Tax-free bonds may provide you better return than FDs: Know how safe they are, their features, benefits

Bank Fixed Deposits (FDs) provide an easy and safe way to invest your money, but due to tax and inflation inefficiency they actually give much lower effective return than the rate of interest that the deposits offer. The interest rate offered by banks on FDs are generally marginally higher than the prevailing inflation rate and after deducting taxes, the actual return becomes lower than the rate of inflation. As a result FD investments suffer capital erosion in long run as the long-term maturity values fail to keep the purchasing power of the money invested intact at the time of maturity.

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