Which Is Beneficial: Recurring Or Fixed Deposits?

India has long been a country that prioritises saving overspending. Therefore, most of us are aware of Fixed Deposit and Recurring Deposit concepts, mainly because they are two of the most preferred investment options. Let us look at some of the reasons why they are so beneficial.

FDs and RDs: Traditional investment opportunities

Traditional investing options such as fixed deposits and recurring deposits have been popular for years. Many modern investors put money into FD and RD regularly to offset the risks associated with sophisticated, market-linked instruments.

An investor can put aside some money into the FD for a specific time at a set interest rate. However, if you withdraw money before the minimum lock-in period gets completed, banks levy a penalty.

Monthly, quarterly, half-yearly, or annually, the interest gets either accumulated and added to the amount of the fixed deposit account or deposited to the investor's savings account. At the end of the investment term, the investor's collected interest is given to the principal sum of the FD.

You can make use of a fixed deposit calculator to know your maturity amount before investing. These are available on the banking apps too. On the other hand, a recurring deposit is a monthly investment of a defined amount at predetermined interest rates. The interest and maturity proceeds get credited in the same way as an FD.

If the interest amount for a financial year exceeds Rs. 10,000, the bank deducts a Tax Deduction at Source for both. Here, you can use a recurring deposit calculator to know what the maturity amount will be. So, you might wonder how an FD differs from RD.

Higher returns in FD

When an FD and recurring deposit are co pared, the former's maturity proceeds are likely to be higher. It is because the FD requires you to invest the entire amount at one go. As a result, the interest gets computed on a bigger sum, and the maturity proceeds end up being bigger due to compounding effects.

On the other hand, the RD account allows you to invest a set amount of money monthly. As a result, while the first instalment receives interest for the whole 12-month period, the second instalment only earns interest for the first 11 months. As a result, the interest earned here is lower than the FDs.

More flexibility in RD

FDs are the best option for you if you have significant money to invest. On the other hand, RDs are a great choice if you want to develop a safe pool of assets. In addition, with consistent monthly commitment, you can set specific, short-term goals, such as paying annual school fees or saving for a major family event.

A Detailed Guide On The Facilities Offered Under Online Savings Account

Today, all public and private sector banks offer savings account. You can use them for parking and growing your savings gradually. The moment you begin earning, you can open the account if you do not hold one. While some organisations do offer an account for depositing the salary, consider opening a regular one with which you can enjoy a host of benefits. Thanks to digital banking, you can open an account in minutes online. 

Here are some of the most generic facilities which banks offer on online saving account opening: 

Usage of account for daily transactions 

The essential feature of the account is it lets you conduct all types of daily transactions. There is no upper cap on the sum you can deposit in the account. Deposit the money through cash, cheque, or online transactions through various accounts. However, banks have a daily withdrawal limit on such accounts. Generally, the withdrawal limits are higher when you remove cash from the bank branch than the ATM. 

Provides ATM or debit card 

All Indian banks offer an ATM or debit card in the saving account welcome kit. The ATM card includes your name, a 16-digit code, and the expiration or validity date on the front, while the CVV number with the signature strip on the back. You use the ATM card for withdrawing funds from any ATM vestibule. However, you should check the number of transactions possible through ATM, be it home bank or otherwise. 

Besides withdrawing cash at the ATM, use the card for shopping at retail stores and online portals. You can use them for paying the utility bills as well. 

Net banking services 

You already have opened the account online. Now, you can explore more opportunities here. You can do transactions often, check your account balance, download the bank statement, transfer funds through NEFT, RTGS, or IMPS modes. You have the provisions to pay the utility bills, house rent, loan EMIs, and other monthly expenses directly through the account. You can even set up login details in the banking apps for on the move transactions. 

Earn interests on the savings 

Every bank offers savings interest rates on the balanced parked. The interest rates offered are generally not too high, but you can earn higher interest rates under the online mode. It is also applicable for those who have maintained higher deposits in the account, usually exceeding Rs. 1 lakh. The interest rates offered ranges between 4% to 7% depending on the bank and the savings. The interest pay-out also happens on a half-yearly or yearly basis. 

When you open the saving bank account, enquire about the different accounts you can open. Apart from the standard account, there is a joint account, zero-balance, accounts under various Government schemes, women, senior citizens, and minors.

How Is A Home Loan Beneficial?

A home is where you can relax and reside safely after a hectic day at work. It gives you peace of mind and ensures you get the freedom to perform your chores without any interruption. You aim to lead a secure and peaceful life with your family without worrying about insecurities and giving them utmost attention.

Banks and financial institutions are offering a home loan to every citizen of the country to fund the cost of the property. You can borrow a loan amount according to your affordability and repayment capacity and repay it with interest in equated monthly instalments. You can apply for a loan for constructing and renovating the house as well.

Tax benefits

To encourage more people to buy a house, the Indian Government provides a tax deduction on the principal and the interest payable on the housing loan. You are eligible to claim a tax deduction of up to Rs. 1.5 lakh on the loan amount and Rs. 2 lakh on the interest in a financial year under Section 80 C and Section 24 B of the Income Tax Act, 1961. The deductions are only available after the completion of construction.

Convenience

You can receive quick approval when you apply for home loan, even before selecting the property. It helps you arrange funds and pay the seller immediately without wasting time. You can also get attractive interest rates with affordable repayment options from the bank or lender.

EMI repayments

You can repay the loan from your bank account in affordable monthly instalments. Set the auto-debit feature by giving standing instructions to the bank and saving time. You can also avoid the hassle of signing and procuring cheques for the payment.

High repayment tenure

You get a high repayment tenure which can go up to 30 years even when you apply for home loan online. These days, you can visit the bank website or download the official banking app to access all their banking and finance products without seeing them personally. You can reduce the burden of instalments by extending the loan tenure.

Attractive interest rates

When you avail of a home loan in India, you get it at a low and attractive interest rate compared to other unsecured loans. Generally, the interest rate ranges between 7.35% to 8.50%, making it an affordable loan scheme.

Security

Buying a home is one of the biggest financial commitments. You need to pay the EMIs on time and ensure you have the repayment capacity to finance the loan. It gives you mental satisfaction and a sense of accomplishment. You can secure your future by applying for a home loan online and reducing the paperwork.

Tips For NRIs Interested In Buying A Home In India

Non-Resident Indians (NRIs) may use NRI home loans to finance their plans to buy a home in India. However, the mechanism should also ensure that the Foreign Exchange Management Act of 1999 (FEMA) and related RBI regulations get followed because of the cross-border remittance requirements. As a result, when applying for a home loan for NRI in India, NRIs must keep the following points in mind:

• Home loans are available for a wide range of residential properties, including new construction and ready-to-move properties. In addition, a home loan can get used to finance the purchase of a plot, building works, and maintenance and improvement costs. However, under current FEMA legislation, an NRI gets no permission to purchase agricultural land, plantations, or farmhouses, among other things.  

As a result, even if an NRI wants to be a co-borrower, no loan can be obtained for such a house. 

• According to RBI regulations, an NRI home loan can only get repaid with NRI accounts, like NRE and NRO accounts. Apart from debits from an NRI account, a foreign money transfer from abroad may get used to credit the Home Loan directly.
  
  
• An NRI should prepay their NRI home loans in the same way that residents can. However, credits into the home loan account must come from the borrower's NRI accounts or foreign remittances to meet the standard repayment conditions.
  
  
• Banks typically charge slightly higher credit spreads due to the higher risk perception of the person staying out of the region. As a result, the home loan interest rate for NRI is slightly higher than for locals. If an NRI returns to India with the aim of settling, the loan account must be converted to a residential home loan so that lower interest rates can get obtained.
  
  
• Compared to a standard home loan for Indian citizens, NRI home loans come with additional paperwork requirements. You will need to submit a copy of your passport and a valid visa along with the application form. A General Power of Attorney (GPA) will need in favour of a resident Indian with whom the bank can interact in India.
  
  
• Though NRIs may jointly purchase a property in the name of another NRI, this is not possible with a resident Indian or those who are not permitted to buy property in India.

Types Of Recurring Deposit Accounts In India

A recurring deposit is the most popular secure and low-risk investments in India. It offers an opportunity to invest without a lumpsum corpus. You get assured and fixed returns on such fund transfer. It is ideal for achieving your short-term financial goals.

Now, a typical RD account has a period ranging from six months to 10 years. You pre-decide the fixed instalments you make each month. Your RD interest rates get determined based on these aspects. However, different forms cater to needs. It is essential to understand them to benefit from them. Read on to find out:

Regular RD account: It is the most widely used form. It allows you to invest in monthly deposits for a pre-determined period. The recurring deposit interest rate you get is fixed and assured. It gets calculated as a compound or simple interest method based on the duration you choose. You can open it if you are aged 18 years or above.

RD account for senior citizens: These accounts provide additional benefits to the elderly. You can open it if your age is above 60 years. The main advantage is the higher recurring deposit rates compared to regular accounts. This rate gets compounded quarterly to result in higher maturity amount. An additional interest of 0.25 to 0.75% gets offered on this account. It is to aid the older citizens during retirement and in the absence of income.

RD account for minors:  Some banks also allow citizens under 18 years to open RD account. However, they get supervised by the minor's guardian or parents. The interest rate is either higher or lower than traditional RD schemes depending on the bank. It gets converted into a standard recurring deposit once the child becomes an adult. This scheme is to gather funds for children higher education.

RD account for NRI/NRE: Banks and financial companies also offer specialised RD schemes for Non-resident Indians. You can benefit from this by opening a Non-resident ordinary or Non-resident external account. The interest on the former is taxable at 30 per cent, while the latter does not allow taxability in India. It, however, facilitates account transfer to your home country. 

Flexi RD account: It lets you make investments in flexible instalments. You open the account with a core amount and add variables to it. This enables you to invest at your convenience whenever you have the availability of funds—failure in depositing the core amount results in a penalty. The same is not applicable for variables. You get the facility of tracking them through banking apps.

6 Benefits Of Opening A Savings Account

Money is a resource which if saved today, can benefit the future. It is the only saviour during medical emergencies and other urgent fund requirements. Nowadays, every process and facility require money for initiation and completion. Without having enough funds and savings, it is impossible to fulfil even daily necessities. Remain prepared for any circumstance with the help of adequate cash and face all difficulties easily.

Banks offer many services to their customers, one of which is a savings account. It helps secure all the assets and cash and provides interest on it. As a bank account holder, you can withdraw funds conveniently without the fear of loss or theft. Here are some of the benefits it offers:

1. Creates an emergency corpus: With a saving account, you can prepare yourself financially to face any unplanned emergency. Whether it is a broken major appliance, automobile repair, or medical emergency, you can always withdraw the funds from the account at any time as it offers lots of liquidity. The amount in the bank account is sufficient to cover the expenses and escape the hassle of borrowing. 
   
   
2. Asset protection: You can also opt for an online saving account opening to store your assets. They are free from any impact from market volatilities. For instance, if you invest funds in real estate, bonds, and stocks, there are chances of getting higher returns on the investment than bank accounts. But you risk losing money in unforeseen circumstances where you get lower returns which is not the case with bank accounts. 
   
   
3. Hassle-free operations: Technology has changed the scenario of every sector, including banking. Nowadays, smartphones have become the prime mode of payments and banking with compatible mobile banking apps. It offers 24/7 service and makes funds available at any time of the day.   
   
   
4. Easy bill payments: One of the greatest advantages of having an online bank account is the freedom to pay pending utility, mobile recharge, credit card, and water bills directly from the bank. You need to enter your bank account and card details on the provider’s website and pay the bill. You receive an SMS and email alert of the transaction on your registered mobile number and email ID. 
   
   
5. Minimal amount requirement: It has become very convenient to operate a bank account with the minimal amount required for opening it, which can be as low as Rs. 500.
   
   
6. International debit card: When you open a bank account, you get a kit from the bank containing the passbook, chequebook, a debit card for cash withdrawals at ATMs and other necessary documents. You can activate the facility for international transactions on your debit card.

 

What Are The Types Of NRI Accounts?

Every person requires an account to store money which they can use during emergency fund requirements or urgent payments to fulfil their daily needs. Whether you live in India or elsewhere, you require a savings account with unlimited access to funds to meet your requirements. Many Indians travel abroad for a better future and lifestyle. They have many aspirations and want to lead an independent life.

As an NRI, you can open an NRI account if you are residing outside India’s geographical territories for at least 120 days in a year and spend less than 365 days in India in the four previous years. You can maintain your NRI status only if you abide by this condition according to the Income Tax Act, 1961. However, if you leave India for employment in a different nation, you become an NRI immediately.

You need to understand the various characteristics of the three bank accounts available in India. It helps you fulfil your investment objectives, financial obligations, and plans about your residency adequately. Here are the types of savings accounts in detail:

1. NRE account: You can open a Non-Residential External account and maintain it with earnings originating from your country of residence in the Indian Rupee denomination. This type of NRI bank account does not include any taxes on interest and principal amounts. 

2. NRO account: At the time of the NRI account opening, you can open it with the income you earn in India. All the deposits in the Non-Residential Ordinary account take pace in Indian Rupee denominations. The source of income can be rent, dividends, etc. For instance, Mr Rahul, an NRI residing in Newark, USA, has an apartment in Mumbai, which he has leased to Mr Arman. 

To receive rent earnings from such a lease, Rahul must open an NRO account where Arman shall deposit the stipulated rent amount periodically. As deposits in an NRO account occur in rupee denominations, there is no currency conversion involved. Both principal and interest earned are taxable. 

3. FCNR (B) account: When you opt for the Foreign Currency Non-Residential account, it allows you to deposit in your resident country’s currency. But it holds it in any one of the foreign currencies prescribed by the Reserve Bank of India. 

The currencies it supports are US Dollars (USD), Canadian Dollar (CAD), Australian Dollar (AUD), Euro (EUR), Great Britain Pound Sterling (GBP), Singapore Dollar (SGD), Hong Kong Dollar (HKD), Japanese Yen (JPY) and Swiss Franc (CHF). While opening any of these accounts, ensure to check the NRI account interest rates as they differ between banks and account balance slabs.