Have idle cash? put it to work for higher returns!
Having ideal cash is great, but it is important to think of it as an asset rather than spend it at a whim on the latest gadget or a frivolous holiday. It may be that you need the spare cash after a couple of months for an emergency or build a corpus of funds to purchase a large asset. However, letting the cash sit idle in a savings account with 4% to 6% interest is the least productive way to deal with it. Depending on your risk appetite, you can chose from a fixed deposit considering the various fixed deposit interest rates offered or invest the spare cash in the markets. Whatever your choice, we list the best ways to make your idle cash work for you:
A fixed deposit is the easiest way to deploy your spare cash and the same can be linked to your savings account. You need to check the fixed deposit interest rate to ensure you are getting the best deal. Typically banks will give you a poor interest rate compared to NBFCs. There is no requirement to have a fixed deposit only with the bank in which you maintain your account. For your convenience many financial institutions and NBFCs also offer online fixed deposit applications, which require minimal paperwork and are quick to complete. Typically there is no penalty in premature withdrawals; however, the interest applied to the deposit may be slightly lower. A word of caution: All interest earnings from fixed deposits are taxable at the normal rate applicable depending on your tax bracket. Further, if your interest income for the year is above Rs.10,000, you be also be submit to TDS [Tax Deduction at Source] at 10% of the earnings.
These are a type of mutual fund that come with ultra low risk. They are called liquid funds as the investor can withdraw money easily and quickly. Once the KYC is complete and you are a mutual fund investor, you can invest in these funds. With a return of 7% to 8%, mutual funds are taxed at a lower rate if held for more than 3 years as the earnings are treated as capital gains. An investor also has the option of withdrawing small amounts when required while the returns on amounts invested are not affected. Many funds also give you the option of transferring money into their account the same day.
Income funds are debt schemes that invest your money in a mix of long term, medium term and short term bonds. Typically income funds are ideal if you do not need the spare cash for 8 to 10 months. The returns are slightly higher than liquid funds; however, you need to choose the term of the fund carefully when applying as an early exit can involve a one-time penalty. If the term and early exit parameters suit your requirements, these funds may be right for you with attractive returns in the short to medium term. The earnings are taxed at the applicable rate for withdrawals before a 3-year period, after which tax is applied at 20% with indexation benefits.
When you are looking to maximize your returns on the idle cash, turn to Bajaj Finance Limited for all your needs. With easy and minimal documentation, a fast, online application process, high returns and quick transfer of money, it just may be your ideal investment partner.