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Last Updated : Feb 10, 2020 02:55 PM IST

A guide to Budget 2020 for FD Investors

The Union Budget for 2020 is out and while most expected a relaxation in personal income tax laws, the dual tax regime system proposed has left many wondering what to do next. As a fixed deposit investor, getting a grip on what Budget 2020 means for your finances is crucial as failure to do so would be akin to driving without a roadmap or knowing where your destination lies. Determining the investment route for the year should begin with picking one of the tax regimes and then making appropriate investment decisions.

To help you in this regard, here’s an investor’s guide to Budget 2020.

Choose one of the two tax regimes

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When it comes to picking between the two tax regimes, there is no one-size-fits-all approach that works. The decision depends not only on your annual income and salary structure, but on factors such as your risk profile, fixed obligations, investment habits, and goals.

Selecting the right tax regime for you is also crucial as it forms the playground for your fixed deposit investments. To get a better understanding of which one to pick, consider the following table. Here, an assumption is made that your annual income is Rs. 10 lakh and a few figures have been assumed to be exemptions and deductions to illustrate the impact they have on the taxes you pay.
ParticularsScenario #1Scenario #2Scenario #3
Annual incomeRs.10,00,000Rs.10,00,000Rs.10,00,000
HRA exemptionRs.1,00,000Rs.1,00,000-
Standard deductionRs.50,000Rs.50,000Rs.50,000
80C deductionRs.1,50,000Rs.50,000-
80 CCD deductionRs.50,000--
Gross taxable income - new/ oldRs.10,00,000/ Rs.6,50,000Rs.10,00,000/ Rs.8,00,000Rs.10,00,000/ Rs.9,50,000
New: Tax @ 15% + 4% cess (A)78,00078,00078,000
Old: Tax @ 20% + 4% cess (B)44,20075,4001,06,600
Profit/ loss with new regime (B-A)-Rs.33,800-Rs.2,600Rs.28,000
VerdictOld regime offers savings Old regime offers marginal savingsNew regime saves tax

These figures are applicable for FY 20–21 and you’ll note that your tax savings differ greatly depending on how much you are able to leverage the available exemptions and deductions. Given this scenario, see the two options you have below.

Invest in FD for assured returns

If you’re adept at diverting your income towards tax-saving vehicles, then you can invest in a fixed deposit to utilise the Section 80C deduction limit. A bank FD would help you do this and what makes this option even more attractive is the 5-fold hike in the insurance coverage from DIGC, as announced by Budget 2020.

However, it is wholly possible that when it comes to Section 80C, you have your bases covered with investments in Public Provident Fund, National Savings Certificate, or Tax-saving mutual funds. In this case, it’s more profitable to go for a company FD like Bajaj Finance Fixed Deposit, where you get generous FD interest rates of up to 8.10% for new customers and up to 8.35% for senior citizens. Bajaj Finance is also one of the safest investment avenues, with the highest ratings of FAAA by CRISIL and MAAA by ICRA.

Why now is the right time to invest in FD?

Post the Budget 2020, you may find a greater scope to put your savings to better use. While equity markets are surging now, there is always scope for market volatility, with an element of higher risk. This leaves safe options like FD, PPF and government savings schemes, for you to invest in.

However, speculations about a reduction in interest rates for PPF and savings schemes are rife, which makes fixed deposit a lucrative investment option. With facilities like Systematic Deposit Plan for regular savers seeking monthly starting Rs. 5000 per month, FDs are a great way to grow your savings.

While you can invest over a flexible tenor, the rates peak when you choose a longer tenor, which can also help you earn a higher interest income. Moreover, you can use the Multi-deposit feature to invest in several FDs of different tenors, using a single cheque, and thereby align your investments to your goals. To enjoy long-term gains, you can use the Auto-renewal facility and reinvest at maturity in a hassle-free manner, while enjoying a better rate of return.

So, there you have it! Irrespective of which regime you opt for, you can use a vehicle like the Bajaj Finance FD to grow your wealth and enhance your portfolio's worth. To start today, simply book an online FD by filling a short form.

The following article is an initiative of Bajaj Finserv and is intended to create awareness among readers

Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.
First Published on Feb 10, 2020 02:54 pm
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