Updated: May 23, 2022
Things one might ignore thinking of FDs as instruments of the past generation
Almost everyone is familiar with FDs. FDs are investment instruments offered by banks and non-banking financial companies (NBFCs) for the purpose of saving money. They are accounts in which you can invest a significant amount of money at a fixed rate of interest for a set period of time. You'll receive a lump sum at the end of the tenure with interest, so this is an excellent money-saving plan. Market fluctuations do not affect the interest rate, so the returns on maturity are fully guaranteed as well. Depending on your needs, you can choose a fixed deposit for a period of a minimum of 7-14 days and up to a maximum of 10 years.
There are a number of benefits to investing in a fixed deposit:
· In case you're a beginner, it's the safest way to get started with investing.
· FDs are easily renewed and you get bonuses whenever you renew your deposits.
· Certain tax saving fixed deposits offered by Indian banks are exempt from tax under Section 80C of the Income Tax Act, 1961.
· With FDs, there is always an option available for premature withdrawals but you might lose a portion of your interest income if you opt for premature withdrawal.
· They provide better returns than investments in stocks.
· A savings account can be opened for as little as Rs. 5,000 without an upper limit, and you can put in as much as you wish.
· When you need funds urgently, you can borrow against your fixed deposit. This way, you avoid closing your FD prematurely.
· Senior citizens often get the benefit of higher interest rates.
· Many banks now offer value-added bank fixed deposits, which offer additional benefits such as healthcare benefits and free insurance to banking FD investors.
Fixed deposit always proves useful in an emergency. The current technology allows one to open or close a bank FD in a few minutes using a computer or a mobile phone. FDs are a much safer option than any investment scheme.
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