Excellent Plan with Bank FDDharameshValue-Investing31HiMy father in law taught me an exellent idea of investment through Bank fixed deposit.Make a FD with bank and take loan on that FD and re-FD that loan amount.Repay that loan within a year and take another loan & repeat the cycle.Eg:Make a FD of 50K with any bank. Interest,take for instance is 8%. Take a loan of 30K on that FD after few days and make another FD of 30K with bank @ 8%. Bank used to charge 2% extra on loan amount ie 10% in this case. I will be paying 10% interest and other side earning 8% on FD.So net impact of loan is 2% only probably cheapest in world.Also my networth increased from 50K to 80K.After repaying the loan in a year. I can again opt for 30-50 K loan & repeat the cycle. I feel this very attractive option & safety is exteremely high.Such small saving plan may yield better fund in future & house wives can be invloved for theseactivities & formalities withbank.Would request you to suggest your view.

31 AnswersKarthikOctober 9, 2012 at 1:38 pmCan you answer one simple question?effectively what percentage return do you think you earn from your 50k investment?REPLYDharameshOctober 9, 2012 at 2:43 pmHi KarthikAbove given practice develops the habit of investment & gives instant result. For one year return on 50K will not be more than 6% after deduction of loan interest but total net worth of investement after maturity will be 86400 in a year.May be the same can also be done with 50K FD and opening an RD but RD gives somewhat return only opted for 5 years.Now 36400 can be used for any long term investment in MF or stock market and remaining 50K can be used for FD against to repeate the cycle.REPLYKarthikOctober 9, 2012 at 2:55 pmYou are just complicating the way of investing, paying an unncecessary charge of 2%, and investing the 30k in Equity as a lumpsum which is not a good idea.Instead, we should go for Systematic Investment plan and make the habit of investing small amounts steadily (the amount you will be paying for the loan that you took against the FD can be used for investing in SIP)REPLYKarthikOctober 9, 2012 at 2:58 pmand, when you say your net worth increases by 30k by getting a loan against FD, your Liability increase by 30k.REPLYDharameshOctober 9, 2012 at 3:52 pmYes karthik liablity will also be incresed by 30K for that particular year but it is secured liability. Your suggestion of SIP in MF is good. Can you suggest few good MF suitable for SIP.REPLYRameshOctober 9, 2012 at 3:07 pmIt seems that you are creating money out of thin air. Better check the details or do it yourself over a single year, and see how much money you made.REPLYDharameshOctober 9, 2012 at 3:36 pmHi RameshYes this formula is already implemented by my father in law and he had developed sound investment out of it. Now he has grown old after fullfilling all his responsibilities with good financial backup.I have posted this just to have views of other members of this website for pro & cons of scheme. May be SIP in MF is better idea provided it give good return. I have portfolio of approx 2 lacs in MF in different scheme since last 5-6 years. Only few have responded wellrest seems junk to sell off. MF have risk factor to gain. No expert can predict any fund in advance that it will be a super hit.whenever any fund performs well expert starts to recommend it. Its just trial & error method of investment.Would like suggestions for good MF for SIPMoreover I am not saying above FD scheme is one & all should be in portfolio. This is one of the type of secured investment can be included in overall portfolio. May be some people can come out with better idea.REPLYBiswa SinghOctober 9, 2012 at 3:57 pmI am not convinced that you will get any positive return out of it. Also its too complicated to think of. If possible please show with calculation for one year how much money you are going to make.REPLYKarthikOctober 10, 2012 at 1:47 amI think, Dharamesh is trying to put this..Assets10 Lakh FD at 8% for one year Maturity amount 10,83,6348 Lakh FD at 8% for one year Maturity amount 8,66,907Liabilities8 Lakh Loan at 10% for one year, Total Outgo 8,43,992The FD taken with the loan earns Rs. 22,915, which can be considered as a total return of 1,06,549 instead of 83,634.But, If we consider 30.9% Tax, the difference is very small which comes to 2,240. For 20.6%, difference is 9,132 and for 10.3%, difference is 16,023.REPLYRameshOctober 10, 2012 at 10:47 amWill you continue to earn money on the FD, over which you have taken a loan?REPLYBiswa SinghOctober 10, 2012 at 9:39 amKarthik,8 lakh loan at 10% per year would be 8,80,000. So here he has a loss around -14,000.If you now decuct this loss 14,000 from the original FD then the actualy return earned will be not 8% rather 6%. I dont see any profit in it.REPLYDominic PrakashOctober 10, 2012 at 10:37 am@Dharamesh: I dont see any profit either but I see lot of pain in tracking loans and FDs. Generally (all) banks try to squeeze any meager amount from their clients. Actually Banks make money from these 1% or 2% between their loan with RBI and loans given to their clients. Like you do between FD and loan.REPLYTheZionViewOctober 10, 2012 at 11:19 amIf you invest at 8% and Loan at 10% from it. You can profit only if the loan amount gets anything above 10%.Example100000 at 8% for 1 year you earn 10800080000 at 8% for 1 year you earn 86400Your return is 108000+86400=194400Loan 80000 at 10% for 1 year you pay=88000Your actual return is =194400-88000=106400So if you look at the example you will be making a loss of 1600 which is 1.6%.REPLYDharameshOctober 10, 2012 at 11:36 amDear AllIt seems you all taking this scheme as short term gain whereas it is long term investment plan on continue basis.Also I have previously told you it can be part of overall investment portfolio.Let me explain :Take a loan against FD which normal earning person can easily repay within 6-12 months. No need to take higher risk. This is small investment on regular basis which can be done in the name of Housewife or mother to save the tax on interest. I have made a data based presentation for 10 years with minimum return possibility. Here I am not able to paste excel presentation with proper rows & colum marked. It is getting scattered. Hopefully you can try to arrnage for yourself in readable contentInvestment Loan Total FD FD Interest @ 8% Loan Intrest Net Return Total FD Value50000 30000 80000 6400 3000 3400 8640086400 30000 116400 9312 3000 6312 125712125712 30000 155712 12457 3000 9457 168169168169 30000 198168 15854 3000 12854 214022214022 30000 244022 19522 3000 16522 263544263544 30000 293544 23484 3000 20484 317028317028 30000 347027 27762 3000 24762 374790374790 30000 404790 32383 3000 29383 437173437173 30000 467173 37374 3000 34374 504547504547 30000 534547 42764 3000 39764 577311Total Investment in 10 Yrs 380000 (50000+30000*10+30000 Loan Intrest)Total return 577310Net Surplus 197310Moreover I have calculated interest on loan on simple intrest formula on yearly basis whereas it is actually on reducing balance basis.So total interest will come down & will be added in net surplus. Also if any one can manage to repay loan before 12 months in each cycle may yield more return.Hopefully I have managed to convience you all that this scheme can manage to give return if followed carefully and gives safe & secured return. Pls do not compare it with return with equity market where we are always in mercy of market conditions & luck. I do agree that it is a bit complicated and need to visit 2-3 times bank in every year. But obvious gain is there.Thanks you all for your valuable time & feedbackRegardsREPLYDharameshOctober 10, 2012 at 11:51 amInvestment Loan Total FD FD Intrest @ 8%Loan Intrest Net ReturnTotal FD Value50000 30000 80000 6400 3000 3400 8640086400 30000 116400 9312 3000 6312 125712125712 30000 155712 12457 3000 9457 168169168169 30000 198168 15854 3000 12854 214022214022 30000 244022 19522 3000 16522 263544263544 30000 293544 23484 3000 20484 317028317028 30000 347027 27762 3000 24762 374790374790 30000 404790 32383 3000 29383 437173437173 30000 467173 37374 3000 34374 504547504547 30000 534547

Can E-Receipt of PPF A/C alone be considered proof for tax deduction?Trishit RayBanking,EPF or PPF,Income Tax,Tips or Useful Information2Hello everybody,PPF for simple tax savings purpose is a good option specially if one is risk avert and dont need the money in near future.I also do have a PPF account.I deposited some money through online banking and downloaded the pdf version of the e-receipt.The e-receipt has INB reference no.,my name,ppf a/c no.,amount,date,debit a/c no. and the transaction type clearly shows as PPF Deposit.It has the bank logo which is SBI in my case.My question is if I take a print out of this e-receipt will this alone be enough proof for tax deduction?Regards,Trishit Ray

2 AnswersAshal JauhariJune 4, 2012 at 2:28 pmDear Trishit, yes the e-receipt is a valid proof to claim tax benefit at source from your employer.ThanksAshalREPLYBrundabanJune 6, 2012 at 3:07 pmDear Trishit,Along with e-receipt you can produce the front page of PPF Pass book(scan copy) showing your PPF A/C No. and Name.Also you can print the transacation history showing the transaction in ppf ac and this can be used as proof.