The scraping of the Rs. 1000 and Rs. 500 notes on
November 8th 2016 has lead to widespread confusion among the masses.
This demonetization has gained a highly polarizing response. Apart from the
ones with hoards of black money, how has this move affected common people with
investments and loans to pay off? Here are some insights on the issues.
Mutual
funds
Mutual Funds are deemed to be beneficial in the
long run. The scraping of the notes will lead to banks reducing the interest
rates for fixed deposits. Thus we will see a gradual shift towards Mutual
Funds, which offers a much better returns. With interest rates falling, debt
mutual funds are expected to do well in this economy, and this trend will
continue for a while. Also with stock markets rapidly falling due to
demonetization, you can invest in god equity mutual funds are low prices, and
reap benefits in the future.
Bank FD
If you are someone who has parked a majority of
your money in Bank FDs then you have bad news. Bank FD rates are expected to go
down, since many people are flocking to deposit their money in denominations of
Rs 500 and Rs 1000 in the banks. Since Banks are getting a heavy cash inflow due
to deposits, they do not have to depend on interest rates from loans, thus they
can afford to reduce interest rates on FDs. If you fall in a higher tax
bracket, then investing in tax free bonds, which gives you 6% returns with no lock-in
period is your best bet, since the interest you earn through this is not taxed,
unlike FDs.
Car loans
and home loans
These are all set to fall. Again, since people are
queuing up to deposit their money in their savings accounts, these make up the
low cost deposits. Hence, banks can afford to give out loans at significantly
lower rates. If you are planning on buying a new car or a home, this would be a
great time.
If you are confused about how this demonetization
will affect your taxes and billings this year, you can contact us for expert
services. Our professional CAs at Mahaveer and Singhvi Associates will ensure
that your money matters are handled with care. Please contact our website at http://www.ca-msa.com/
