Fixed deposit is one of the most popular and widely used investment product in India. A Fixed Deposit is a financial investment instrument offered by NBFCs and banks, which provide a fixed rate of interest (higher than saving and current account deposit) during entire tenure of investment.
FD pays a fixed rate of interest, higher than a normal savings account to the investor, until its maturity date. It is a type of deposit where the investor’s money gets locked for a fixed period of the time. The tenure of fixed deposit for which the money shall be locked-in is decided by the investor.
Importance of FD
Over the years, Fixed Deposits have evolved into highly flexible and versatile financial product which come with a lot of benefits. Let’s have a look at some of the reasons why you should choose FDs as an investment option.
- Promotes Savings:
FDs require an investor to hold the invested amount for a fixed period of time (investment tenure). This leads to inadvertently saving money as premature withdrawals lead to penalties, thus encouraging savings.
- Assured Returns:
Fixed Deposits give assured returns on investment. The returns on an FD investment are pre-decided and fixed for a specific tenure thus equity market fluctuations and other factors don’t impact expected returns, making them one of the safest investment options.
Tax Benefits:
You can avail tax benefits under Section 80C of the Income Tax ACT, 1961 by investing in Tax saving FD option (5year tenure). Deduction on investment amount up to INR 1.5 lacs can be claimed by investing in these products, making only interest earned as taxable.
Premature withdrawals are not allowed on this investment, except in the case of the deposit holder’s untimely death.
- Higher Interest Rate:
FDs give a higher interest rate than saving and current account deposits, while giving the same level of security on your investment.
- Flexibility On Tenure of Investment:
These investment product offer flexibility of choosing investment tenure from 7 days to 10 years, therefore investor can choose tenure as per their investment requirements.
Easy Liquidation
Liquidation of an FD investment is an easy process. In case, FD is booked online, liquidation request can be placed online otherwise there is offline process to manage such request.
Availing Loan against FD
In case of a financial emergency, FD comes across as a dependable financial instrument. Loan of up to 95% of the FD amount can be availed against these investments.
Your savings will work for you, when you don’t work. Therefore, invest wisely in FDs and take benefit of the several advantages it offers.
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