How to Use the Working Capital Cycle for Better Financial Management

The working capital cycle is an essential financial indicator of your business’s financial efficiency. This measures and tracks your business’s time to convert assets and liabilities into cash. In simple words, this cycle dedicates how long it takes for you to arrange finds for your business. 

Knowing this is important as liquidity is a crucial parameter to carry out the regular operation of your business. Gaining more information on the capital cycle can help you maintain stability during a challenging economic environment.  

Understanding Important Components of Working Capital Cycle

Successful business management includes comparing all the current assets against current liabilities. However, there are a few important pillars to keep in mind for better management of working capital:

Billing

This indicates the time taken by the buyer to pay the seller for goods or services. The billing process includes:

  • Gathering data of the buyer or seller
  • Creating the invoices
  • Sending invoices to the parties 
  • Getting confirmation and tracking payments
  • Collecting payments 
  • Adding records into the accounting software

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Inventory

This indicates the overall time a company takes to convert sales into inventory. This is an important component indicating your business’s inventory management and how well you manage the stock levels. All the money spent on buying inventory gets deducted from the working capital. 

Receivables

Managing the receivables is important in terms of collecting the money owed to a company. Receivables are the amount owed to your company for purchasing goods or services indicating the rights to collect in future.

Cash

You can ensure a constant and steady cash flow to the business by ensuring the timely management of payables and receivables. That can help better optimise operation efficiency, which helps in making a strategy to balance the requirements.

Operating Cycle in Working Capital

The time required to convert the current assets to cash is calculated by adding different operating cycle days. The working capital days indicate the time period starting from the day you pay for inventory to the payment you receive by selling.

These are the cycles involved in the procedure:

  • Step 1: This cycle starts with cash in hand, but later, gets tied up in the payment of raw materials. It is known as inventory days, as your cash is used to acquire inventory for the business.
  • Step 2: The account receivable cycle represents the time period required to collect the payment from the customers after selling them goods or services. 
  • Step 3: The account payable cycle represents the time period when your business’s cash is tied up in paying the suppliers for raw materials.

Knowing all the cycles and the days each takes, you can use the working capital cycle equation. 

Also Read: What is Working Capital Demand Loan (WCDL)? 

How to Calculate It

Using the formula for the working capital cycle, you can calculate the capital cycle:

Working Capital Cycle= Inventory Days + Receivable Days – Payable Days

What Strategies to Implement

To increase your business’s operational efficiency, you can implement various strategies such as:

  • Having good credit terms

This strategy can increase payable days by maintaining a good supplier relationship. You can negotiate to keep the cash for a longer period and utilise it in various other areas of your business.

  • Accelerating cash collection

You can reduce the receivable days with proper practice of maintaining invoices. You can also offer discounts for previous payments.

  • Speeding up sales

By improving demand forecasting and applying lean inventory techniques, you can reduce and decrease the length of inventory days. 

You can also use certain software and tools to manage the capital cycle. Using inventory management software will help you to track stocks and optimise reorder points. Having a good invoicing system can help you in billing automation, eventually speeding up the payment cycle. 

Using a financial planning tool can provide you with information on ongoing cash flow trends. This will help in better financial strategizing and business forecasting.

By using these techniques, you can effectively optimise your capital cycle to create sustainable financial health in the long term. While it is necessary to maintain the capital cycle, sometimes unforeseen expenditures can cause financial scarcity. 

In this case, you can opt for a Fibe Instant Personal Loan to fund your business’s expenses. We offer you a ₹5 lakhs loan without requiring any collateral. You can use the funds without any restrictions and pre-close the loan at no additional cost.

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FAQs on Working Capital Cycle

What is a good working capital cycle length?

A short capital cycle is desirable, though having a long cycle is not bad. However, it depends on the nature of the business.

How does the working capital cycle affect a company’s cash flow?

The cycle represents the availability of liquidity and, hence company’s cash flow. The shorter it is, the better the business can run. 

Can a negative working capital cycle be beneficial?

Yes, a negative capital cycle represents the availability of liquidity to carry out day-to-day business expenses, benefiting the company.

How does the working capital cycle impact financial statements?

A negative working capital cycle represents a financially healthy cash flow, maintaining a positive impact on the financial statement.

How to Manage Cash Flow for Effective Financial Management

In business, cash flow and cash flow statements can be helpful in understanding the liquidity of funds. That way, you can improve your cash management to carry out day-to-day expenses. 

Management of cash flow means control of cash outflow with analysis of possible sources of inflows. This ensures your business’s financial stability to perform the usual operations during a challenging period. 

Here is a guide to help you understand cash flow and cash flow statements and their importance with complete information.

Understanding How Cash Flow Works

This involves knowing the total income over a specific period and taking note of spending. This also helps you make cutbacks on unnecessary expenses. To calculate the current cash flow over a period of time, you need to reduce the cash outlays from your cash inflows. 

For cash flow analysis, you need a cash flow statement. This financial document outlines all the necessary information and detailed analysis of a business’s cash flow in a specific period of time. It shows all the data on cash received and cash used in different areas.

Upon completing an accurate calculation, you may get a positive or negative balance. A positive balance represents that you have enough liquidity to carry out regular expenses. A negative balance means you have inadequate liquidity. Thus, it helps you determine your current liquidity.

Also Read: What Is Channel Financing? 

Types of Cash Flow

After learning what is cash flow, knowing the type can help you to understand where your business stands better. There are various kinds of cash flows depending on expenditure, such as:

Operation-related cash flow

When money is generated due to sales, either due to goods or services, it is included in the entity’s core business cash flow. Expenditures include cost of goods sold, rent payments and others. This is included in the outflow of cash in operations.

Financing-related cash flow

The cashflow changes if there is an increase or decrease in long-term financing activities such as:

  • Changes in dividend issued 
  • Stock repurchases
  • Debts or liability incurred

This type of statement reflects such changes. 

Investment-related cash flow

This cash flow statement includes the fluctuation in long-term assets in the business, such as:

  • Loan extended by the entity
  • Buying fixed assets
  • Profit due to investment funds

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Why to Understand Cash Flow Management

It has both long-term and short-term effects on the business as it determines the smooth operation of the business and its financial position. These are the reasons why knowing understanding cash flow and cash flow statements is critical:

Increases Profit

You can optimise your expenses by managing the cash flow and lead the way towards overall growth. That will result in:

  • Minimising the debt
  • Increasing the value fir the shareholder

Decreases Risk

Cash flow analysis and management ensure that day-to-day expenses are met by maintaining the required liquidity to run the business. That way, you reduce the risk of cash shortage.

Also Read: 5 Warning Signs for a Cash Crunch

Enhances Decision Making

Correct forecasting of cash flow can improve the decision-making capability in various areas of business:

  • Resource allocation
  • Budgeting of various expenditure
  • Strategic investment

This creates growth opportunities for businesses while minimising risk.

Attracts Investors

Practising proper cashflow management can gain confidence from investors, lenders, stakeholders and others by fostering trust. This can build confidence to invest in the business, attracting more financial opportunities. 

Also Read: What Is Invoice Discounting?

Steps to Implement 

You can take certain steps for better cash flow analysis:

  • Investing the surplus funds smartly and maintaining a reserve fund for unforeseen needs
  • Keeping a proper record of all the cash transactions, including time-in entry
  • Analysis of the area of overspending and cutting down on these to increase cash flow
  • Monitoring the payment dates and terms with suppliers and negotiating for favourable terms
  • Preparing a cash flow statement to analyse the inflows and outflows
  • Forecasting future cash trends depending on past projections and data

By taking the necessary steps, such as creating an in-depth cash flow statement, tracking your expenses and others, you can have a good strategy to maintain your cash flow and cash flow statements. 

If you need to fuel up your working capital or meet other business needs, qualifying for financing can sometimes not be easy. In this case, a Fibe Instant Personal Loan can be a smart option as it offers you up to ₹5 lakhs loan . You can use these funds without any restrictions and apply without any collateral. Pre-cloure facility at no additional cost gives you an added advantage. 

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FAQs on Cash Flow

What tools or software can help me track cash flow?

Here are a few tools that can help you to track your cash flow:

  • Cash controller
  • Cash flow frog
  • ThinkOut
  • Strands BFM
  • PlanGuru

What’s the difference between cash flow and profit?

While the meaning of cash flow indicates a business’s inflow and outflow of cash, profit is the balance left after meeting all the expenses.

A Complete Guide to a Credit Card Cycle and its Importance

The credit card lifecycle has different phases. One of the important components to take into consideration as a user is the billing cycle. Every credit card comes with a billing cycle – some for 30 days, others for 28 days – depending on the issuer offering the credit card. 

Understanding this is crucial, as failing to pay bills on time can adversely affect your credit score. However, this is different from a credit cycle, which is a concept of economics. As such, understanding the credit cycle and how the credit card billing cycle works can give you a clear picture.

A Brief Understanding of the Credit Cycle

It is referred to as the cyclical fluctuation in:

  • Interest rates
  • Availability of loans 

This cycle has two phases that are intertwined with each other:

  • When the economy is contracting, lenders are less willing to give loans and, if so, offer loans at a high interest rate
  • When it’s expanding, lender tends to give loans at a low interest rate 

Hence, during recessions, credit availability is low and at a high interest rate. However, when the economy is on an upswing, you can avail of personal loans easily at lower interest rates of interest. 

Credit Card’s Lifecycle

This principle above is very different from a credit card lifecycle, which basically involves everything from getting a card to closing your account. On the whole, it involved the following:

  • Getting a new card from a credit card company on approval on your application 
  • Activating your card via online and offline modes within 30 days of receiving it 
  • Renewing your card once it expires by getting a new card and activating it 
  • Replacing your card if it is lost or stolen
  • Closing the credit card account 

How the Billing Cycle Works 

Within a card’s lifecycle, the only way that you can maintain good financial health is by paying your credit card bills on time. For this, understanding your issuer’s bill payment cycle is crucial. It can help you plan your credit utilisation during the interest-free period and avoid late payment penalties. 

Understand how the billing cycle works for credit card  with an example: 

  • Say your bill generation date is 10 March
  • Thus, your new billing cycle starts on 11 February and ends on 10 March
  • At the end of your billing cycle, the bill is generated, showcasing all your transactions
  • Now, if your due date is the 28th of March, you must pay the amount before the due date to avoid any extra fees and charges

You may assume that the repayment date is the bill generation date, which is not true. In fact, the issuer provides an interest-free period of up to 25 days to pay the bill. This is known as the grace period on the bill. You can pay the credit card bills during the grace period to avoid high interest rates later. In fact, as per the RBI, you get 3 days more to pay your bill after the payment due date. It is only after 3 days that you will be charged a late payment fee. 

Also Read: How to Read Credit Card Statements

Important Factors to Consider

Knowing these terms will help you to clearly understand your credit card cycle and plan repayment. 

  • Statement Date

This is the date on which you receive your statement after the completion of the billing cycle. After this date, the new billing cycle begins. 

  • Credit Card Due Date

This is the day when you have to pay your complete credit card bill to avoid any charges. The issuer decides this date based on your credit card cycle, which remains fixed throughout the billing cycle.

  • Minimum Amount Due

In case of financial shortages, you can only pay a minimum amount. This is generally 5% of the total billing amount. The rest of the outstanding amount will be carried forward to your next billing cycle. This way you avoid late fees, but you still need to pay interest on the outstanding dues. 

Repayment behaviour is an important part of how you manage your credit card. Understanding when to pay your bills can help you make the best use of your credit card. This way, you can also enjoy the maximum interest-free period. 

For instance, you can get an interest-free period of up to 50 days with the Fibe Axis Bank Credit Card. Not only does it come with zero annual or joining fee, but it also offers you perks like up to 3% cashback.

You can also enjoy hassle-free UPI payment and other benefits like a waiver of fuel surcharge and free access to domestic airport lounges. So, what are you waiting for? Download the Fibe App or register on our website to get it now!

FAQs on Credit Cycle

How does the credit cycle impact interest rates?

Depending on the economy, the credit cycle differs. When it peaks, loans are easily available and interest rates are more affordable. 

What is a credit card life cycle?

It includes the following stages:

  • Application
  • Issuance
  • Activation
  • Expiry and Renewal
  • Replacement
  • Closure

Can I change my billing cycle to align with my pay dates?

Yes, you can change your card’s billing cycle by contacting the issuer to align with the time you get your salary. This way, you can pay bills on time and maintain your creditworthiness. 

How to best time my purchase as per the credit card cycle?

It is best to make a big-ticket purchase at the beginning of the billing cycle. This gives you the maximum amount to repay.

ID Proof & Address Proof Documents: Complete List for India (2026) 

An identity proof will prove who you are while an address proof document will prove where you stay. In India, commonly accepted ID proofs & address proofs include an Aadhaar card, passport, driving license and voter ID card among others. In case you need to apply for KYC, open a bank account, join an organization, obtain a loan or SIM card, you can use these documents. Some documents such as Aadhar or passport can double up as ID proof & address proof if they are updated with the relevant details. 

What is ID Proof? 

An ID proof is basically a document used to validate your identity. This includes verifying your name, photograph, date of birth, and other details. The use of ID proof helps to establish your identity and reduce any chances of fraud, duplication and misuse of services. Ideally, documents issued by the government and duly verified can be considered as ID proofs. For instance, when applying for a personal loan, your bank will ask you to provide your PAN card and your Aadhaar card. Your PAN card will be used to verify your identity and financial details while your Aadhaar card will be used for your digital KYC purposes. 

What is Address Proof? 

An address proof document refers to any proof which is used to confirm the address that you have provided while applying for any services or filling out forms. Whenever you are asked to provide your residential address, the relevant authorities require you to provide address proof. This will ideally indicate your full name, address, and the date of issuance of that document. 

For instance, a 3-month-old electricity bill would be accepted. On the other hand, if the bill is too old, chances are high that it won’t be considered an address proof. Also, when you apply for an apartment for rent, the owner might ask for address proof which clearly indicates that you are their tenant. 

ID Proof Documents List in India 

There are a variety of ID proof documents which you can use. These are some common ones. The requirement may differ depending on the organization or service provider. 

ID Proof Document Ideal For 
Aadhaar card For digital KYC, banking, loans & government services 
PAN Card KYC, tax filings, loans & bank accounts 
Passport Travel & identity verification 
Driving License Identity verification 
Voter ID Card Electoral, age and identity verification 
Post Office ID Card Identity verification under certain circumstances 
Bank Passbook with Photograph Banking & KYC Verification 
Government issued Photographic ID Employment, official, and public service verification 
Photo ID issued by Ministry of Home Affairs Official purposes when accepted 
Photo ID issued by central and state governments Official purposes when accepted 

 
The good thing about photo ID proof is that it allows the verifier to confirm whether the applicant and picture in the photo are indeed the same person. Before applying for services, always check what kind of ID proof is acceptable. In some cases, the organization might ask you for an original, digitally verified copy. 

Address Proof Documents List in India 

Address proof documents are used to verify your residence. These include some of the commonly accepted ones: 

Address Proof Document Important Point(s) 
Aadhaar card Must have your latest address updated 
Passport Valid only if the address shown is current 
Voter ID Card Accepted as address proof under various circumstances 
Driving License Useful if the license contains a current address 
Ration Card Mostly used for family residence verification 
Electricity bill Generally accepted if it’s a new one 
Water bill Must clearly display applicant’s residential address 
Phone bill Preferably landline or postpaid bills 
Gas bill Only accepted if the bill has the name of the applicant 
Bank statement Must have the applicant’s signature or stamp 
Rent Agreement Useful for tenants but it must be registered /notarized 
Income Tax Assessment Order Accepted under certain official circumstances 
Vehicle Registration Certificate Valid only if the address is mentioned there 
MGNREGA Job Card Accepted for numerous government purposes 
Pensioner Card with Address Useful for senior citizens 
Certificate by Village Panchayat Chairman Mostly used in rural areas 
Certificate issued by employer on the letterhead Accepted by some organizations 
Address Proof issued by Member of Parliament Might be accepted when the required documents are unavailable 
Certificate issued by MLA / Gazetted officer Accepted in certain instances 
Caste/Domicile Certificate with photo and address Accepted under certain circumstances 

ID Proof and Address Proof Documents for Minors 

Since minors have few identification documents such as PAN Card, voter ID Card and driving license, they should use different documents to prove their identity and address. Some documents which minors can consider include: 

  • Aadhaar card – This is an Indian identification document and works well as proof of identity of minors as well. 
  • Birth certificate – Can serve as an auxiliary identity document 
  • Passport – Can work as a proof of address as well 
  • School ID card – Proof of identity document 
  • Certificate of Bonafide issued by school – Can act as an auxiliary identity proof for students 
  • Parent’s passport or Aadhaar – Can be considered to verify your address if needed 
  • Ration card – If listed as a dependent family member 
  • Government health or child welfare card 

 
Additionally, an address certificate with photo of minor issued by any government-recognized educational institute can also be considered. After turning eighteen years of age, they must apply for identity documents such as PAN or voter ID cards if they haven’t already. Additionally, they also need to update their details in Aadhaar. 

Difference Between ID Proof & Address Proof Documents 

There are quite a few differences between ID proof and address proof. Take a look below: 

Difference Factor ID Proof Address Proof 
Purpose Confirm who you are Prove where you stay 
Important Details Name, photograph, date of birth, identity number Residential address 
Examples PAN Card, Passport, Aadhaar, Driving license Aadhaar card, utility bill, rent agreement, Bank statement 
Use Case KYC, Employment, tax filing & banking Loans, SIM cards, bank accounts & government services 
Can Be Used as Both Documents? Yes, if it has identity details and address Yes, documents like Aadhaar, Passport & driving license 

Issues Associated with Address Proof Documents 

Some reasons why documents submitted as proof of address fail to pass verification: 

  • Outdated Information – Outdated documents won’t be considered as address proof. For instance, when you submit your utility bills, make sure they were issued not more than three months ago. 
  • Spelling Mistake – When submitting your proof, make sure your full name and residential address do not contain any spelling mistake. 
  • Incomplete Address – An incomplete address in the document submitted as proof of address isn’t acceptable. 
  • Utility Bills older than three months – Old bills are less likely to be considered as proof of address. Make sure to have bills issued within a recent timeframe. 
  • Document not in the name of the applicant – Most times, your proof of address must be in your name. 

 
To avoid all this hustle, it’s advisable to maintain up-to-date documentation. For instance, if you change your residential address, try to update this information on your Aadhaar, utility bills, bank statements, among others. 

Importance of Documents: Why Are They So Vital? 

Identity or address proof documents are quite significant in verification and here are some important reasons why: 

  • Reduce Cases of Fraud – By using identity/address proof documents, there’ll be a reduced risk of identity theft, misuse and fraudulent application. 
  • Ease KYC Compliance – Financial institutions such as banks, NBFCs, and insurance companies require valid KYC documents before accepting any request. 
  • Check Eligibility – These documents help to verify various factors such as age, citizenship, residency, income profile, or geographical location. 
  • Speed Up Process – Documents make it easy to verify identities thus making the loan processing, employment onboarding, account opening faster. 
  • Avoid Multiple Claims – Most government schemes use this method to avoid claiming benefits from the same government identity. 
  • Security Against Fraud – Helps to reduce illegal activities. 
  • Digital Transactions – Makes it easier to conduct transactions online through various platforms. 
  • Establish a Verification History – Documents enable you to create a verified transaction record for the future. 

 
When taking a personal loan from banks or NBFCs, you will have to provide some documentation including proof of identity and address to qualify. 

With Fibe’s Instant Cash Loan, you don’t need to provide any physical paperwork when applying. 

Apply for a Fibe Instant Cash Loan now and borrow up to ₹10 Lakhs using just your proof of address and identity. With Fibe you enjoy flexible repayment terms ranging from 6 to 36 months and no prepayment or foreclosure charges. 

FAQs On  ID Proof and Address Proof Documents 

1. Can I renew my passport and use it as proof of identity? 

Ans: Yes. You can renew your passport. Until the time of renewal, you may opt for other proofs of ID such as Aadhaar card, driving license or PAN card. 

2. My details on my Aadhaar card do not match the other documents? 

Ans: It is highly recommended to rectify any discrepancies in your details. Visit the official Aadhaar site for more assistance on how to update your records. Always use supporting documents to confirm your data including name, gender, date of birth, and your address. 

3. Can children below five years obtain an Aadhaar card as an identity proof? 

Ans: Yes, children under the age of five are eligible for an Aadhaar card. They are referred to as ‘Baal Aadhaar’ and the card will be linked to the parent/guardian’s Aadhaar. 

4. Is my PAN card proof of address? 

Ans: PAN Card works best as a proof of identity and is not accepted as proof of address. For address proof, you can opt for Aadhaar card, passport, driving license, utility bills, or rent agreement. 

5. What documents can work as both ID proof and address proof? 

Ans: The common types of documents which can serve as both include Aadhaar, passport, driving license, and voter ID provided they are updated with your identity and current address. 

6. Can I use mobile bills as my proof of address? 

Ans: In general, prepaid mobile records aren’t considered proof of address. But postpaid bills may work if they show your full name, address and billing date. 

7. How does an ID proof differ from address proof? 

Ans: As explained above, an ID proof is used for identifying yourself while address proof is used to prove your current address.

Beginner’s Guide to Open a Salary Account: Why is It Important?

Once you start a career as a professional, you will need a salary account to get your earnings credited each month. This is your first step toward financial independence, and understanding the various salary account benefits will help you plan your finances better.

Opening this account takes just a few minutes and requires some documents. Most companies offer to open your account at the time of joining, which is an easier and faster option. Knowing all the perks it offers allows you to decide where your money is best credited and held. 

Read on to know what is a salary account, how to open one, its features and more.

What is a Salary Account?

These accounts work similarly to savings accounts, through which employees get their monthly remuneration from employers. Most business organisations and companies tie up with various banks to create salary accounts for their employees.

With such an account, you can automatically enjoy benefits when you join the workplace. A salary account is meant to give you easy access to your earnings. This type of bank account gives you more than just the payroll benefits, as you can also earn lucrative interest too. 

Also Read: Salary Account VS. Savings Account

Perks of a Salary Account

The salary account benefits and features will vary from bank to bank, but here are some common perks you can enjoy.  

  • Zero Balance

In most cases, you don’t need to maintain a minimum account balance, unlike a savings account, where you may have to pay a penalty when your balance is low. 

  • Banking Services 

With this account, you can enjoy convenient banking services. For example, fund transfers or bill payments are easier and faster with such an account.

  • Debit Card and Chequebook 

You get a complimentary debit card, which you can use to withdraw funds from your nearest ATM or pay online and in person. You can also transfer funds using a chequebook and keep track of your transaction history in your passbook.

  • Loan Facilities 

Since lenders can easily review your income details, availing a loan with a salary account is easier. 

  • High Interest Rates

With this feature, you can grow your income by earning interest on the money in your account at the rate decided by the bank. This is a great way to earn additional income while enjoying liquidity. 

Also Read: What Is Salary Overdraft?

Step-by-step Guide to Open a Salary Account

Regardless of which bank your employer has tied up with, the initial onboarding process remains the same. Thus, you can follow these steps to open a salary account. 

  • Step 1: Go to the online application system
  • Step 2: Fill out the application form
  • Step 3: Choose the preferred branch (if there’s an option for it)
  • Step 4: Complete verification and KYC
  • Step 5: Receive your welcome kit

Required Documents

While applying for your first salary account, you will need to submit some documents. The bank can ask you to provide the list of the following documents along with an application form:

  • Aadhaar Card 
  • PAN Card 
  • Driving Licence 
  • Voter ID Card
  • Latest photo passport-sized

For salaried employees, this account offers a way to manage finances without hassles. However, if you are short on funds, opting for a hassle-free loan is just as important. One such option you can choose from is Fibe Instant Personal Loan. 

Get up to ₹5 lakhs Loan with a flexible repayment tenure of 3 to 36 months and a streamlined application process. Along with competitive interest rates, Fibe allows you to repay the loan with any foreclosure charges. Download our Personal Loan App or register on our website to easily access the required funds.

FAQs on Salary Account

What is salary account meaning? 

A salary account means a bank account where you receive the compensation from your employer as per the terms of your employment. 

Do I need to maintain a minimum balance in a salary account?

In most banks, there are generally no minimum balances for salary accounts. However, some banks may have a policy for minimum balances. You can check with your salary account bank in this regard.

Is a salary account automatically converted into a savings account when I switch jobs?

Every salary account is a type of savings account. If there have not been any salary credits in it for three months, it’s converted to a regular savings account. So, when you leave the job, you can still use it and access it as your savings account. 

Can I open a salary account in any bank or only the one recommended by my employer?

Your employer initiates the process of opening your salary account at the bank where they have a tie-up. However, you can talk to your company’s HR to check if you can open an account in a bank of your choice. 

Are there any transaction limits on salary accounts?

It entirely depends on which bank you have your salary account with. Some banks offer you unlimited free transactions while others offer a fixed number, after which they charge a transaction fee.

What kind of loans can I avail through my salary account?

You can apply for a variety of loans, including:

  • Personal loan
  • Car loan
  • Home loan

However, an employee, you must have a certain minimum income with a stable employment history to get a loan.

Tax Deductions on FDs: What You Need To Know Before Investing?

Understanding the TDS on the interest of fixed deposits is an important aspect of calculating your total earned interest. It also directly impacts your total earnings, which is important when you are investing. 

Here is everything you should know about TDS on fixed deposit interest and how much fixed deposit interest is tax-free to plan your investments smartly. 

How TDS is Calculated on FD Interest?

The interest from FD returns is completely taxable as it is calculated as a part of your net annual income. Therefore, the issuer will deduct 10% from your total interest earned before directing it to your bank account along with the capital deposit. 

This rate only applies if you have provided a PAN card at the time of application. In the absence of a PAN card, the TDS deducted on FD is 20%.

Also Read: Tax Benefits on an Education Loan

Exemption for Tax Deduction 

While the taxation on fixed deposits is applicable to all investors, it applies only after a threshold amount. Here is the exception list and the criteria.

Threshold LimitCriteria 
₹40,000Citizens under 60 years of age 
₹50,000Citizens over 60 years of age 

If your total interest from all FDs exceeds this limit, you must pay TDS. Otherwise, you can enjoy tax-free interest. 

Also Read: Guide on Calculation Of Tax

Example of Tax Deduction at Source 

To better understand how much TDS is deducted on FD interest, consider an example. Assume you have four deposits, all accumulating different amounts of interest. 

  • FD 1: ₹45,000
  • FD 2: ₹25,000
  • FD 3: ₹1,000
  • FD 4: ₹7,000

In this case, only the first FD surpasses the threshold limit. Thus, you only have to pay tax on the additional ₹5,000 on the first FD. However, you will not pay any tax if you are a senior citizen, as the threshold limit is ₹50,000 for depositors over 60 years. 

Also Read: Tax Benefits While Availing a Personal Loan

How to Save on Paying Tax on FD Earnings?

Now that you know how much fixed deposit interest is tax-free, you can calculate your investment amount to keep it under the threshold limit. This is one way to avoid paying TDS on your FD returns. 

Another way is to invest in tax-saving FD, which allows you to claim a deduction of up to ₹1.5 lakh on your investment. This way, you can earn maximum interest without worrying about taxation. However, know that this comes with a lock-in period of 5 years. 

If you have an annual income under ₹3 lakhs, you can also submit Form 15G to avoid paying tax on FD interest. Similarly, Form 15H is applicable for senior citizens. If you don’t fall under any of the criteria, you are liable for a TDS deduction on FD. 

In conclusion, you must pay tax on all your income. Whether it is active, like a job or business, or passive, like FD investments. However, you don’t need to pay any taxes when you get funds via loan. This makes it an ideal solution when you know your exact financial needs. 

Thus, if you need a fixed amount for any personal requirement, consider applying for the Fibe Instant Personal Loan. We offer ₹5 lakhs with minimum documentation and swift approval. Apply now on our Personal Loan App or website to enjoy loans at affordable interest rates with zero foreclosure charges. 

FAQs on TDS on FD Interest

Is the interest earned on fixed deposits taxable in India?

Yes, banks and financial institutions deduct TDS on interest of fixed deposit before disbursing the funds to your account. This is done after the tenure is complete.  

How much interest from fixed deposits is tax-free?

If your interest is under ₹40,000 in a year, the issuer will not deduct TDS as per section 194A of the Income Tax Act. 

What is the TDS limit for senior citizens on fixed deposits?

This limit for tax-free interest for senior citizens is ₹50,000 in a year.

Can I claim a tax deduction on the principal amount invested in fixed deposits?

Yes, it is allowed under Section 80C of the Income Tax Act. As per this section, you can claim up to ₹1.5 lakh each financial year as a deduction. 

Will TDS be deducted if I hold multiple FDs across different banks?

The TDS deduction on FD is calculated for net income from all the accounts individually. In case you hold multiple FDs, you need to submit Form 15G or Form 15H for all issuers to avoid deductions. 

What is the penalty for not paying taxes on FD interest?

If your bank or financial institution does not deduct TDS on fixed deposits, you are still liable to pay tax on the total interest you earn. If you do not do so, you will need to pay up to 300% of the tax evaded as per Section 271(C) of the IT Act. 

What are the latest changes in tax rules for fixed deposits in India?

As per the latest 2024 budget, there have not been any changes in the rules for TDS on interest of fixed deposit.

Best Low-Investment Small Business Ideas in India to Consider Right Now

Do you aspire to start a business? In most cases, financing is one of the major hurdles in achieving entrepreneurial dreams. But you don’t need to factor in a hefty investment. If you want to start a business with a low budget, you can find many options, from affiliate marketing to investing in a boutique. While considering low-investment business ideas, remember that you need to have to:

  • Invest time in market research
  • Have a business plan
  • Know how much funding is required 
  • Have a patience

Whether to tide over a financial crisis or grow a successful business that you can shift into, having a second source of income will help you immensely. Keeping that in mind, invest in something simple that can potentially build substantial returns.

Some questions to ask yourself when planning your business are:

  • Does it have a low entry barrier?
  • Is it scalable?
  • Is there a demand for it in the market right now?
  • Can I get clients for it right away?
  • Is it easy to set up?
  • Is it sustainable? 

If the answer to all of the above is yes, you can start an investment on the basis of your interest. Take a look at some business ideas with less investment below:

Also Read: 3 Best Investment Options to Boost your Income

Top 10 Small Business Ideas in India

You can easily earn money online with the growing fintech industry and internet-based jobs right from home. However, some ideas will require a bit more room and, in some cases, a team.

  • Affiliate Marketer

This is a booming business where you market products to bring in new customers. This can be a great source of passive income where you need to do is sign up online. Having adequate digital marketing experience can help immensely with the potential to grow a sizable income.

  • Online Courses

You can teach any subject that you have an interest in or hold expertise in. If you have a special skill, you can monetise it as well. This is one of the best low-investment business ideas you can go for with people signing up all across the world!

  • Content Creation

From booming YouTube channels to Instagram creators, content is the latest career option you can choose. You can earn revenue from ad sponsorships by sharing content that attracts an audience. It could be anything from travel to finance – make sure whatever you do resonates with viewers. 

  • Graphic Designer

If you have a creative mind and knowledge of graphic design, this can be a great option for your second source of income. With a small investment amount, you can get a laptop and software to start working. Today, you can even learn to use free software to create great output for MSMEs and single-person brands. 

  • Wedding Planner

Wedding planning in this country has a very large market if you know how to approach clients and get things done. Contacts with photographers, DJs, dance tutors, food and flower vendors, hotels, and designers can help you put it all together. With how much people spend on weddings, this is one of the most lucrative investment ideas in India for a new business. 

Apply for Wedding Loan 

  • Cooking Coach

Cooking skills are something that everyone requires. To maintain a healthy lifestyle and ensure an exciting new taste for the palate, online cooking videos and classes are booming across the globe. If you have the skill, you can make it as a business!

  • Fitness Coach

The world is middle of an obesity pandemic and people are adopting fitness as a part of their lives. Fitness coaches are the need of the hour to guide people in the right direction. All you need to do is have proper knowledge of this field and some experience. A course in health and nutrition can help you get started. 

  • Photographer

If you click good photos and have time to spare, become a part-time photographer. Starting from weddings to important corporate events, you can freelance for a number of projects. You only need an Instagram page to start sharing your creative point of view and get bookings. 

  • Café / Boutique

While these are long-term money investment ideas, they can be hugely profitable. Create a place where people can sit, work or study as well as order coffee and get sandwiches or other eats. The other option is to sell furniture and/or clothing by sourcing it from artisans across India. Both ideas may require time to gain customers, but can offer great satisfaction and revenue. 

  • Salon and Spa

Among other popular investment ideas in India is opening a beauty salon/spa. This requires you to hire a team of professionals and market your services online. You can do this in an area where such services are required, as this will require some funds to get off the ground. A little patience can go a long way in building your brand. 

Also Read: Top Traditional Ways to Invest and Grow Money

Establishing a business requires hard work and dedication but offers a lot of rewards, too. If you want to start a business, now is the time to go for it. Starting a business requires funds, and if you do not qualify for business financing, get a Fibe Instant Personal Loan.

With it, you can get up to ₹5 lakhs loan quickly with minimal paperwork. Its flexible repayment tenure of 3 to 36 months will help you repay the loan comfortably. What’s more, there are no pre-closure charges to worry about, so you can repay the loan early. To get started, register on our website or download our Personal Loan App.

Easy Guide to Compound Interest: Definition, Examples and Applications

You will come across the term compound interest in various financial facets and investments. Starting from savings accounts to loans and fixed deposits, it is a common term. With it, your money can grow much faster and you can build wealth quickly. 

Similarly, when your loan interest compounds, your outstanding debt can quickly become larger. It is essential to understand what is compound interest to explore investment options and make informed decisions.

Guide to Compounding Interest

Compound interest is a type of interest with which you can earn an escalated return compared to simple interests. With compounding interest methods, you can earn interest on the original sum of money and the interest accumulates over the previously earned amount.

How Does Compound Interest Work?

Compound interest works on the capital amount as well as the interest earned over the previous period. To break it down, you need to know what these are:

  • Principal Balance: The amount you invest initially
  • Interest: The interest rate applied to your principal amount
  • Compounding Frequency: This shows how often your interest will be compounded (monthly, quarterly, annually or daily)
  • Duration: The duration over which your funds attract interest

With the power of compounding, your principal grows every month/year as it earns interest. This new sum earns more interest unless you withdraw from your invested sum. 

How to Calculate It?

Since you know what is compound interest, now you must learn how to calculate it. The growth with compound interest is significant, which can lead to lucrative returns. 

Formula: A = P (1 + r/n)nt

  • A = the final amount of money you will get at the end of the period
  • P = the amount you invested, your principal amount
  • r = interest rates
  • n = the number of times your interest compounds each year
  • t = tenure or the number of years the amount can grow

Also Read: What Is Accrued Interest?

Examples of Compound Interest

This example will give you a better understanding of how to calculate compound interest when it comes to investing. 

Say you invest ₹1,000 in a fixed deposit for 3 years at 10% p.a. Find how much you get with simple interest and compound interest with these terms:

  • The principal amount is ₹1,000
  • The interest rate is 10% per year
  • Compounding frequency is once a year 
Simple Interest Compound Interest 
Interest after year 1: ₹1,000 x 10% = ₹100
Interest after year 2: ₹1,000 x 10% = ₹100
Interest after year 2: ₹1,000 x 10% = ₹100
Total: ₹1,000 + ₹300 = ₹1,300		Interest after year 1: ₹1,000 x 10% = ₹100
New total for year 2: ₹1,100
Interest after year 2: ₹1,100 x 10% = ₹110
New total for year 3: ₹1,210
Interest after year 3: ₹1,210 x 10% = ₹121
Total: ₹1,210 + ₹121 = ₹1,331

In this case, you received ₹31 more thanks to the power of compounding. Imagine what your gains will be when you apply this principle to larger amounts! 

Also Read: Interest Rates On Personal Loans In India

Pros and Cons of Compound Interest

Compounding interest also has its pros and cons. Here are some of the most common aspects of compound interest.

  • Builds long-term wealth
  • Minimise wealth erosion risks
  • Compounding can lead to high interest during loan repayments
  • The returns are taxable when it comes to interest earnings in most investments 

Who Gets the Benefit of Compound Interest?

Compound interest helps the investor who receives the interest or gains. Apart from investors, banks and lenders can also earn compounding interest through bonds, loans and investments.

The bottom line is that the long-term outcome of compound interest is very potent for your finances. When it comes to investments like fixed deposits, it can increase your wealth. You can rely on it to achieve long-term goals.

If you want to fulfil your goals today, explore the Fibe Instant Personal Loan. Its easy-to-meet eligibility criteria will help you qualify quickly. You can get up to ₹5 lakh and a flexible repayment tenure from 3 to 36 months. Prepay your loan at any time without foreclosure charges and become debt-free easily. To get started, register on our website or download our Personal Loan App.

FAQs on Compound Interest

How is compound interest applied to loans and mortgages?

Based on your compounding frequency, your principal loan amount will increase. The interest rate will be applied to the new accumulated principal. You can easily learn how much it will be if you know how to calculate compound interest or by using a compound interest calculator online. 

Can compound interest help me retire earlier if I start saving now?

It is always wise to start your retirement plan earlier in your life and investing with compounding interest increases your long-term wealth. However, consider taxes to compute your actual returns before you proceed. 

Is the formula for cumulative interest the same as compound interest?

No, the formula for cumulative interest is different from the compound interest formula. 

Cumulative Interest: Principal X Tenure X Rate

Compound Interest: A = P (1 + r/n)nt

Where:

  • A = the final amount of money you will get at the end of the period
  • P = the amount you invested, your principal amount
  • r = interest rates
  • n = the number of times your interest compounds each year
  • t = tenure or the number of years the amount can grow

Is compound interest always beneficial to the borrower?

Compound interest is never an excellent option for borrowers as they have to pay more and the principal amount will keep increasing.

How can I avoid missing out on compound interest opportunities?

Discipline is the only answer in this case. If you are investing, try to avoid the temptation to withdraw prematurely to enjoy the power of compounding interest. 

Can compound interest be used for short-term financial goals?

Compound interests can be a great way to achieve your short-term financial goals and build long-term wealth. Using the compound interest calculator formula, you can see how this principle creates a snowball effect on your finances, resulting in overall growth. For short-term goals, you can invest a higher amount. 

Fixed Deposits Explained: A Simple Guide for Beginners

A fixed deposit (FD) is one of the most popular options in Indian households as it is secure and has the lowest risk. If you have extra funds available or wish to grow your savings without any risk, this is an ideal choice. 

Funds readily available are easily used. Unless you have placed them in an account out of quick access, you may end up spending them. That’s where FDs come into play. Thus, you can better explain fixed deposits as a savings instrument rather than an investment.

Read on to know the definition of a fixed deposit account, its types, its working and more. 

What are Fixed Deposits?

An FD is a financial instrument that banks and financial institutions offer. It is an effective way to grow your money without subjecting it to market risks. It ensures you earn a predictable profit by the end of the tenure. 

How Does a Fixed Deposit Work?

To better understand what is a fixed deposit, you must know how it works.

  • Investment

You deposit a lump sum amount for a fixed tenure, ranging from a few months to several years.

  • Interest Rate

The bank or NBFC offers a predetermined interest rate for the entire tenure, typically higher than regular savings accounts.

  • Tenure Options

You can choose the tenure based on your financial goals ranging from 7 days to 10 years.

  • Interest Payout

You may receive the interest payments at regular intervals (monthly, quarterly or annually) or ask the bank to compound it and get it when the FD matures. 

  • Maturity

At the end of the tenure, you will receive your initial investment plus the interest earned.

  • Premature Withdrawal

You have the option to withdraw your funds before maturity, but it may incur a penalty and affect the interest rate.

  • Tax Implications

Interest generated on FDs is taxable as per your income tax slab and TDS (Tax Deducted at Source) may apply if it exceeds a certain limit.  

Also Read: Difference Between Callable And Non-callable FD

Types of FDs

Issuers offer various options to meet different financial needs. Whether you seek security, tax benefits, or convenience, there is an FD for you. Here are the key features that better explain fixed deposit types:

Tax-Saver FDs

  • These FDs come with a mandatory lock-in period
  • They provide tax deductions, but early withdrawal can reverse the benefits

Regular FDs

  • Normal FD schemes offer higher interest than savings accounts
  • They offer short- to long-term, flexible tenures and allow loans against deposits

Reinvestment FDs

  • The bank or NBFC reinvests the interest into the principal amount
  • You earn interest on the principal and accumulated interest, paid at maturity

Auto FDs

  • This type combines the benefits of savings accounts and FDs
  • You set a threshold for your savings and excess funds automatically go into the FD for higher interest

Senior Citizen FDs

  • These FDs serve older investors
  • They offer a higher interest rate, prioritising capital safety over high returns

Digital FDs

  • You can invest in such FDs entirely online
  • The process requires no physical documentation and includes quick verification

Also Read: Term Deposit Vs Fixed Deposit

Benefits of Fixed Deposits

FDs help you grow your savings with minimal risk. Now that you know what is a fixed deposit and how it works, know some key benefits you can enjoy with it:

  • Flexible Tenure: You can choose the tenure based on your preference 
  • Loans Against FD: You can borrow up to 95% of your FD value during emergencies
  • Assured Rate of Return: FDs offer a guaranteed rate of return throughout the tenure, so you can plan your returns and finances more efficiently 
  • Easy Liquidation: It can be easily liquidated online or at the financial company’s branch
  • Tax Threshold for Interest: No tax is deducted on interest until it crosses the income tax cap of ₹40,000 for regular investors and ₹50,000 for seniors

In conclusion, knowing what is a fixed deposit can boost your earnings. However, you do not have to break your FD if you need immediate funds. Instead, you can opt for Fibe’s Instant Personal Loan, offering fast access to funds without collateral. 

Get up to ₹5 lakh at competitive interest rates through our digital platform. Download the Fibe Personal Loan App for iOS and Android or apply on our website to secure funds.

FAQs on Fixed Deposit

Can I open an FD in a minor’s name?

Yes, you can open a fixed deposit for a minor. However, you need to be a parent or guardian to operate the account on behalf of minors until they turn 18 years old.

Can I transfer my FD to another bank?

No, you cannot directly transfer an FD to another bank. However, you can close the FD with your current bank and open a new one with a different bank.

How do I track my FD account?

Most banks provide multiple avenues through which you can track your FD account. Some of these are:

  • Online platform
  • Mobile app
  • Customer care service
  • SMS banking
  • Missed call service

Can I add a joint holder to my FD account?

Yes, you can add a joint holder to your FD account. Most banks allow joint FD accounts with two or more holders.

What is the fixed deposit definition?

It refers to a savings scheme where you invest a certain lump sum for a fixed interest for a fixed tenure. It offers interest on your invested amount across the duration you choose. It is considered a nearly risk-free investment.

How to Fill Cheque Correctly: Step-by-Step Guide

Knowing how to fill the cheque correctly ensures your payments go through without issues and keeps your transactions secure. Following the proper steps in your cheque-facilitated transactions prevents errors that could lead to delays or rejections.  

To understand what correctly filling out a cheque entails, read on.  

What is a Cheque? 

A cheque is a written order that tells a bank to pay a specific amount to a designated person or entity. In India, the Negotiable Instruments Act of 1881 governs all cheques. People often use them for personal and business transactions.  

If you fill out a cheque incorrectly, the bank may reject or dishonour cheque, causing processing problems.  

Also Read: What is Cheque Leaf?  

Different Types of Cheques 

Each type of cheque serves different purposes and offers varying levels of security and flexibility. Here are a few types of cheques you need to know about: 

  • Bearer Cheque 

A bearer cheque is cashable by anyone who presents it at the bank. It may not specify a payee’s name. That makes it easily transferable but it’s less secure.  

  • Order Cheque 

An order cheque is payable only to the named person. The payee must endorse it on the back to deposit it. That adds a layer of security to the transaction.  

  • Crossed Cheque 

A crossed cheque has two parallel lines at the top left. It is used to deposit funds directly into a bank account and not cashed directly. That prevents unauthorised cash withdrawals. 

  • Post-dated Cheque 

Post-dated cheque is issued for a future date. You cannot cash it until that date arrives. People often use it for scheduled payments and budgeting.  

Detailed Guide to the Parts of a Cheque 

Before you fill out a cheque, you need to understand the various sections that a cheque has. These include: 

Bank Information: The cheque includes the bank’s name and address.  

IFSC: IFSC Code is a unique 11-digit code, combining both numerals and letters.  

Payee Information: This section clearly mentions the name of the recipient of the funds. Date Box: Here, you need to mention the date on which the cheque is issued.  

Rupees: You need to write the amount in words here.  

Account Number: Include the account number to process the payment.  

Signature: The drawer must sign the cheque in the designated space, typically printed with their name above the signature line. 

Amount to Be Transferred: The maximum amount that you can draw.  

Cheque Number: Each cheque has a unique cheque number and MICR code. 

Amount: Write the transferable amount in numbers in this box.  

Also Read: 5 Important Facts of Account Payee Cheque  

Cheque Writing Sample. Here is a sample example of writing a cheque for your reference. Figure 1. 

Cheque Writing Sample and Format 

Filling out a cheque consists of two main parts: writing the cheque and recording the payment. Follow these steps and use the correct cheque fill format to ensure accuracy and prevent dishonour by the bank. 

  • Write the Date 

It is mentioned in the top right corner in the format “DD/MM/YYYY.” You can also create a post-dated cheque if needed.  

  • Record the Payee’s Name 

Write the payee’s name, who can be an individual or a business. Ensure you spell the name correctly.  

  • Write the Amount in Words 

In the designated space for ‘Rupees,’ write the amount in words starting from the left side. Include the word ‘only’ after the amount to prevent tampering. For example, write “four thousand and four ‘only’ if you wish to write a cheque for ₹4,004.  

  • Write the Amount in Numbers 

In the box on the right side, write the same amount in numerals, formatted as ‘4004/-’.  

  • Sign the Cheque 

Mismatched or incorrect signatures can result in the cheque being cancelled or deemed invalid. Sign the cheque using the same signature you use for other banking transactions.  

 For Example: 

Date: 28/04/2025 

Pay: John Doe 

Amount: ₹5,000.00 

Amount in Words: Rupees Five Thousand Only 

Signature: [Your Signature] 

Filling out a cheque accurately helps you to build trust with lenders when applying for loans. It allows you to avoid charges if your cheque bounces due to an error. This makes it a secure and simplified option for fund transfer.  

If you are looking for a financing option with similar features, check out Fibe’s Instant Personal Loan. With us, you can borrow up to ₹5 lakh instantly. Experience competitive interest rates and repay over a comfortable tenure. Download the Fibe Personal Loan App today or apply on our website for a quick loan solution.  

FAQs on Filling a Cheque 

Can I write the date in any format on a cheque?  

No, there is a specific format for updating the date on a cheque. You need to write the date in the format ‘DD/MM/YYYY’ only.  

What happens if I make a mistake while writing the amount in words?  

In such cases, it is often best to write a new cheque to avoid any issues.  

Is it necessary to include a ‘/–’ sign after the amount in numbers?  

Although it is not necessary, it is best practice to use this sign after the amount in numbers. The ‘/-’ sign indicates an endpoint to your written amount. It helps prevent tampering and clarifies the amount.  

Can someone misuse a cheque with my signature, but no other details filled in?  

Yes, blank signed cheques are likely to be misused. Avoid leaving cheques blank and store them securely to prevent fraud.  

Can I write a cheque for a future date?  

A post-dated cheque has a future date and is not cashable until then. People commonly use it for scheduled payments and budgeting, such as paying rent as tenants.  

How long is a cheque valid after the date mentioned on it?  

In India, a cheque is valid for three months from the date mentioned. After this period, it is considered stale and may not be acceptable for payment by the bank.  

What happens if my signature is mismatched or unclear?  

If you sign a cheque and your signature does not match the specimen signature held by the bank, your cheque will be void.