I have saved some money. want to put in fixed deposit for my kid. which policy and which bank will be the best?



I have nearly one lakh rupees and want to put in fixed deposit for my kid’s education. please suggest some good bank with maximum returns and I do not want to pay tax on it.

I have saved some money. want to put in fixed deposit for my kid. which policy and which bank will be the best?
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3 Replies to “I have saved some money. want to put in fixed deposit for my kid. which policy and which bank will be the best?”

  1. Dear friend!

    Your problem can be broken down into two parts:
    1. You want security for your kid’s education
    2. You don’t want any tax liabilities on whatever you get as returns from your investment. Right?

    I’d suggest you not to go for the bank FD’s then. Reason, the interest you receive on bank FDs (also known as ‘term deposits’) fall prey to taxation. The banks deduce 10% tax at their end before rolling out the final returns to you at the end of the term. If you fall under the 30% taxation bracket (actually, most of us do), then this means that the remaining 20% of the interest returns tax liabilities are to be bourne by you. There seems to be no escape.

    I’d suggest to put your money in Liquid Funds or Liquid Plus funds, if you plan to get the tax benefits besides enjoying gain over short term FDs. These special funds invest in government instruments, hence there is very low level of risk included in these types of funds. Besides, in the current markets, as there is very feable expectation for the market to face any further sharp dip, it is really a very safe bid to invest in such funds. Moreover, the money can be invested even for as little term as a day and can be redeemed within a couple of days.

    If the time horizon (for utilization of the funds for your kid) is longer than two years, I’d suggest to invest the money in ELSS funds….these are the mutual funds which give you tax consessions under Sec 80C. The only constraint is that there is a lock-in period of 3 years, before which if you intend to withdraw your money, you need to pay small amount as exit load (a sort of panelty). To invest in mutual funds, you should have a PAN card which is issued by the Income Tax Deptt, Govet. of India.

    But, if your time horizon for utilizing the money in the context is beyond 3 years, I’d suggest to invest in good quality shares. The condition of market reflects that the good shares are available at high discounts. It is a truth that in long run, the equities give highest returns and help in wealth creation. Moreover, if you remain with your investment with the company for more than 3 years in a row, you enjoy the benefits of Long Term capital gains on the profits you earn on those shares. Even you can distribute a part of your investment to MF as well as another to equities. This strategy broadens your money’s exposure besides reducing the risk related to the markets.

    For your benefit, I summarize:
    1. If your time horizon is less than a year: Invest in Liquid Funds / Liquid Plus Funds
    2. If your time horizon is greater than 3 years: Invest in MFs / Equities.

    I have been investing in the Equities / MFs for a while, and have learnt the rules of this game hard way. To share my experiences in the field of investments, I have started a blog, which you can visit. http://investmentconcepts.blogspot.com.

    Regards,
    Nitin



  2. Fixed deposit are the safest option for saving your hard earned money for future. The banks providing fixed deposit are:
    ABN AMRO Bank
    Axis Bank
    Bank of Baroda
    Canara Bank
    Corporation Bank
    Deutsche Bank
    HDFC Bank
    HSBC
    ICICI Bank
    IDBI Bank
    Standard Chartered
    State Bank of India

    The interest rate varies from 9.50 to 7.15.
    For more details have a trip here:
    http://www.paisawaisa.com/banking/fixed-deposit.aspx





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