Money Guru: Is this the right time to invest in FDs? Experts decode

Money Guru: Ever since the RBI turned hawkish, both the private and public sector banks have increased their interest rates on fixed deposits and schemes promising fixed return. Investors are now in a state of confusion about whether to invest in fixed returns tools now, given the volatility in the equity market. In today's edition of 'Money Guru' show with Zee Business' Swati Raina, Hemant Rustagi, CEO, WiseInvest Private Limited, and Kshitij Mahajan, Managing Partner, Complete Circle Wealth Solutions, shared tips on how to manage your fixed return investment.

Hemant said that it is very important to focus on the interest rates when you invest in market-linked products. The relationship between the interest rate and bonds is inversely proportionate. "It means that when the interest rate increases, the market price of existing bonds falls. When interest rates go up, generally, it is observed that it impacts the portfolios with long horizons," he said and praised the Reserve Bank of India for its prompt action to control inflation.

Kshitij too echoed similar views as he lauded the central bank for successfully changing the inflation trajectory in the right direction and underlined that the inflation will probably be brought under the tolerance level by December. He said that a rate hike impacts savings and therefore one could look towards many government schemes that are very attractive. He also talked about tax efficiency while considering fixed return investment.

Where to invest in debt?
-Small Savings Scheme
-FD
-Target Maturity Fund
-Fixed Maturity Plan
-Debt Fund

Scheme Interest Rate
FD 5.5%
Debt Fund 5.25%-5.45%
PPF 7.1%
SSY 7.6%
KVP 6.9%
SCSS 7.4%

Small Savings Scheme
The expert claims that small savings plans offer interest rates that are higher than bank deposits. It offers advantages under section 80C. In addition, investments up to Rs. 1.5 lakh are tax-free. 
- SSY for girls up to 10 years
- SSY- Sukanya Samriddhi Yojana
- SCSS- For citizens above 60 years
- SCSS-Senior Citizen Saving Scheme
- EEE benefit in PPF, SSY

Fixed Deposit
FDs, also known as Fixed Deposits, are attractive in the era of rising interest rates. Deduction from tax slab on interest earned on FD. This will be effective only if it is included in the lower tax slab. FD rates are expected to increase further.

Debt Fund
Debt Funds are low duration. It is ultra-short duration funds. This can also be invested in short-term and floating rate funds. Do not invest money in long-term FDs, experts suggested, adding that short-term investment in rising interest rates is apt.

Investment Options in Debt Funds
-Banking & PSU Funds
-Corporate Bond Fund
-Dynamic Bond Fund

Debt Fund- Tax Liability
Tax liability as per the investment tenure
STCG tax will be applicable if profit is redeemed before 3 years
In this case, the tax liability will be as per the tracks slab.
LTCG tax will be applicable if profit is redeemed after 3 years
20% tax will be applicable with indexation benefit

What is TMF and FMP?
TMF stands for Target Maturity Fund whereas FMP stands for Fixed Maturity Plan. TMF and FMP both have fixed maturity periods. But the only difference is that TMF is open-ended funds while FMP is closed-ended funds.