Short-Term Savings: Look Beyond the FD
Finance · English · Portrait · 1 min · whiteboard animation
This finance whiteboard animation was made with AutoScribble — the script was written, every scene hand-drawn and the narration recorded automatically in about 10 minutes. You can make one like it from a single sentence.
Transcript
Stop putting money only in FD.
Nikhil saved ₹10 lakh for his house (needed in 8 months). He thought FD is the safest option.
FD interest is added to your income and taxed as per your slab. In the 30% slab, a 7% FD gives only about 4.8% after tax.
Arbitrage Funds are a better alternative.
They carry almost FD-level risk but are taxed like equity.
How they work: The fund buys stocks in the cash market and sells them in futures at the same time. It earns from the small price difference. Market ups and downs don’t affect it much.
Tax:
- After 1 year → only 12.5% tax
- Before 1 year → 20% tax
Even with 20% tax, a 6.5% arbitrage fund leaves you with ~5.2% — better than FD’s 4.8%.
If you’re in the 20% or 30% tax slab, arbitrage funds can work better than FD for short-term money.