If done smartly, investing can be an aid to several future financial problems. A person belonging to salaried employees class saves a handful amount of money every month and looks further to invest it securely. In the financial race, where there are multiple investing options available, each claiming to be the best, the decision should be taken wisely. The ultimate goal of investing is to get more interest in less principal amount. Recurring deposit is emerging as the best investment option for people belonging to salaried class and even business class.
Recurring deposits bring several benefits for one who can put some money monthly into the account. Source: Medium.com
Recurring deposits can be understood as a monthly saving scheme offered by banks which help people with regular incomes to deposit a fixed amount every month into their recurring deposit account and earn interest at the rate applicable to fixed deposits. It can be either opened by a minor under the guidance of a senior person or by a major and senior citizen in a bank account or post office. The value of the principal amount varies from bank to bank, but in general, it starts from INR 500.
You can calculate the maturity amount and rate of interest you will be getting at the end of the maturity period using a recurring deposit calculator. Looking to use a recurring deposit calculator? Click here.
Here are four reasons why salaried employees should grow their savings by investing in recurring deposits
- High Rate Of Interest
Once you plan to start saving, you should be very particular about the rate of interest you get back. For people belonging to the service class, it becomes the foremost condition to invest money somewhere. Recurring deposits give the rate of interest almost at the same price applicable for fixed deposit. Where other investing options have a rate of interest equal to 3 to 4%, the recurring deposit rate of interest is up to 7.25%. You can calculate the rate of interest you will be getting using a recurring deposit calculator.
- More tenure= More Outcome
People belonging to service class generally look for long term investment. They pull out it for a medical emergency, house planning, marriage, education, or retirement. Recurring deposits helps them in saving more as it is a secure investment and offers secure returns. The value of the maturity amount is directly proportional to the initial amount and rate of interest. The maturity amount can be easily calculated using a recurring deposit calculator. If you invest for a longer tenure, the maturity amount will be higher than the maturity amount of investment for lower tenure.
The value of the maturity amount also depends on the investment; the investor is doing.On can invest in recurring deposits for a minimum of six months to a maximum of 10 years.
If the investor is closing his/her account before the maturity period, the bank cuts a 1-2 % penalty over the total money, which it gives in the form of a close maturity amount. You can use a recurring deposit calculator to calculate the tenure for which you should invest to get the maximum rate of interest.
- Save TDS(Tax Deducted at Source)
The recurring deposit provides an opportunity for the depositors to save their TDS. Bank cuts TDS if the interest value is more than INR 10,000 in a financial year for senior citizens the limit is INR 50,000. The amount of deducted TDS is 10% if PAN information is updated otherwise by 20%. It is recommended to use a recurring deposit calculator while estimating to avoid any mistakes.
To save your TDS deduction, there are two ways:
- Form 15H which is a declaration by senior citizens that the annual income is less than INR 3 lacs, and
- Form 15 G for other citizens is a declaration that the annual income is not more than INR 2.5 lacs.
If a service class person comes under this category, they can request the bank to not cut their TDS, as per the new budget. Furthermore, there are other ways as well to save taxes, which you should learn prior to making any investment.
- No need for a financial background
People belonging to salaried employees class are generally unaware of the financial market. To invest in financial services, one must have good knowledge of the stock market, finance, interest, and other business jargon. For people who are unaware of the financial market, recurring deposits are the best option to invest as it is easy to understand and follow.
People invest in share markets, stock exchange, and mutual funds to make good money. However, these investments need a deep understanding of finance and economy as the investment and rate of interest is entirely dependent on the condition of the share market. If the value of the share market is high, the investor will get a good return, and if it is low, it can result in bankruptcy as well. To keep a count & estimate on your investments using the recurring deposit calculator.
