What Are the Advantages of the Fixed Deposit
Fixed deposits (FDs) have always been one of the most favourable investment alternatives in India. Most people consider an FD as the best investment option since the risk involved is very subtle while the returns are guaranteed. It is a safe and trustworthy financial insurance that assures financial security.
What is a Fixed Deposit?
Fixed deposit (FD) is a financial investment instrument provided by financial institutions that allow investors to lock up a sum of money for a specified period. Fixed deposit interest rates are usually higher than regular savings accounts, and the investor gets to determine the tenure of the fixed deposit.
Opening a fixed deposit is a trouble-free process and be done both online and offline. Before deciding on opening a fixed deposit account, you must be aware of all the benefits that come with it. Read on to know what makes fixed deposits so reliable.
Advantages of Fixed Deposit
Assured Rate of Return
One of the main reasons people prefer investing their funds in a fixed deposit is an assured rate of return. Unlike other investment instruments, fixed deposits are not market-driven, which is why investors are provided with an interest rate that remains unaffected throughout the tenure of fixed deposits.
Customisable
There is no limit to how much money you can invest in a fixed deposit. You can start a fixed deposit for as little as INR 10,000 without any upward limitation. The tenure for a fixed deposit is adjustable. It can be anywhere from 7 days to 10 years. Each financial institution has its own tenure rules, but you can decide the perfect one for your needs. This is one of the things that make it possible for anyone to commit to a fixed deposit.
Encourages the Habit of Saving
Not everyone can excel in saving, but everyone wants to have a good bank balance to rely upon during tough times. Investing in a fixed deposit makes saving so much easier. Since it is a liquid option, you can simply withdraw your fixed deposit along with the interest you have accumulated to help you out in times of need. The withdrawal process is quick and straightforward.
Higher Interest Rate for Senior Citizens
As mentioned earlier, fixed deposit investors get a higher rate of interest than regular savings accounts. The interest rate is even higher for senior citizens in some financial institutions like PNB Housing. The fixed deposit interest rate for senior citizens usually ranges from 0.25%-0.65% above the standard rate.
Tax Benefits
Banks provide fixed deposit investors with a tax-saving fixed deposit option that help them bring down their taxable income. Investors can claim a deduction of a maximum amount of INR 150,000 for the amount invested u/s 80C of the Income Tax Act, 1961. Housing finance companies like PNB Housing offer a TDS-free interest income of up to INR 5,000 a financial year.
One-Time Effort
As previously discussed, the rate of interest involved in a fixed deposit remains unchanged. Market fluctuations do not affect fixed deposits. So, you will not have to keep up with the market. Hence, you can conveniently invest any amount without every worrying about market-based rate fluctuations.
Conclusion
We hope this article enlightened you about everything you need to know before opening a fixed deposit account. Investing in a fixed deposit is a clever financial move as it comes with so many benefits. Fixed deposits are an incredible financial instrument for those who want to see fixed earnings in their account.