As the year 2023 approaches, many investors are looking to make smart decisions when it comes to their savings. One popular option for long-term investment is a fixed deposit, but there have been some changes in recent times that you should be aware of. Here are three must-know updates about fixed deposits before you invest in 2023.
1) Increase in minimum deposit amount
One of the major changes in fixed deposit that will take effect in 2023 is the increase in the minimum deposit amount. For most banks, the minimum deposit amount has been raised from Rs. 5,000 to Rs. 10,000. This means that to open a fixed deposit account, you will now need to deposit at least Rs. 10,000. This change may not seem significant, but it can have an impact on those who have smaller savings or are just starting with investments.
The reason for this change is to align with the current market conditions and to ensure that the banks have enough funds to continue their operations. This increase in the minimum deposit amount may also have an impact on the interest rates offered by the banks.
2) Changes in interest rates
Speaking of interest rates, there has been a noticeable change in them as well. The Reserve Bank of India (RBI) has cut the repo rate by 135 basis points since 2019, which has resulted in a drop in interest rates for fixed deposits as well. Due to this, the interest rates offered by banks for fixed deposits have gone down by an average of 1%.
Banks offer different interest rates for different tenures, and it is important to keep an eye on these changes before investing in a fixed deposit. With the current decrease in interest rates, it is always advisable to do your research and compare rates before making a decision. This will help you get the best possible returns on your investment.
3) Tax implications
Previously, interest earned on fixed deposits was taxed as per the investor's income tax slab. But from April 2020, there have been changes in the taxation rules for fixed deposits. According to the new rules, the interest earned on fixed deposits will now be subject to TDS (Tax deducted at source) if the annual interest earned by an individual exceeds Rs. 40,000. The TDS rate is 10% if the PAN is provided and 20% if it is not provided. This means that if you are a high-income investor, you may end up paying more tax on your fixed deposit returns than before.
Additionally, if the total interest income from all your fixed deposits exceeds Rs. 40,000 in a financial year, you will need to declare it in your income tax return and pay taxes accordingly. Therefore, it is important to consider the tax implications before investing in a fixed deposit.
In conclusion, these are three important changes that you must know before investing in a fixed deposit in 2023. With the increase in minimum deposit amount, changes in interest rates, and modifications in taxation rules, it is crucial to stay informed and make well-informed decisions while planning your investments. Keep in mind these updates and make sure to do your research before investing in a fixed deposit in 2023.