Category: Personal Finance

Loan against the deposit amount

A loan against a fixed deposit account is one of the easiest methods to get funds in need. You have the option of taking a loan on your FD or withdrawing it early if you need money in a hurry. Normally banks may lend you loan amounts that vary from 86% to 95% against your FD. The relevant Certificate of Deposit or CD is pledged with the bank until the loan amount is not reimbursed in the case of a loan against a fixed deposit. In the event that the loan is not paid, the bank has the right to reclaim the funds from the fixed deposit account of the holder or borrower. Once you establish a legitimate fixed deposit account with a bank, you will be eligible for a loan against a fixed deposit. The application process for a loan against a fixed deposit is simple and can be completed online.

To apply for this generally, banks require you to submit the duly filled application form along with Fixed / Term Deposit receipts. The loan amount provided varies from one bank to the next. If we take the State Bank of India as an example, the minimum/maximum amount that can be taken for a loan or overdraft facility is Rs. 25,000/Rs. 5 crore. That being said, the amount must not exceed 90% of the entire amount deposited. The repayment term is the time frame in which the loan amount, as well as any accrued interest, must be reimbursed to the bank. In the case of SBI, the loan amount must be repaid within 5 years for STDR/e-STDR and 3 years for TDS/e-TDR. On a loan against an FD, interest is levied on a daily reducing balance. In the case of SBI, a charge of 1% will be added to the relative time deposit rate. It is important to note, however, that the loan against the FD option is not available for tax-saving fixed deposits.

Interest income is taxable

Section 80C allows for tax deductions on 5-year tax-saving bank FDs of up to Rs 1.5 lakh every financial year. Individuals must pay full tax on interest received on bank fixed deposits, while older persons can receive a deduction of up to Rs 50,000 on interest received on savings and fixed deposits. Interest income from tax-saving FDs, on the other hand, is taxable according to the depositor’s tax bracket. Interest income must be reported under the heading “Income from other sources,” and elderly individuals can claim a tax reduction under Section 80TTB. As a result, investors seeking better tax-free returns from their fixed income tax saving strategies can favour small savings schemes such as Sukanya Samriddhi Accounts and others.

TDS on fixed deposits

FD interest is taxed with the relevant surcharge/cess as per your tax slab rate. TDS on fixed deposits (FDs) is 10% if the interest amount surpasses Rs 40,000 per year, which is applied in the fiscal year 2020-21. If you do not furnish your PAN Card to the bank, the TDS rate on fixed deposit interest is 20% under current Income Tax standards. TDS is not withheld on Time Deposits (FD) or Recurring Deposits (RD) placed at a post office. Senior citizens over the age of 60 can enjoy up to Rs 50,000 per year as tax-free income from FD. Form 26AS includes details about the TDS levied by the bank. If your total annual income is less than Rs 2.5 lakh, you can submit form 15G/15H at your concerned bank. This ensures that the bank will not subtract TDS because your income does not fall under the taxable brackets.

Premature withdrawals

Investors often choose their FD duration based on the highest possible interest rate, disregarding premature withdrawal options. As a result, unexpected events or unmet personal plans can cause customers to prematurely withdraw FDs, incurring a penalty of up to 1%. Premature withdrawal options on fixed deposits allow the account holder to close the account before the maturity date. This is a great relief during times of financial difficulty. As a result, the depositor will be required to pay a set amount as a penalty to the bank. For the duration, the FD remains with the bank, the effective interest rate will be lower than the effective rate applicable at the time of placing the FD. In the instance of an SBI fixed deposit, the applicable interest rate will be 0.50-1 per cent lower than the applicable rate at the time of placing the FD for the duration the FD stayed with the bank, or 0.50-1 per cent lower than the contracted rate, whichever is lower. The bank would levy a penalty of 0.50 per cent for early withdrawals on retail term or fixed deposits up to Rs. 5 lakh for all tenures. The relevant penalty for retail fixed deposits with a balance of more than Rs. 5 lakh but less than Rs. 1 crore is 1% for all tenures.

DICGC insurance cover

The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India, provides deposit insurance for deposits made with authorized banks. In the event of a bank collapse, the insurance scheme would cover bank deposits, which comprise fixed deposits, savings accounts, recurring deposits, and current accounts, up to Rs 5 lakh per depositor. This insurance scheme covers both the interest and principal amount of bank FDs. Investors who don’t want to bear risk can enjoy fixed deposits as they can ensure optimum capital security by spreading their FDs among various banks up to a limit of Rs 5 lakh. Though long-term returns of debt and equity mutual funds have outperformed FD returns by a massive percentage, investors’ primary concern should be always capital security, which always comes first before higher yields.

Central Government Covid Relief Measures

Family Pension under Employees State Insurance Corporation (ESIC)

To assist families in living a dignified life and maintaining a fair standard of living, the ESIC pension system for employment-related death cases has been extended to include people who have died as a result of Covid. Dependent family members of such people will be entitled to a pension equal to 90 percent of the worker’s average daily pay, as per current regulations. This benefit will be accessible retroactively beginning March 24, 2020, and for all such circumstances through March 24, 2022.

Employees’ Deposit Linked Insurance Scheme (EDLI)

The EDLI scheme’s insurance benefits have been improved and liberalised. This will benefit all beneficiaries, but it will be especially beneficial to the families of employees who have died as a result of COVID.

The maximum insurance benefit has been raised from 6 lakh to 7 lakh rupees.

Delhi Covid Relief Measures

According to recent sources, the Delhi government will pay ex gratia payments to persons who are qualified for state-sponsored programmes, including Rs 50,000 to the dependents of those who died as a result of COVID-19. A committee has been formed to give up to Rs 5 lakh in compensation in the event of death owing to a shortage of oxygen. Aside from that, the Delhi government will cover the costs of schooling for children whose parents died as a result of the coronavirus.

All orphaned children who have lost both parents to COVID, or who have lost a single parent to COVID, will be paid Rs 2,500 every month until they reach the age of 25, as well as free schooling. Along with the ex-gratia payout, a monthly annuity of Rs 2,500 would be instituted in families where the earning member has died. If the husband dies, the woman will receive the pension. If the wife dies, the pension is given to the husband, and if the individual is unmarried, the annuity is given to the parents.

Madhya Pradesh Covid Relief Measures

Madhya Pradesh Chief Minister Shivraj Singh Chouhan stated that the state would pay a monthly stipend of Rs 5,000 and free education to children whose parents died of COVID. Students in classes 1 to 8 would receive a stipend of Rs 500 per month, while students in classes 9 to 12 would receive a stipend of Rs 1,000 per month. This stipend will be available to students in both public and private schools.

The state government has also decided that if any working, regular, permanent workers, daily wage earners, ad hoc, contractual, outsourced, other government servants/employees of the state die suddenly as a result of Covid 19, their families will be eligible for an ex-gratia amount of Rs 5 lakh as immediate financial assistance, according to Chouhan.

Tamil Nadu Covid Relief Measures

Tamil Nadu joined the list of states that have offered assistance to children who have lost their parents as a result of the deadly second wave of Covid-19. The state government declared that children who have lost both parents will receive financial support in the form of a fixed deposit of Rs 5 lakh, which the child would be able to withdraw in full with interest when he or she reaches the age of 18.

The government will cover these orphaned children’s educational costs until they graduate, and they will be given first preference for placement in government-run children’s homes.

Karnataka Covid Relief Measures

The Karnataka government offered a Rs 1,111.81 crore relief fund for people affected by the COVID-91-induced closure. This is intended to help persons who work in the unorganized sector, such as washermen, rag pickers, and daily wage laborers. It also offered a free ration of up to five kilograms of food grains and a reduced tariff of Rs 15 per kilogram for food grains over ten kilograms. People who have lost both parents will be eligible for monthly monetary support of Rs 3,500 under the plan.

All about Nifty dividend opportunity 50 index

Now talking about the index as of April 30, 2021, the index has 50 companies. At the time of rebalancing of shares/ change in index constituents/ change in investible weight factors (IWFs), the weightage of the index constituent (where applicable) is capped at 10%.

Coming on to why this index can be of interest to investors is that the index is designed in order to give investors’ an exposure to high-yielding companies which at the same time offers stability and tradability requirements.

So, for now we shall discuss that while dividend paying stocks are considered to provide stability during volatile periods and also offer a secondary source of income, they can even offer capital appreciation as in the current time with respect to benchmark indices.

Performance of the dividend index in comparison to Nifty

On a year to date basis, while the Nifty Dividend Opps 50 index gained by 12.96 percent, Nifty during the same period was up by 11.11 percent. As per the NSe report as on April 30, 2021, the index return since inception have been 8.51% (price return), while total return is at 11.30 percent.

Components of Nifty Dividend Opp 50 index with the top weightage

Stocks	Weightage (in percentage)
TCS	9.8
ITC	9.73
Infosys	9.71
HUL	9.61
Larsen and Toubro	9.32
Tata Steel	4.63
Tech Mahindra	3.43
Nestle India	3.35
Power Grid	3.25
Bajaj Auto	2.87

Dividend yield stocks that have offered way better return than the Nifty index:

Note here while for the purpose of comparison we have considered YTD returns, long term data since 2007 as per data from Bloomberg shows that while the Dividend opportunities index has offered an annual return of 11.3 percent, Nifty has fetched 8.9 percent (taking into account both capital appreciation and dividend)

1. Tata Steel:

Tata Steel from the dividend index is a stock which in line with other metal stocks has run up quite substantially. This stock on a year to date basis has surged by a huge 75 percent. Other than the capital appreciation, the stock of Tata Steel declared a final dividend of Rs. 25 per share for which the ex-date is June 17.

This is in comparison to Nifty’s YTD return of 11.46 percent.

2. TCS:

The IT major in a Covid hit year has managed to offer a 10 percent return on a YTD basis. For the fy21, the company declared an interim dividend of Rs. 15, in respect of which the stock turned ex-dividend as on May 25, 2021.

3. Power Grid Corporation of India:

This power generation and distribution company also gained an over 18 percent during the period from December 31, 2020 to May 31, 2021

4. Infosys:

The country’s leading IT firm based out of Bengaluru on rapid expansion in the digital sphere with the outbreak of Covid 19 is also performing well. During the period under review the stock has gained almost 11.5 percent. The Infosys company stock for the dividend announced for FY 21 shall turn ex-dividend today.

5. Larsen and Toubro:

This infrastructure company has also reaped a higher return than Nifty of 15 percent considering closing price of Rs. 1287 as on December 31, 2021.

GoodReturns.in

Investment

oi-Vipul Das

|

Updated: Monday, May 31, 2021, 13:11 [IST]

Kotak Mahindra Bank has adjusted the interest rate on fixed deposits (FDs) for amounts more than Rs 2 crore to Rs 25 crore and beyond, with effect from May 24, 2021. Kotak Mahindra Bank provides interest rates of 2.5 per cent, 2.75 per cent, and 3.00 per cent on FDs maturing in 7 to 30 days, 31 to 90 days, and 91 to 179 days, respectively. Kotak Mahindra Bank gives a 3.80% return on term deposits maturing in 280 days to less than 12 months. The bank is now giving 4.00 per cent and 4.15 per cent interest rates on FDs expiring in 12 months – less than 15 months and 15 months – less than 18 months. The bank is currently offering interest rates of 4.25 per cent and 4.50 per cent for deposits maturing in 18 months – less than 2 years and 2 years and above but less than 3 years. Similarly, the bank is currently offering 4.60 per cent and 4.75 per cent on FDs maturing in 3 years and above but less than 4 years and 4 years and above but less than 5 years, respectively. Following the most recent revision, the bank is currently offering the maximum interest rate of 5.00 per cent on FDs maturing in 5 years and above, up to and including 7 years. These rates are effective from 24 May 2021.

Kotak Mahindra Bank FD Rates

Tenure	Rs 2 Cr & above but below Rs. 5 Cr	Rs. 5 Cr & above but below Rs. 10 Cr	Rs. 10 Cr & above but below 25 Cr	Rs. 25 Cr & above
7 – 14 Days	2.50%	2.75%	2.75%	2.75%
15 – 30 Days	2.50%	2.75%	2.75%	2.75%
31 – 45 Days	2.75%	3.00%	3.00%	3.00%
46 – 60 Days	2.75%	3.00%	3.00%	3.00%
61 – 90 Days	3.00%	3.25%	3.25%	3.25%
91 – 120 Days	3.00%	3.35%	3.35%	3.35%
121 – 179 Days	3.00%	3.50%	3.50%	3.50%
180 Days	3.75%	3.55%	3.55%	3.55%
181 Days to 270 Days	3.75%	3.65%	3.65%	3.65%
271 Days to 279 Days	2.90%	2.75%	2.75%	2.75%
280 Days to Less than 12 Months	3.80%	3.65%	3.65%	3.65%
12 months – less than 15 months	4.00%	3.85%	3.85%	3.85%
15 months – less than 18 months	4.15%	4.10%	4.10%	4.10%
18 months – less than 2 Years	4.25%	4.25%	4.25%	4.25%
2 years and above but less than 3 years	4.50%	4.25%	4.25%	4.25%
3 years and above but less than 4 years	4.60%	4.50%	4.50%	4.50%
4 years and above but less than 5 years	4.75%	4.50%	4.50%	4.50%
5 years and above up to & inclusive of 7 years	5.00%	4.50%	4.50%	4.50%
Source: Kotak Mahindra Bank, W.e.f. 24th May 2021

Kotak Mahindra Bank FD Rates (Below Rs 2 Cr)

Kotak Mahindra Bank provides interest rates of 2.5 per cent, 2.75 per cent, and 3.25 per cent for FDs maturing in 7 to 30 days, 31 to 90 days, and 91 to 179 days, respectively. Kotak Mahindra Bank provides 4.40 per cent interest on term deposits that mature in 180 days to less than a year. The bank offers 4.50 per cent on deposits with a maturity period of one year to 389 days. The bank will pay 4.80 per cent on FDs maturing in 390 days to less than 23 months. Kotak Mahindra Bank would provide a 5% interest rate on deposits maturing in 23 months to less than 3 years. The bank will pay 5.10 per cent on term deposits with a maturity period of three years or more but less than four years. Kotak Mahindra Bank pays a 5.25 per cent interest rate on deposits with a maturity period of four years or more but less than five years. The bank offers 5.30 per cent on FDs maturing in 5 years and above, up to and including 10 years. Senior folks continue to get interest rates that are 50 basis points higher than the regular customers. On FDs maturing in 7 days to 10 years, the bank provides interest rates ranging from 3% to 5.8%. The current Kotak Mahindra Bank FD rates (below Rs 2 crore) are listed below and are effective as of April 26, 2021.

Tenure	Regular FD Rates	Senior Citizen FD Rates
7 – 14 Days	2.50%	3.00%
15 – 30 Days	2.50%	3.00%
31 – 45 Days	2.75%	3.25%
46 – 90 Days	2.75%	3.25%
91 – 120 Days	3.00%	3.50%
121 – 179 days	3.25%	3.75%
180 Days	4.40%	4.90%
181 Days to 269 Days	4.40%	4.90%
270 Days	4.40%	4.90%
271 Days to 363 Days	4.40%	4.90%
364 Days	4.40%	4.90%
365 Days to 389 Days	4.50%	5.00%
390 Days (12 months 25 days)	4.80%	5.30%
391 Days – Less than 23 Months	4.80%	5.30%
23 Months	5.00%	5.50%
23 months 1 Day- less than 2 years	5.00%	5.50%
2 years- less than 3 years	5.00%	5.50%
3 years and above but less than 4 years	5.10%	5.60%
4 years and above but less than 5 years	5.25%	5.75%
5 years and above up to and inclusive of 10 years	5.30%	5.80%
Source: Kotak Mahindra Bank, W.e.f. 26th April 2021

Note

HDFC Bank, the leading private sector lender, has also changed its FD interest rates with effect from May 21, 2021. On deposits maturing between 7 days and 10 years, HDFC Bank currently provides interest rates ranging from 2.50 per cent to 5.50 per cent. Senior folks continue to get interest rates that are 50 basis points higher than the general public. Senior folks will get interest rates ranging from 3% to 6.25 per cent on FDs with terms ranging from 7 days to 10 years. HDFC Senior Citizen Care is a special FD scheme offered by HDFC Bank for senior citizens. On these deposits, the bank gives a 75 basis point higher interest rate. The interest rate on a fixed deposit made by a senior citizen under the HDFC Bank Senior Citizen Care FD would be 6.25 per cent. Click here for more details.