Bank FD Rates have peaked now. CRR down from 4.5% to 4%

[SSV]

RBI' MPC decided that CRR to be cut by 50 basis point from 4.5% to 4% ..
CRR= Cash Reserve Ratio .. ( the cash that need to be kept as a reserve which could not be available for lending )..

This redcution in CRR means the banks now have more funds ( liquidity) for lending from their deposits.. means Banks dont need to pay more interest to get more deposits..

Means: FD rates have peaked .. Book your FDs now for the maximum FD rate.. FD rates may go dwon in future..
An official Repo rate cut is on the cards for Feb meeting ...

All the best ..

 

[Trust Me]

Any reduction of such scale will drive deposits more away and make FD look so unacttractive for most people. Sr. Citizens will shift to PPF (7.10%)/SCSS (8.25%)

PPF and FDs are not competing products. They are very different. PPF is not nearly as liquid, so money meant for FDs are unlikely to go to PPF. People typically consider PPF as long term investment. Also, yearly contribution to a PPF account is limited to 1.5L only!

Also, Sr. Citizens are likely to prefer SCSS to FDs for guaranteed higher interest from direct government accounts, and as such, may prefer to saturate that to start with, before going to FDs.

In a declining FD rates regime, money is more likely to flow towards MF and such.
.

 

[desiviru]

PPF and FDs are not competing products. They are very different. PPF is not nearly as liquid, so money meant for FDs are unlikely to go to PPF. People typically consider PPF as long term investment. Also, yearly contribution to a PPF account is limited to 1.5L only!

Also, Sr. Citizens are likely to prefer SCSS to FDs for guaranteed higher interest from direct government accounts, and as such, may prefer to saturate that to start with, before going to FDs.

In a declining FD rates regime, money is more likely to flow towards MF and such.
.

Bro I was talking about Sr. Citizens specifically and most of them are extending PPF for 5 years as they started early. No one is starting today to get locked for 15 years. So liquidity problem not an issue. They smartly take 50-75% out for investment in gold/land but keep rolling with it. Old generations don't think the way new gen did. In longer run, I can guarantee you Gen Y and Gen Z will be on receiving end with nothing in hand when inflation strikes them. I have always learnt that previous gen methods were capable of beating every scenario. So I follow those with regular intent.

Yes, PPF is 1.5L/year but SCSS is 30L per person max with 8.25%. Sr. Citizens don't look for liquidity option too early and they get regular quarterly interest. Other invest in PPF for a long term corpus. Decision can't be taken on fact how other assets are performing today. We have to take a view of next 25 years. Also land and gold is always a better option then going with SIP in markets which may look good today but overall if we compare even markets are not giving good returns and in m many cases last 10 yrs investment are fetching lower than FDs itself. So I always advice for a highly diversified protfolio with maximum funds parked in safe zones.

Today Gen are more inclined towards spending on unnecessary things and then most of them can be found saying, we didn't took a good decision while going for such stuff. Only 10% of Gen Y/Z are really taking a good approach that is hybrid one. My pure advice is before spending a rupee, have a plan for generating a rupee equal or more than to it.

 

[Tarun239]

Bro I was talking about Sr. Citizens specifically and most of them are extending PPF for 5 years as they started early. No one is starting today to get locked for 15 years. So liquidity problem not an issue. They smartly take 50-75% out for investment in gold/land but keep rolling with it. Old generations don't think the way new gen did. In longer run, I can guarantee you Gen Y and Gen Z will be on receiving end with nothing in hand when inflation strikes them. I have always learnt that previous gen methods were capable of beating every scenario. So I follow those with regular intent.

Yes, PPF is 1.5L/year but SCSS is 30L per person max with 8.25%. Sr. Citizens don't look for liquidity option too early and they get regular quarterly interest. Other invest in PPF for a long term corpus. Decision can't be taken on fact how other assets are performing today. We have to take a view of next 25 years. Also land and gold is always a better option then going with SIP in markets which may look good today but overall if we compare even markets are not giving good returns and in m many cases last 10 yrs investment are fetching lower than FDs itself. So I always advice for a highly diversified protfolio with maximum funds parked in safe zones.

Today Gen are more inclined towards spending on unnecessary things and then most of them can be found saying, we didn't took a good decision while going for such stuff. Only 10% of Gen Y/Z are really taking a good approach that is hybrid one. My pure advice is before spending a rupee, have a plan for generating a rupee equal or more than to it.

What is SCSS?

 

[desiviru]

What is SCSS?

Senior Citizen Savings Scheme by Goverment of India and President of India being Head of Scheme and guaranteed with no affect to Principal+Interest. Post Offices and many banks are working as intermediateries to offer SCSS account. You can open online also with many banks. ICICI Bank is the only private sector bank to have permission from GoI to provide SCSS account.

Can be taken once you turn 60 yrs of age.

Min. investment 1000. Max: 30 Lakh (100% safe unlike banks which has 5L with DICGC).

This is a one time deposit scheme and you can't add funds later. Scheme is for 5 years with only one time extension allowed for 3 years. After that you can open new SCSS Acc. You can close it anytime you want but if closed before 1st year no interest will be payable and prinipal amount will be adjusted accordingly from final payout for all the interest paid till 364 days. If you close after 1 year only a 1% penalty. Rules changed a year ago with making it more flexible. Before that you were not allowed to prematurely close it. Also max. limit increased from 15 Lakh to 30 Lakh. You can open multiple accounts with different banks but total investment across all banks can not exceed 30L. For e.g: You invested 10L this year. So now you can open new one with 20L.

I had opened for my parents in 2019 (father)/2022 (mother). Now both have reached maximum limit.

Interest is paid every quarter to same savings account from which it was funded at the end on succeeding month. For e.g: Apr-Jun interest is paid on July 1 or 2 (if 1 is holiday).

You can read more about SCSS at every bank website. Remember Banks are just intermediateries.

 

[Tarun239]

Senior Citizen Savings Scheme by Goverment of India and President of India being Head of Scheme and guaranteed with no affect to Principal+Interest. Post Offices and many banks are working as intermediateries to offer SCSS account. You can open online also with many banks. ICICI Bank is the only private sector bank to have permission from GoI to provide SCSS account.

Can be taken once you turn 60 yrs of age.

Min. investment 1000. Max: 30 Lakh (100% safe unlike banks which has 5L with DICGC).

This is a one time deposit scheme and you can't add funds later. Scheme is for 5 years with only one time extension allowed for 3 years. After that you can open new SCSS Acc. You can close it anytime you want but if closed before 1st year no interest will be payable and prinipal amount will be adjusted accordingly from final payout for all the interest paid till 364 days. If you close after 1 year only a 1% penalty. Rules changed a year ago with making it more flexible. Before that you were not allowed to prematurely close it. Also max. limit increased from 15 Lakh to 30 Lakh. You can open multiple accounts with different banks but total investment across all banks can not exceed 30L. For e.g: You invested 10L this year. So now you can open new one with 20L.

I had opened for my parents in 2019 (father)/2022 (mother). Now both have reached maximum limit.

Interest is paid every quarter to same savings account from which it was funded at the end on succeeding month. For e.g: Apr-Jun interest is paid on July 1 or 2 (if 1 is holiday).

You can read more about SCSS at every bank website. Remember Banks are just intermediateries.

Thanks, SCSS can be opened with PPF or either one of them, what are tax exemption rules for SCSS?

 

[desiviru]

Thanks, SCSS can be opened with PPF or either one of them, what are tax exemption rules for SCSS?

PPF and SCSS are two different schemes and you can opt for both or either as per your own wish. While PPF can be opened by anyone of any age above 18 or even less with guardian details, SCSS is solely for above 60 age as told before.

PPF is tax exempt completely but SCSS is not. It is only good for people who have less than 7.75L yearly income (new regime). Most people do it in their mother's name or husband do it in wife's name because their income from all sources like pension etc are in lower brackets. But if someone is already having a taxable income, SCSS not a good option because with 10% or 15% cut, you are left with less than FD.

SCSS interest is fully taxable as per slab and you can fill form 15H for TDS exemption. Also if interest in SCSS is less than 50K yearly you don't need to fill 15H also.

 

[Trust Me]

..... But if someone is already having a taxable income, SCSS not a good option because with 10% or 15% cut, you are left with less than FD.

I am puzzled. How so? I thought SCSS gave a higher interest than comparable FDs!
.

 

[desiviru]

I am puzzled. How so? I thought SCSS gave a higher interest than comparable FDs!
.

If your income from pension and other FDs is more than 7.75L/year then a new SCSS investment will make interest fall in 10% bracket. So you will get 8.20-10.4% (tax deducted)= 7.38% only. FDs compound annually and SCSS is based on simple interest.

There are people who are getting 70-80K monthly pension and are already in 10% slab. More income will push their earnings in 15% tax deduction which bring SCSS down than FD.

 

[ramirami]

If your income from pension and other FDs is more than 7.75L/year then a new SCSS investment will make interest fall in 10% bracket. So you will get 8.20-10.4% (tax deducted)= 7.38% only. FDs compound annually and SCSS is based on simple interest.

There are people who are getting 70-80K monthly pension and are already in 10% slab. More income will push their earnings in 15% tax deduction which bring SCSS down than FD.

That's not how taxes work. If someone goes into the higher tax bracket, the higher tax rate is only applicable on the amount in the bracket, not on the whole income, so it is always better to earn more money, irrespective of in which tax bracket that pushes you.

Also, exactly because of the way taxation works, 8.20 does not become 7.38 if you are in the 10% bracket because the 10% is not on the entire income. To get the correct effective tax rate, you must do total tax divided by total income. Can't directly do 10% less.

 

[Trust Me]

If your income from pension and other FDs is more than 7.75L/year then a new SCSS investment will make interest fall in 10% bracket. So you will get 8.20-10.4% (tax deducted)= 7.38% only. FDs compound annually and SCSS is based on simple interest.

There are people who are getting 70-80K monthly pension and are already in 10% slab. More income will push their earnings in 15% tax deduction which bring SCSS down than FD.

You are comparing apples to oranges! That's why I had mentioned "comparable FDs", meaning non-cumulative FDs paying out quarterly interest, --- which, basically, what SCSS accounts are. When compared with similar FDs, SCSS comes out ahead.
.

 

[desiviru]

That's not how taxes work. If someone goes into the higher tax bracket, the higher tax rate is only applicable on the amount in the bracket, not on the whole income, so it is always better to earn more money, irrespective of in which tax bracket that pushes you.

Also, exactly because of the way taxation works, 8.20 does not become 7.38 if you are in the 10% bracket because the 10% is not on the entire income. To get the correct effective tax rate, you must do total tax divided by total income. Can't directly do 10% less.

Do you read what I wrote or even understood? Do you even understand what you just wrote? 🤣

Take example of a Sr Citizen who is having a pension of 60K/month and an LIC annuity plan giving Rs.75000 per year (or 6250/month). I am giving example of such Sr. Citizen whose ITR I file.

His total income deom pension + LIC annuity = 795000. He has FDs also @ 7.75% in PSU banks which all fell in 10% tax bracket as interest is 2.3 Lakh. Now if he goes for SCSS investment say with 10 Lakh and earn more interest of 82000 a year whole this amt will still remain in 10% bracket and some will fall in 15%. Above 10L from all sources will get into 15%. How come yoy bring it down when there are no deduction. If you go for Old Regime you will be paying more. My example was simple but people here write without giving thought.

795000+230000-75000 (SD)+82000= 1032000.

Most of the 5% tax brackets are covered by his pension and annuity. So all the FD+SCSS will cut 10%-15%.

I agree with the pt that you should not stop investing because of tax brackets but you should look at other option that bring more interest so that it can take care of tax payments with extra %ge like with SFB I did where I get 2% more and losing .30% on extra so leftover of 1.70% is actually taking care of my tax for other FDs/Investments.

We should always look for instuments that can give us much more return to as to setoff the tax burden.

 

[ramirami]

Do you read what I wrote or even understood? Do you even understand what you just wrote? 🤣

Take example of a Sr Citizen who is having a pension of 60K/month and an LIC annuity plan giving Rs.75000 per year (or 6250/month). I am giving example of such Sr. Citizen whose ITR I file.

His total income deom pension + LIC annuity = 795000. He has FDs also @ 7.75% in PSU banks which all fell in 10% tax bracket as interest is 2.3 Lakh. Now if he goes for SCSS investment say with 10 Lakh and earn more interest of 82000 a year whole this amt will still remain in 10% bracket and some will fall in 15%. Above 10L from all sources will get into 15%. How come yoy bring it down when there are no deduction. If you go for Old Regime you will be paying more. My example was simple but people here write without giving thought.

795000+230000-75000 (SD)+82000= 1032000.

Most of the 5% tax brackets are covered by his pension and annuity. So all the FD+SCSS will cut 10%-15%.

I agree with the pt that you should not stop investing because of tax brackets but you should look at other option that bring more interest so that it can take care of tax payments with extra %ge like with SFB I did where I get 2% more and losing .30% on extra so leftover of 1.70% is actually taking care of my tax for other FDs/Investments.

We should always look for instuments that can give us much more return to as to setoff the tax burden.

Please give illustration of tax calculation for both scenarios and of post tax net income in both scenarios.

My claim is in no case you get to keep lower amount in spite of earning more because of change in tax bracket.

 

[desiviru]

Please give illustration of tax calculation for both scenarios and of post tax net income in both scenarios.

My claim is in no case you get to keep lower amount in spite of earning more because of change in tax bracket.

Then your own case is wrong and result of miscalculation.

Your reply tells you are't able to calculate simple things itself. I got an impression from your first reply itself that you don't understand much about how tax system works and how it impacts your tax brackets when you replied that increasing income will not have much effect on all the income from interest.

Anyways, I don't want to waste my time when simplest of examples didn't cleared your doubt. The complex one will blow your mind. Go to IT website and then use calculator, the simple one (not the advanced one though as your will confuse yourself) or open an excel sheet and write down things to learn in life rather than just posting 2 sentences so that other cook for you.

 

[ramirami]

Then your own case is wrong and result of miscalculation.

Your reply tells you are't able to calculate simple things itself. I got an impression from your first reply itself that you don't understand much about how tax system works and how it impacts your tax brackets when you replied that increasing income will not have much effect on all the income from interest.

Anyways, I don't want to waste my time when simplest of examples didn't cleared your doubt. The complex one will blow your mind. Go to IT website and then use calculator, the simple one (not the advanced one though as your will confuse yourself) or open an excel sheet and write down things to learn in life rather than just posting 2 sentences so that other cook for you.

Boss I wanted you to put down numbers so that I can point out exactly which number is wrong but sure, may be I am the idiot here. You should continue to avoid earning more money if it will put you in a higher tax bracket!

For everyone else, the last line is sarcasm. In all cases, higher pre-tax income leads to higher post-tax income, even if the higher income puts you in a higher tax bracket. In fact, Section 87A of the Income Tax Act was recently amended to make sure of exactly this!

 

[qf037x42v]

Boss I wanted you to put down numbers so that I can point out exactly which number is wrong but sure, may be I am the idiot here. You should continue to avoid earning more money if it will put you in a higher tax bracket!

For everyone else, the last line is sarcasm. In all cases, higher pre-tax income leads to higher post-tax income, even if the higher income puts you in a higher tax bracket. In fact, Section 87A of the Income Tax Act was recently amended to make sure of exactly this!

Just to add, it is called marginal relief

 

[Arnal07]

Bro I was talking about Sr. Citizens specifically and most of them are extending PPF for 5 years as they started early. No one is starting today to get locked for 15 years. So liquidity problem not an issue. They smartly take 50-75% out for investment in gold/land but keep rolling with it. Old generations don't think the way new gen did. In longer run, I can guarantee you Gen Y and Gen Z will be on receiving end with nothing in hand when inflation strikes them. I have always learnt that previous gen methods were capable of beating every scenario. So I follow those with regular intent.

Yes, PPF is 1.5L/year but SCSS is 30L per person max with 8.25%. Sr. Citizens don't look for liquidity option too early and they get regular quarterly interest. Other invest in PPF for a long term corpus. Decision can't be taken on fact how other assets are performing today. We have to take a view of next 25 years. Also land and gold is always a better option then going with SIP in markets which may look good today but overall if we compare even markets are not giving good returns and in m many cases last 10 yrs investment are fetching lower than FDs itself. So I always advice for a highly diversified protfolio with maximum funds parked in safe zones.

Today Gen are more inclined towards spending on unnecessary things and then most of them can be found saying, we didn't took a good decision while going for such stuff. Only 10% of Gen Y/Z are really taking a good approach that is hybrid one. My pure advice is before spending a rupee, have a plan for generating a rupee equal or more than to it.

bro which equity mutual fund gave less return than fd in last 10years?
Market not giving good returns now? Nifty is up almost 60% in last 2.5yr and small,midcap indices/Small and midcap mutual funds have almost doubled in the same tenure.Do you expect Index/Mutual funds to double every 2years?

 

[desiviru]

bro which equity mutual fund gave less return than fd in last 10years?
Market not giving good returns now? Nifty is up almost 60% in last 2.5yr and small,midcap indices/Small and midcap mutual funds have almost doubled in the same tenure.Do you expect Index/Mutual funds to double every 2years?

I was talking about investment made today. Not 10 years before. Already said, we have to look for future not past. Markets gave returns between 2021-2024 mid only and that doesn't happen every 10 years. Overall returns of markets in last 15 years are CAGR at 11% only. Go deep with mathematics. How many actually invested before Covid? How many actually invested after 1 years of markets regained?

So we have to make a point looking at all things. Now many Mid, Small caps have came down 25-60% also. I gave you example: My friend having SIP of 10K per month started in June 2021 was sitting on around 50% profit or returns on invested cost. In last 6 months, investment equal to 14 months have eroded 40% and his returns averaging at 35.3%. So overall 10% per year and if markets go south in this or next quarter it will reduce it further bringing actual return less than FD. So Sun don't rise when you open your eyes. 90% of people have actually missed the upside.

After Covid crash trend was #MutualFundSahiNahiHai and most of people came out of it and returned at higher levels. Only 5-10% are those who actually started after 2021 and got returns but didn't got out at highs and now facing dowenside. This generation hasn't seen the phase of bear markets which when starts lasts 5-7 years where average market returns are 3-4% only. Wait for it.

 

[Arnal07]

I was talking about investment made today. Not 10 years before. Already said, we have to look for future not past. Markets gave returns between 2021-2024 mid only and that doesn't happen every 10 years. Overall returns of markets in last 15 years are CAGR at 11% only. Go deep with mathematics. How many actually invested before Covid? How many actually invested after 1 years of markets regained?

So we have to make a point looking at all things. Now many Mid, Small caps have came down 25-60% also. I gave you example: My friend having SIP of 10K per month started in June 2021 was sitting on around 50% profit or returns on invested cost. In last 6 months, investment equal to 14 months have eroded 40% and his returns averaging at 35.3%. So overall 10% per year and if markets go south in this or next quarter it will reduce it further bringing actual return less than FD. So Sun don't rise when you open your eyes. 90% of people have actually missed the upside.

After Covid crash trend was #MutualFundSahiNahiHai and most of people came out of it and returned at higher levels. Only 5-10% are those who actually started after 2021 and got returns but didn't got out at highs and now facing dowenside. This generation hasn't seen the phase of bear markets which when starts lasts 5-7 years where average market returns are 3-4% only. Wait for it.

In last 20years avg large cap equity mutual funds gave 12% cagr and small/midcap funds gave 16-18% cagr.
I am not talking about individual stocks.Mutual funds are not regular source of income, so you have to invest some amount in fixed assets for regular income.Since 2000, nifty never have 3-4% returns in a 4-5years phase.In current economic condition of India, 4-5 years long bear market in impossible.Market will correct price wise or time wise in the middle but in longer run Mutual funds return will surely beat FD by handsome margins.From dec, 2021 to April 2023 Nifty gave 0 return.This type of time correction will happen again but if you continue to do sip or invest for 8-10years you can get double the return of FD.

 

[desiviru]

In last 20years avg large cap equity mutual funds gave 12% cagr and small/midcap funds gave 16-18% cagr.
I am not talking about individual stocks.Mutual funds are not regular source of income, so you have to invest some amount in fixed assets for regular income.Since 2000, nifty never have 3-4% returns in a 4-5years phase.In current economic condition of India, 4-5 years long bear market in impossible.Market will correct price wise or time wise in the middle but in longer run Mutual funds return will surely beat FD by handsome margins.From dec, 2021 to April 2023 Nifty gave 0 return.This type of time correction will happen again but if you continue to do sip or invest for 8-10years you can get double the return of FD.

That's what US thought in 1929 and bubble burst. Then between 1939-1945. Then between 1965-81. That's what people thought during 2004-2007. That's what people thought in 2012-13 and that's what people are thinking now from 2021-2025. But every generation will see the wrath of markets. What will you do when you need the money and you are stuck with longer term view just because you couldn't anticipate short term profit booking?

The word impossible is nothing. In Nov 2019, people were like we will never be able to see Nifty below 10K mark ever. But we saw 7400. Pandemic may not hit but something new will come to drag it. This time during pandemic, drug lord money and those who were sitting with billions saved the market but it won't happen always. That's why I said, wait for it. People learn from few decades. I went into centuries to make a view. The 18th centruy recession in Europe was never thought of and it started with public health crisis. No one knew that so many people will lost life and even for labour for food, countries will have to beg to other countries.

Life is a circle. It keeps coming back to points where it started after complete rotation and then start a new rotation.

 

[thereguser]

if adani ambani shares are falling we have to bail out those @$$holes with our FD na, simple.