💡 Don’t invest in FDs 💡

Here's why you should not invest in FDs

Taxation: The interest earned on FDs is fully taxable, unlike savings account which offers tax exemption on interest earned up to INR 10,000 per year. The tax on FDs is deducted at the source. If you fall in the 30% income tax slab, 30% of the interest earned on FD will be deducted. Let's suppose that you have invested INR 1,000 in an FD. Assuming the interest rate of 8%, your amount at the end of the year will become INR 1,080 but since the interest earned is taxable you will only earn INR 56 by the end of the year. This taxation will not help your earnings grow significantly.
Investment = INR 1,000
Interest Earned = 8% = INR 80
Amount after adding interest income = INR 1,080
Tax deducted = 30% of INR 80 = 34
Final amount in the account after a year = INR 1,056

Inflation: When one invests their money in FDs, they do not take inflation into account. The current inflation rate is almost 5% which means that your money is constantly losing value and if the inflation rate remains the same in the future, the interest you earn on the FD investment won't matter much as your purchasing power won't be any bigger. In fact, this inflation will eat away your returns and despite investing for such a long period of time, you wouldn't gain much

Interest Rate: Currently, most FDs offer an interest rate of 7 to 8% max which is not much as some other investment options like debt mutual funds can help you earn 10 to 18% interest. In investment, often risk is directly proportional to returns but debt mutual funds are mostly risk-free investment instruments and still offer a better return rate as compared to FDs. So even if you are a conservative investor, other investment options which are safe as well as offer good interest rates are better long-term investment options