Inflation is eating your bank FD's money

Inflation is eating your money which you have invested in form of FD's in banks. Yes its true! If you are thinking that your hard earned money invested in Bank FD's is giving you returns of 8-8.75% then think again. The inflation rate is 7.61 % is eroding your interest earning. And at if you will calculate you will find that may be it is giving negative returns.

At present most of the banks in India are giving 8 to 8.75 % interest on Fixed deposit on more than one year period, not more than that. After accounting inflation and tax on interest ( Interest earning is taxable under section 80 C of Income Tax Act) earned, Your money is still the same without growth.

If your annual income is below 2.5 lakh and at the tax rate of 10.3 % your effective earnings on Fixed deposit would be in between 7.62% and 7.85 %. Inflation is 7.61 % so you see that you are geting marginal interest earning on your investment in FD's. If you fall in the annual income range of more than 2.5 lakh then you can calculate yourself it is perhaps eating your money.

So it is better to choose other investment options other than bank FD's. Other investment options keeping current inflation in mind are Mutual Funds ( Diversified Equities with good past performance) , Gold and Real Estate.

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