Bank FD v/s Banking Fund

Bank FD v/s Banking Fund

We Indian love very much keep deposit in bank FD. Since my childhood I have seen immense faith of people in bank FD because they all think that bank FD is the safest instrument on this earth to keep their hard earned money. Very few people know that the bank only give guarantee maximum Rs 1 lakh through insurance in case of any system collapse or bankruptcy. It means more than Rs 1 lakh in bank always in risk. However, there are very low chances to fail the bank because our central bank RBI is one of the top regulator in world. Every financial instrument have their own risk and reward. So we are going to do a small comparison between bank FD and banking fund.

For example a person invest Rs 1,00,000 in SBI bank FD and in a banking Fund on 20th May 2003. After 11 year the value of invested Rs 1 lakh in SBI bank FD grows up to Rs 2,66,190. On this amount we have to pay tax according to our income slab and bank deducts TDS direct at the time of withdrawing the money. Bank FD is a secure investment compare with other available instruments. It hardly beats the inflation. Therefore it is not a wealth creator.

In other hands, banking funds invest in banking stocks. After 11 year, the value of invested Rs 1 lakh grows up to Rs. 14,67,000. And the amazing thing that there is no TDS deduction and it is tax free. It means you have not to pay tax on your gain. The only risk is volatility because equity is always volatile and checks your patience. It is a wealth creator instrument for long term investor.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Increased Service Tax from 1st June 2015

Increased Service Tax from 1^st June 2015

From starting 1st June 2015, the service tax rate has been increased from 12.36% to 14%. Service tax is levied by the central government on certain services. It is paid by the end user. Eating out, travelling and mobile bill will also get costly now onwards. In financial services mutual fund distribution service has been came under the ambit of this tax this time.

At present we are paying the service tax on our insurance premium and distributor also pay the service tax on received commission by selling the insurance product. In banking space, various fees and charges linked to saving account, term deposit and debit or credit card attract service tax. Bank FD interest does not come under this tax. The interest of home loans and personal loans do not charge service tax but the processing fee and late payment fee attract service tax.

The increased tax will also affect your share trading bill. The brokerage levied on your buying and selling shares are also attract the service tax and from today the new rate would be applied. Mutual fund adviser and distributor will pay now service tax on their commissions received by selling mutual funds. The mutual fund AMC also pay the service tax on management fee.

Service tax on the mutual fund distributor will also impact the business of mutual fund badly and the new IFA get affected by imposing this tax.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com