Ever wondered why banks introduced Fixed Deposits? What benefit do they draw from imply keeping your money for a fixed period and then returning it with a handsome return?

There’s a simple financial explanation to this. When you put money in your current or savings bank account, you can withdraw it anytime. But, if all the funds keep floating at customer’s discretion, then how will the bank find money to carry out processes such as giving out loans? That’s why there’s a need for deposits with a fixed tenure, aka Fixed Deposits or FDs. In return for blocking the customers’ funds for a longer duration, banks give a higher rate of interest compared to other deposits.

This quid pro quo is also utilised by company fixed deposits in India. Whenever a company needs funds, it has several means of raising them from the market. If it went to institutional lenders, they would ask for a higher interest rate. If it, on the other hand, goes to the bank customers with its Company Fixed Deposit instead, it will only have to pay them slightly higher than their bank FDs, which would still be lower than what the company would’ve had to pay the institutions. So, it’s a win-win situation!

There is one more reason why it’s called a ‘Company Fixed Deposit’. The interest rate remains fixed throughout the tenure. The fluctuation in bank rates does not impact the rate of return on FDs. From the very beginning, a customer knows how much interest the Principal amount will earn at the end of the tenure.

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How would you afford a good lifestyle when you are old and have retired? Would you have strength to continue earning the second income at that age? Alternatively, would you like to depend on someone to take care of your needs? No, right? So, you must start investing in a good pension plan.

The most advertised pension plans are different varieties of annuity plans offered by insurance providers. You decide when the pension starts and what kind of amount will be paid to you on a monthly basis. There is also an option of getting a certain sum paid regularly for a fixed duration regardless of your living tenure. Apart from this, there are other tax-related and financial benefits associated with different insurance products that you will need to inquire about before investing.

A very reliable choice is the National Pension Scheme (India), popularly known as NPS. If you invest in a Tier-I account of NPS, your investment is exempt under Section 80C. However, the pension that you will withdraw from it will be taxable. You will also be liable for Service Tax and other levies.

NPS lets you track the investment value on a daily basis. To open an account, approach a bank, Post Office or any financial institution authorised by the PFRDA (Pension Fund Regulatory and Development Authority).

Start investing early, start investing now and incur a handsome pension amount while you enjoy your Golden Years.

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Bonds, by definition, are debt instruments, investing in which gets you a fixed interest. Either you get the entire interest on maturity of the bond, or you could get it at regular intervals. It varies depending upon the type of the bond, and investor preference. However, it is advisable to not withdraw interest at regular intervals, as it would add to the Principal deposited, thus increasing your maturity amount.

The government issues bonds to finance its expenditure requirements. Both Central and State governments can issue government bonds in India. The government issues a variety of bonds -- Fixed Rate, Floating Rate, Zero Coupon and Capital Indexed, among others.


Why you should invest in them

● These are gilt-edged investments, i.e. they carry practically no risk of default.

● They are long-term securities. Once you invest, you don’t have to monitor constantly.

● The interest is paid at regular intervals, usually half-yearly.

However, out of all governments bonds in India, it is the Capital Gains Bonds that India prefers most. This is because they substantially save tax when you conduct property transactions. These bonds are issued by National Highways Authority of India (NHAI) and Rural Electrification Corporation Limited (RECL).
You can invest a maximum total of Rs. 50 lakh in them. By investing in these bonds within 6 months of your property sale, instead of attracting tax, your investment gets an exemption under Section 54 EC.

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