrepay any liabilities that you may have.

Helps achieve long-term goals

ULIP accelerates wealth creation by offering huge returns in the long haul. Based on the goal you have, you can choose from the types of ULIP and invest accordingly. Be it having a retirement corpus or saving up for education, you can focus on a goal and make investments accordingly. Equity-based ULIP funds easily offer higher returns than traditional investments. Over the years, with the power of compounding, one can generate sufficient funds not only from the amount you have invested but also on the returns that you earned over the years.

Offers flexibility

ULIP benefits as an investment, depending upon the types of investment you choose. If you can take risks, you can invest in equity funds. They offer huge returns for the high risks involved. If you are looking for a safe investment, there are debt funds available, that, for low risk, comparatively offer low returns. Here, the money is invested in corporate and government bonds. You can also choose investments that are a mixture of both; they’re known as balanced funds. They generate moderate returns as the amount is partly invested in equity funds and partly in debt funds. One of the unique features ofa ULIP is that you can switch your fund allocation anytime you want and make the most of the market fluctuations. For example, if you had invested in the equity funds of ULIP before COVID-19, you could switch to debt funds during the pandemic, making it a safer option. Based on your risk appetite and market conditions, you can switch the allocation and maximize the potential of your returns.

Useful for emergencies

The COVID-19 pandemic made people take seriously the uncertainties of life and the existence of an emergency fund to rely on during those times. ULIPs come with a lock-in period of 5 years. After that lock-in period, you can claim free partial withdrawals anytime you want. The availability of partial withdrawals with no charges is one of the ULIP benefits that ensure you have funds to access in times of emergencies.

Tax benefits

A ULIP plan is designed in such a manner that the policyholder gets tax benefits on multiple levels of the plan. Section 80C of the Income Tax Act states that the premiums that you pay for your ULIP are exempt from taxes. The amount that you receive when your ULIP matures is also exempt from taxes. The sum assured that your nominee receives in the event of your demise is exempt from taxes as well. These are according to the current tax norms, and it is important to check the updates from time to time.

Starting a new job in the insurance industry can be a good choice for new and experienced workers. It’s a job that allows for flexibility and a wide range of exciting clients, depending on your specialization. It can take a lot less time to become an insurance agent than other jobs that require a license. The requirements for becoming an insurance agent vary from state to state.

Many steps must be taken to become a POS insurance agent. Most of your licensing time will be based on how well you do in an online class that requires many study hours. A week or two may also pass before you get your license. After passing your exam and background checks, you may also have to wait for the license.

Look at these steps to becoming an insurance agent if you are ready to start making money from insurance sales!

Decide What Kind Of Insurance Agent You Want To Be

Start by getting to know the field. Therefore, it should not surprise you that insurance agents deal with things like money and business. There are many different insurance fields, so figure out which one you want to work in. Life, health, property, and liability are just a few things that insurance deals with, but there are many more.

Decide Which Insurance Products You Will Sell.

It is possible to get many different types of business insurance and personal insurance policies. Personal lines of insurance are for people and their families. These things are covered by this: insurance for cars, home insurance, and even life insurance.

As a business insurance agent, you make sure that your clients have policies that cover everything from general liability to property damage and errors and omissions.

Review Your State’s Licensing Requirements

It is essential to know what products you will be selling before you start getting licensed. This way, your insurance agent business can get the right license.

In your state, the name of your license will be different from the name of your state. You may need to get many different licenses for your job. Find out more about what you need to do from your state licensing department or the company you want to work for.

Get A Job At An Insurance Company So You Can Sell Products.

A company must hire you to sell its products before you can do so, and you must be approved by them first. You will need to fill out an application online for each insurance company you want to sell products for and get an appointment and binding authority, which will be on your state insurance license. You will need to do this for each company.

Find And Maintain Clients.

A license means that you can do what you want to. You will need to start looking for them now to find new clients. As a new agent, many people begin by writing their insurance and asking for business from their friends and family first. This is a great way to get a sense of how the systems work and learn how to quote new coverage.

A good idea at this point would be to start advertising your business. You might want to join the local chamber of commerce, make a website and advertise your business online, or look into local advertising. Many options are out there, and most of them will require some testing to make sure you find what works best for you, but you will get there in the end.

Protect Your Business

POS insurance agents who start their companies need to ensure that they have commercial insurance. There are many different types of insurance coverage to think about. General liability insurance will cover you in many different ways.

It is one of the most common risks for you if a client gets hurt while at your office. Getting hurt or being sued because you tripped over a carpet could be caused by something as simple as that. This type of insurance can be added to a business owner’s policy, and it often comes at a lower price.