Gold loans and fixed deposits (FDs) are two popular investment options that offer liquidity and earnings potential. Both have unique benefits, eligibility criteria, interest cost implications, and risks. Read on to understand all factors to help you decide which avenue best aligns with your financial aspirations.
Basic Understanding
A gold loan allows individuals to use their gold jewellery as collateral to get a loan, usually from banks or NBFCs. The lender keeps the gold ornaments in safe custody until the loan is fully paid. The key attraction lies in quick processing, fewer documents, and retaining gold assets while meeting urgent funds needs.
A fixed deposit (FD) is an investment product in which money is deposited for a fixed tenure to earn guaranteed returns. It offers stable, risk-free growth but has premature withdrawal constraints. FDs are ideal for those prioritising safety and wealth creation over long periods.
Key Features and Benefits
The following are the main features and benefits of gold loans and fixed deposits:
1. Gold Loans
Gold loans allow borrowers to obtain funds by pledging personal gold ornaments and jewellery as security to banks or NBFCs. The key benefits include:
- Quick processing within hours, with funds credited to the bank account instantly.
- It requires minimal paperwork like ID/address proof and KYC forms.
- Flexible repayment through EMIs, lump sum pay servicing only.
- It is available to all individuals irrespective of credit score and income status.
- The interest-sanctioned loan amount depends on the current gold rates and the loan-to-value (LTV) ratio, a percentage of gold’s market value.
2. Fixed Deposits
Fixed deposits (FDs) are secure investment products banks offer that guarantee fixed returns over a set period. Key attributes are:
- Get assured returns unaffected by market risks.
- Choose tenure from 7 days to 10 years.
- Principal and interest earnings are safe up to ₹5 lakh limit.
- Useful for long-term goals like retirement planning.
Income Tax on Fixed Deposits
Interest earnings from fixed deposits are fully taxable per the income tax slabs applicable to the individual. For income up to ₹2.5 lakh per annum, no tax is payable on FD interest income. Between ₹2.5 and 5 lakh, a 5% tax is levied, while a 20% tax is applicable for income between ₹5 and 10 lakh.
For earnings above ₹10 lakh annually, a 30% tax is imposed on FD interest income. Additionally, tax deduction at source (TDS) gets triggered if the FD interest in a financial year exceeds ₹40,000. One can also claim deductions up to ₹1.5 lakh under Section 80C to lower tax liability on fixed deposit returns.
Conclusion
Connect with Karnataka Bank today for attractive gold loans and fixed deposit options customised to your needs. Karnataka Bank’s easy application processes, competitive interest rates and dedicated customer support make it convenient for you to apply for the right investment product online or visit a branch near you.
Karnataka Bank’s gold loan EMI and FD calculator tools allow you to make well-informed decisions. Partner with Karnataka Bank for a prosperous financial future built on trust and transparency.