Well, again lot of people asking about this. Here are some facts. These are safe investments with fixed returns. They are NCD (non-convertible debentures). The interest rate offered is around 7.5 - 8 % depending on options. It saves tax by way of section 80C, where up to (and only up to) 20K INR gets deducted from your taxable income. So your effective interest rate is slightly better (but just for the year).
Are they worth investing? It is a good bet, if saving tax of about 3-4K matters to you. You could potentially see better FD rates in the future, which can easily cover for the extra 3-4 K you are saving in year 1. My recommendation, if you are tired of FDs then do this. Else wait for FD rates to rise further, ask the branch manager to provide you 10 year rates which will be half a percent lower than your 390 day rate, and put money into that. It provides flexibility of withdrawal and potentially better rates.
Happy investing!
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