after going through the Union Budget 2019 and announcement made by the finacne minister Mr. Piyush Goel. i was having discussion over announcement made by Finance minister, then A colleague of mine asked me, after budget -
Should I invest in Tax Saver FDs from now on, instead of ELSS?
I was dismissive at first, but upon further thinking, it stumbled upon me how the budget just made 5 year tax saver FD interim TDS free. It's now EET, just like ELSS; and unlike ELSS, returns are guaranteed.
Personally speaking, I don't decide where to invest solely based on tax laws, As in, I invest in ELSS for multi-cap equity exposure. Someone else might invest in PPF / EPF and exhaust their 80C exposure as it's Debt component in their retirement corpus.
But Tax Saver FDs look attractive too. The gains are taxable only upon maturity, but no more paying taxes on paper gain.
Let's take SBI 5 Year Tax Saver FD, and assume the rate can be 8% in near future. Even then, highest interest income from 1.5L FD in its 5th year would only be (150,000 * (1 + 8 / 100)^4 * 8/100) INR = 16,325 INR.
One thing to keep in mind here: every year, you'd be opening new FD.
3 years down the line, you might have 3 FDs, whose cumulative income might surpass the 40k limit. In such cases, it'd help to spread your FDs across 4-5 banks.
It'd be like laddering your FDs. 5 Years from starting this process, you'd have one FD maturing each year, and the gains would be added to your income that year.
Should I invest in Tax Saver FDs from now on, instead of ELSS?
I was dismissive at first, but upon further thinking, it stumbled upon me how the budget just made 5 year tax saver FD interim TDS free. It's now EET, just like ELSS; and unlike ELSS, returns are guaranteed.
Personally speaking, I don't decide where to invest solely based on tax laws, As in, I invest in ELSS for multi-cap equity exposure. Someone else might invest in PPF / EPF and exhaust their 80C exposure as it's Debt component in their retirement corpus.
But Tax Saver FDs look attractive too. The gains are taxable only upon maturity, but no more paying taxes on paper gain.
Let's take SBI 5 Year Tax Saver FD, and assume the rate can be 8% in near future. Even then, highest interest income from 1.5L FD in its 5th year would only be (150,000 * (1 + 8 / 100)^4 * 8/100) INR = 16,325 INR.
One thing to keep in mind here: every year, you'd be opening new FD.
3 years down the line, you might have 3 FDs, whose cumulative income might surpass the 40k limit. In such cases, it'd help to spread your FDs across 4-5 banks.
It'd be like laddering your FDs. 5 Years from starting this process, you'd have one FD maturing each year, and the gains would be added to your income that year.