An Interim budget is a harbinger of the direction of the economy and how the government views the savings and investments environment. Tax announcements are the most eagerly awaited as they affect the 475 million middle class population in the country.
This year’s budget tax announcements have given a reason to cheer for most investors. This especially holds true for investors who believe in the power of fixed deposits. The government has also recognized the importance of fixed deposits as an essential instrument for the investors by increasing the tax limits on interest earned on fixed deposits. The important tax announcements as per Budget 2019 are as follows –
Revised tax slabs: Individual taxpayers having annual income up to Rs 5 lakhs will get full tax rebate. Till 2018, people with an income of Rs 3 lakhs were granted income tax rebate.
Increase in TDS deduction limit under Section 80TTA: The threshold of Tax Deducted at Source (TDS) for interest earned on bank and post office deposits has been raised to Rs 40,000 from the current value of Rs. 10,000.
This is covered under Section 80TTA of the Income tax Act. This is an additional saving above the Section 80C deductions of Rs 1.5 lakhs available to individuals. This essentially means that the interest earned on fixed deposits till Rs 40,000 will be tax free. Investors will hence, be able to enjoy higher savings with this amount.
How You Can Save More Tax Now
The below example will show the taxation benefits derived to you post the budget.
Tax Calculation – Resident
All figures in Rs per annum
Heads
Current
Proposed
Gross Salary
7,00,000
7,00,000
Less: Standard Deduction
40000
50000
Net Salary
6,60,000
6,50,000
Less: Income From other sources (Interest Income from FDs etc.)
60,000
60,000
Gross Taxable Income
6,00,000
5,90,000
Less: Section 80 C Deductions
1,50,000
1,50,000
Less : Section 80 TTA Deductions
10,000
40,000
Taxable Income
4,40,000
4,00,000
Thus, if you are earning above Rs 5 lakhs, the saving on interest income will be significant for you. However, your tax bracket will determine the rate of taxation on this interest income. Hence, to be a smart investor, you should go for investment options which provide the benefit of higher returns. Taxation is inevitable and unavoidable. With company fixed deposits like Bajaj Finance Fixed Deposit, you can look to earn up to 8.75% rate of interest. Senior citizens can take advantage of the higher interest rates up to 9.1%. Also, you are assured of high and stable returns as these fixed deposits are rated MAAA (Stable) by ICRA and FAAA/Stable by CRISIL.
Earn higher returns fixed deposits in 2019
From April 1, 2019, financial institutions will use an external benchmark to determine interest rates. This will facilitate any changes in interest rates quickly. Fixed Deposits interest rates have risen in the last quarter of 2018 along with revision in rates of company FDs. Furthermore the increase will be aimed at borrowers. This time is appropriate for investing in company fixed deposits with high returns so you can lock in your future earnings.
Advantages of Company FDs Interest Rates
Company fixed deposits have a TDS deduction only if the returns exceed Rs 5,000 in a financial year. You can always look at the advantages of laddering to ensure that your returns exceed the TDS. Company deposits with high returns are the best fixed income investments over bank fixed deposits and post office savings.
A 3-year company FD with Bajaj Finance can be opened with a minimal amount of Rs 25,000. This will earn you an interest of Rs 2,187 in the first year itself (with a rate of interest of 8.75%). This exceeds the interest earned by any bank or post office deposit.
Similarly, you can plan monthly investments with the same amount or lesser amounts to achieve a consistent return pattern with the company FDs without incurring high TDS deductions. The interest earned far exceeds the tax paid through income tax.
Make use of the FD calculator periodically to find the returns of your total portfolio and seek out the best combination of fixed deposit investments with fluctuations in interest rates. Company FDs are the optimal combination for safety and high returns in 2019.
