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This can get tricky and your understanding is correct if the complete redemption happens within a year. In case of more than a year, the FD may just be more beneficial, since the 8L income is split up across multiple financial years attracting a lower tax slab rate. For example, if 4 years is assumed to be the period, 2L p.a. would attract a lower tax slab each year than the entire 8L only in the fourth year.

Only caveat is the moving to a higher tax slab rate as highlighted above for total redemptions, which could backfire due to deferral of taxes.

Suppose that the best benefit is partial withdrawal where part capital and part of the gains is withdrawn.

Advance Medical Directive

Had been reading about Advance Medical Directives or Living Wills and how the government and courts have recently cleared up some of the procedures around such documents. So decided to go ahead and have one drafted with a lawyer. The lawyer I went to is a good friend, so he also told me that the chances of enforcement are still an unknown. But I'm going ahead anyway.

I don't intend to trigger/get into a debate about the morality aspects. But after recently seeing how the last few months were with an elderly relative, and knowing there are more than enough 'religious' busybody relatives in my family who will come around to harass my spouse when the time comes just to justify their dogma, I decided to at least try and spare her some of that in case. And decided that it is better to have it prepared now, so if and when these things do become more acceptable, the document would have been prepared when I am of sound mind and in perfect health.

The preliminary questions were around what I would prefer in specific situations, coma, terminal illness, etc. Also details about any religious requirements and things like that. (I would like my organs harvested, body donated to a medical college or cremated in a government electric crematorium asap with no hint of any religious nonsense! Again, not trying to trigger debate, to each their own.)

Actually there is another nuance between FD and MFs taxation. In case of a multi-year FD (let's say 3 years), you have to pay tax on the interest across all the three years even though your interest might just be accumulating in the FD account.

Example: FD of 10 lakh for 3 years at 8% pa booked on 1st April, 2022.
- For simplicity, let's assume first year interest interest is 80k.
- You have to pay tax on this interest from 2022 itself even though you might only get the interest on maturity i.e. 1st April 2025 (3 years from FD book date).

On the other hand in MF, you don't pay for NAV gains every year but only at the time of redemption.

Personally I don't like to pay tax on interest income which is not even credited to my account. One more deal breaker for FDs.

Is there any alternative to FD in terms of providing instant liquidity but at the same time being a better option than FD? With FD, I can login to my account and liquidate the FD and the amount will be credited instantly. Very important when there is an emergency, which I experienced recently.

That's called interest on accrued income. FDs don't make sense due to taxation.

Another area (one example) where MF has an edge is LTCG tax exemption of 1.25 Lacs in a financial year. If someone is prudent and takes advantage of this, he can minimize tax and even achieve zero taxation. It's one of the principles of tax harvesting. Simple idea is to keep redeeming some portion every year so as to keep long term gains within tax threshold and keep re-investing same portion.

This is not available for debt MFs.

Thanks for correction. I missed that.

I believe one has option to pay tax for the FD interest on maturity when the interest is actually credited. Up to the individual on when tax is paid (yearly or at the maturity).
However those in lower tax slabs tend to pay tax yearly so as to avoid jumping to higher slab in maturity year due to entire interest accumulation and increasing the taxable income.

AFAIK one has to pay tax yearly on the interest accrued in the year. I am not sure if there is any option to defer tax payment to maturity for multi year FD. Any accrued interest during a financial year is reported by the bank in form 26AS so one has to report it while filing tax return.

Those Insta FDs are indeed the best option. Alternatively, use credit cards with large limit.

Else, sign up for an overdraft facility with your bank. In case of emergency, draw funds from this overdraft facility. But pay back the entire borrowed amount within a couple of days by redeeming debt funds.
https://www.icicibank.com/personal-b...against-salary

This works out very well because interest is charged only on the number of days the funds are utilized. If you don't use the overdraft facility, there is no interest charged.

Very interesting. I wasn't aware of this and googled up. Seems there are two options for accounting FD interest tax - accrual vs cash. The link below provided the simplest explanation. What you mention is the cash basis method.

Not paying every year can get messy since form 26AS shows the annual TDS on FD interest already deducted. So one will put this as ITR refund every year and then cumulatively pay tax when FD matures. Seems hard but allowed per law if someone wants to do it. Thanks for sharing :thumbs up

https://www.canarahsbclife.com/blog/...the%20interest.

If you need physical cash, then the next best option may not be logistically feasible and hence no other option but an FD that you can then visit the branch and take out cash after redemption.

If you need to pay a person via bank transfer or cheque, then again FD is highly liquid and useful.

Otherwise, a Credit Card with good limit (not near to what you usually spend every month) is a very good instant liquidity option. I personally keep a spare card with a good limit and a different credit billing cycle than my primary card. This gives me usually a spare time of 15-45 days, depending upon the day I swipe it. Have used it a few times during admissions to hospitals in family. Quite convenient and safe too.

Well, there are extant solutions to your issue, probably not advised to you :
1. In case of a multi-year FD, you can opt for quarterly payout of the interest earned to your Savings account. You will pay tax only on interest income credited to your account in this case. You will lose out on the compounding benefit though.
2. You can opt for taxation on maturity (your CA could help you with this). You will have to additionally inform your Bank not to deduct TDS.

Hello friends;

Retirement. Yes and as soon as you step in mid 50's you wonder - what are your options left and how will we manage to cater to the ever growing demands of the family and also the economics / taxation / ever changing financial implications etc.

We have a small piece of land in Goa on a island and to reach the main town we take a ferry. We can build a small cottage like house and maybe create some galas and rent them out. It is primarily a village / panchayat township with no major constructions as of now; but I am told things will change soon here.

We wont be having a lot of money to start investing and have ZERO business background. Knowing that labour is hard to come by knowing it is a 'Shushegaad' life for most there and the given unrest of non-goans hitting the shores for employment crisis of sorts.

I have a simple question - is there a business which is sort of trading - buy / sell / expenses : retain profits. Simple as that. I dont see making loads of money, but to ensure that we are not obligated to anyone as much as possible and keep the kids away from any unwanted modern day stress of keeping up with parents and their dilemmas. I for one feel (as known on the internet) the next gen - may not have the time or the patience to look after their parents, whims and fancies.

Inshort - any business, with not much of an investment as I dont have a house in there yet and am hoping with some ideas from this forum I can look at initiating something soon.

Cheers & TIA
S

Overnight and Liquid Funds offer instant credit to your bank account upto an amount of Rs. 50,000/- or 90% of your holdings, whichever is lower.

In case you want a higher emergency limit, just invest across different Funds to enjoy a multiple of the limit.