Expert Anup Bagchi answers questions on CNBC-TV18 and gives tips on bank fixed deposits.

Before putting your money in fixed deposits, check the financial position of the bank. Bank interest rates vary from 8.5%to 12.5%. Actual rate of interest is written on the fixed deposit slip.

Never leave out the renewal column unfilled. Otherwise, on maturity the fixed deposit amount will go back into an FD.

Instead of putting a big amount in one fixed deposit, break it into more than one fixed deposits of small amounts. Your fixed deposit starts from the date you deposit the money into your FD account and not when you issue the cheque.

Banks are offering 8% interest rate on fixed deposits (FDs). Is it really 8%?

Rate of interest is actually 8% and offers from banks include no fine print. You can start a fixed deposit account with Rs 10,000. Not only does it provide you liquidity, you can also raise a loan against the FDs.

I fall in the low tax bracket. Should I invest my money into fixed deposits or fixed mutual funds?

Interest accrued on fixed deposits is taxed while money market mutual funds are tax-exempt. If you are in the low tax bracket, FD is a good investment option. But if you are one who falls under the high tax bracket, investment in mutual fund short-term debt fund or liquid or cash funds will fetch you good returns.

Suppose you get 8% interest on the FD and fall under the 10% tax bracket, your rate of interest goes down to 7.2%.

Are fixed deposits tax-efficient?

Income from FDs is taxed as per the category of tax under which the individual falls. As most people in this country fall under low tax bracket, they can get good post tax income from FD. Most FDs start at Rs 10,000.

Finally, it depends on the individual as to which tax bracket he/she falls under. As most of them fall under low tax bracket category, for them the FDs are attractive. Today the FD is better than post office schemes.

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