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Fixed Income Products
r Bank Fixed Deposits
r Corporate Fixed Deposits
r Public Provident Fund
r Kisan Vikas Patra
r National Savings Certificate
r Post Office Monthly Income Scheme
r Post Office Time Deposit Scheme
r Government of India 8% Taxable Bonds
r Capital Gain Bonds
r Senior Citizen Savings scheme
 
- Bank Fixed Deposits
- Corporate Fixed Deposits
- Public Provident Fund
- Kisan Vikas Patra
- National Savings Certificate
- Post Office Monthly Income Scheme (POMIS)
- Post Office Time Deposit Scheme (POTDS)
- Government of India 8% Taxable Bonds
- Capital Gain Bonds
- Senior Citizen Savings scheme
 

Bank Fixed Deposits

Bank Fixed deposit is best suited for those investors who want to invest a lump sum of money at a low risk and are comfortable committing it for a fixed period of time, and earn a rate of interest on the same.

r Flexible Deposit Terms : The tenure of fixed deposits can vary from as low as 7, 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 5 years. The minimum deposit amount also varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks. The amounts can be in multiple of Rs. 100.
r Great Deals: The banks are free to offer varying rates of interest for products of different maturities. If you are flexible in terms of deposit tenures, you might find differential interest rates in odd tenures like 390 days or 200 days.
r Safe Investments: Bank deposits are generally safe investments because they are insured under the Deposit Insurance & Credit Guarantee Scheme of India up to amount of Rs 1 Lakh.
r Flexible Interest Payment Terms : A Bank Fixed Deposit gives you the option of taking the interest income, as a lump-sum amount on its maturity as well as every quarter (quarterly interest payment) or every month (monthly interest payment)
r Electronic Clearing: The Interest payable on Fixed Deposit can also be transferred directly to Savings Bank or Current Account of the customer.
r

Compounding: Compounding of fixed deposit interest rate is available for all deposits more than 3 months.

 
Tax implications
The interest income earned on a deposit is taxable at the same tax slab as the customer is in. It will be added to his income in the year under the head “Other Income”.
 

Corporate Fixed Deposits

Fixed Deposits in companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. Deposits thus mobilised are governed by the Companies Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option.

Benefits of investing in Company Fixed Deposits

r High interest.
r Short-term deposits.
r Lock-in period is only 6 months.
r No Income Tax is deducted at source if the interest income is up to Rs 5,000 in one financial year.
r Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000.
 

Public Provident Fund

Salient Features

r The rate of interest is 8% compounded annually.
r The minimum deposit is 500/- p.a
r The maximum is Rs. 70,000/- p.a
r Interest is totally tax free.
r Tax saving instrument under section 80C.
r Loan facility available from third year.
r The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.
r The Scheme is for 15 years.
r One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.
r The deposit can be in lumpsum or in convenient installments, not more than 12 installments in a year or two
r installments in a month, subject to total deposit of Rs.70,000/-.
r It is not necessary to make a deposit in every month of the year.
r The amount of deposit can be varied to suit the convenience of the account holders.
r The account in which deposits are not made for any reason is treated as discontinued, account and such an account cannot be closed before maturity.
r The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.
r The account can be opened by an individual or a minor through the guardian.
r Joint account is not permissible.
r Those who are contributing to GPF Fund or EDF account can also open a PPF account.
r A Power of Attorney holder can neither open nor operate a PPF account.
r The grand father/mother cannot open a PPF on behalf of his/her minor grand son/daughter.
r The deposits shall be in multiples of Rs.5/- subject to minimum of Rs.500/-.
r The deposit in a minor account is clubbed with the deposit of the account of the guardian for the limit of Rs.70,000/-.
r No age is prescribed for opening a PPF account.
r Interest is not contractual but the rate is notified by the Ministry of Finance, Govt. of India, at the end of each year.
r The facility of first withdrawal in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance.
r Thereafter one withdrawal in every year is permissible.
r Premature closure of a PPF Account is not permissible except in case of death.
r Nominee/legal heir of PPF Account holder on death of the account holder cannot continue the account.
r The account has to be closed in such case.
r The account holder has an option to extend the PPF account for any period in a block of 5 years at each time.
r The account holder can retain the account after maturity for any period without making any further deposits.
r The balance in the account will continue to earn interest at normal rate as admissible till the account is closed.
r One withdrawal in each financial year is also admissible in such account.
r A PPF account can be opened either in a Post Office or in a Nationalsed Banks.
r The Account is transferable from one Post Office to another and from Post Office to Bank or from a Bank to a Post office.
r Account is transferable from one Bank to another bank as well as within the bank to any branch.
r Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.
r The interest on deposits is totally tax free.
r Deposits are exempt from wealth tax.
r The balance amount in the PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.
r Nomination facility is available.
r The Best option for long term investment
 

Kisan Vikas Patra

Salient Features

r Money doubles in 8 years and 7 months.
r Facility for premature encashment.
r No maximum limit on investment.
r No TDS.
r Rate of interest 8% compounded annually.
r Two adults, individuals and minor through guardian can purchase.
r Companies, Trusts, Societies or other Institutions are not eligible to purchase.
r Non-Resident Indian/HUF are not eligible to purchase.
r Maturity proceeds not drawn are eligible for Post Office Savings account interest for a maximum period of two years.
r Facility of reinvestment on maturity.
r KVPs can be pledged as security against a loan to Banks/Govt.Institutions.
r KVPs are encashable at any Post Office before maturity by way of transfer to desired Post office.
r KVPs are transferable to any Post Office in India.
r KVPs are transferable from one person to another person before maturity.
r Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced patras.
r Nomination facility is available.
r Facility of purchase/payment of Kisan Vikas Patras to the holder of Power of Attorney.
r Rebate under section 80 C is not admissible.
r Deposits are exempt from Wealth Tax.
 

National Savings Certificate

Salient Features

r Rs. 1000/- grows to Rs. 1601/- in six years.
r Minimum investment Rs. 500/-
r Maximum no limit.
r Certificates can be pledged as security against a loan to banks/ financial Institutions.
r A Tax saving investment under Sec 80C
r Individual or minor can apply
r Rate of interest 8% compounded half yearly
r Two adults, individuals, and minor through guardian can purchase.
r Companies, Trusts, Societies or any other Institutions are not eligible to purchase.
r Non-resident Indian/HUF cannot purchase.
r No premature encashment.
r Annual interest earned is deemed to be reinvested and qualifies for tax rebate for the first 5 years under section 80 C of the Income Tax Act.
r Maturity proceeds not drawn are eligible to Post Office Savings Account interest for a maximum period of two years.
r Facility of reinvestment on maturity.
r Facility of encashment of certificates through banks.
r Certificates are encashable at any Post Office in India before maturity by way of transfer to desired Post Office.
r Certificates are transferable to any Post office in India.
r Certificates are transferable from one person to another person before maturity.
r Duplicate certificate can be issued for in case the original one gets lost, stolen, destroyed, mutilated or defaced certificate.
r Nomination facility is available.
r Facility of purchase/payment to the holder of Power of Attorney.
r Tax Saving instrument - Rebate admissible under section 80 C of the Income Tax Act.
Deposits are exempt from Wealth Tax.
 

Post Office Monthly Income Scheme (POMIS)

Salient Features

r Interest rate of 8% per annum payable monthly.
r 5% bonus also payable on maturity Maturity period is 6 years.
r Minimum investment amount is Rs.1500/- or in multiple thereof.
r Maximum amount is Rs. 4.50 lakhs in a single account and Rs. 9 lakhs in a joint account.
r Premature encashment facility after one year.
r No TDS.
r Account can be opened by an individual, two/three adults jointly, and a minor through a guardian.
r A minor having attained 10 years of age can open an account in his/her own name directly.
r Non-Resident Indian / HUF cannot open an Account. Minors have a separate limit of investment of Rs. 3
r lakhs and the same is not clubbed with the limit of guardian.
r A separate account is opened for each deposit.
r Any number of accounts can be opened subject to the maximum prescribed limit.
r Facility of automatic credit of monthly interest to saving account if accounts are at the same post office.
r Facility of premature closure of account after 1 year to 3 years @ 2.00% discount.
r Deduction of 1% if account is closed prematurely at any time after three years.
r Facility of reinvestment on maturity of an account.
r Interest not withdrawn does not carry any interest.
r Maturity proceeds not drawn are eligible to earn savings account interest rate for a maximum period of two years.
r Account is transferable to any Post Office in India, free of cost.
r Nomination facility is available.
r Rebate under section 80 C is not admissible.
r Most suitable scheme for senior citizens and for those who need regular monthly income.
r Deposits are exempt from Wealth Tax.
 

Post Office Time Deposit Scheme (POTDS)

Salient Features

r Minimum amount of deposit is Rs.200/-.
r Interest payable annually but calculated quarterly and the interest ranges from 6.25% - 7.50%
r No maximum limit.
r Account can be closed after 6 months but before one year without any interest penalty.
r Facility of redeposit on maturity of an account.
r No interest is payable on undrawn interest amount.
r Account can be opened by an individual, two adults jointly and minor through guardian.
r A Minor who has attained the age of 10 years can open the account in his/her own name to be operated directly.
r Non Resident Indian / HUF can not open the account.
r Any number of accounts can be opened.
r Two, three and five years accounts can be closed after one year at a discounted rate of interest.
r Deposits not drawn on maturity are eligible to saving account interest rate for a maximum period of two years.
r Account can be pledged as security against a loan to banks/ Government institutions.
r Accounts are transferable from one Post office to any Post office in India.
r Rebate under section 80-C is not admissible.
r Interest income is taxable.
r Deposits are exempt from wealth tax.
r No T.D.S.
r Nomination facility available.
 
Government of India / RBI - 8% Taxable Bonds
Eligibility
As an individual
(i) who is not a Non Resident individual (ii) In his / her individual capacity or joint basis or anyone or Survivor basis (iii) On behalf of minor as father / mother / legal guardian .
(iv) HUF (v) Certain Institutions
Minimum Investment Rs. 1000/-
Maximum Investment Unlimited in multiples of Rs.1000/-
Interest Rate 8% p.a. Taxable
Interest Payable Half Yearly or Cumulative
Tenure / Maturity Period 6 years
Transferability Not transferable
Tradability Not tradable
Loan Facility Not eligible as collateral for loans from banks, financial institutions and NBFC
Income Tax Not eligible for rebate. Even interest on the bonds is taxable as applicable according to relevant tax status
Wealth Tax Exempt from the Wealth Tax under the Wealth tax Act 1957.
 
Capital Gain Bonds

Section 54EC of the I-T Act, 1961, provides relief from capital gains tax. Under this Section, gains on transfer of a long-term capital asset can be exempted from tax if the money is invested in bonds of specified institutions such as NABARD, the Rural Electrification Corporation (REC), SIDBI or the National Highway Authority of India. Such bonds are redeemable after three years. However, to save tax, one has to invest in these bonds within six months from the date of transfer of the original asset. After the lock-in period or on the maturity of the bonds, one is free to put in his money in any kind of asset. Please note that the interest on these bonds is taxable.
 

Senior Citizen Savings scheme

Salient Features

r 9% interest per annum payable quarterly.
r Minimum Deposit: Rs 1000 and multiples thereof.
r Maximum Limit : 15 Lakhs.
r The scheme is for 5 years and can be extended for a further period of 3 years.
r Premature closure facility is available after 1 year with nominal penalty.
r Risk free investment- A central govt scheme
r Individual aged of 60 years and above can invest.
r Retiring employees aged 55 years and above can invest under this scheme.
r A tax saving instrument under Sec 80 C
r Joint account can be opened with spouse.
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