A very good article. But the investment decisions should be based on the Govenment policies and economic growth of the country. It should be analysed from net return (post tax) and not gross return angle. Today, there is no tax-free fixed deposit except investment in PPF (to some extent) which is having extremely long lock in period. Whereas returns from equity and mutual funds, dividend as well as capital gain are tax free (except a nominal 10% short term capital gain tax). Even 'long term' period has been reduced to one year. On the other hand interest on FD is taxed at a normal rate irrespective of the period of FD. Therefore, even 8% interest on FD will reduce the net return to 5.56% & 6.37% for 30% & 20% tax slabs respectively. This rate of net return hardly covers the 'doctored' inflation rate announced by the Government. On the other hand, with the annual GDP growth of over 8% and industrial production rate of over 10%, return from equity is likely to give a net return of over 10%. Any slow down in the economic growth will effect equally to FD & equity as far as net return to the investment is concerned.
