Fixed deposits can be a great way to invest your funds as it involves low risk. Many people prefer banks fixed deposits when it comes to investments. This is a much safer option to invest in compared to investments in shares and mutual funds. Now deposits can be of two types: fixed and recurring deposits.
Fixed deposits are a onetime investment option where you can devote all your funds at one time. If you opt for recurring deposits, you will have to invest your funds regularly over a period of time. The procedure of the fixed deposit is very easy and it is considered extremely secure.
Instead of savings your funds, investing it in a fixed deposit can benefit you. If you are looking for a low risk involving investment then fixed deposits will just fit perfectly. Fixed deposits don’t depend upon the market conditions which makes it a low-risk investment.
Here are some benefits of investing in a fixed deposit:
- Interest Rates
The interest rates on fixed deposits remain constant if you opt for a fixed rate of interest, unlike the mutual funds which fluctuate depending upon the market conditions. Also, the interest rates on fixed deposits vary from bank to bank. This can be beneficial to you if you are investing a lump sum amount.
You can also split the amount and invest in different fixed deposits. When it comes to bank interest rates on fixed deposits they offer you interest rates depending upon your FD tenure as well as the amount you are investing. Senior citizens are provided with higher interest rates compared to others by the bank under senior citizen fixed deposit.
NBFCs also provide you with fixed deposits which lend higher interest rates as compared to banks. But investing in NBFCs can be a little risky as they are not as trustworthy as banks. NBFCs also offer you different schemes when it comes to interest rates on fixed deposits.
- Overdraft Facility:
In the case of a financial emergency instead of going for breaking your FD, you can use the overdraft facility. Breaking your fixed deposit can make you pay a penalty as well as it will lower down your interest rate. But instead, if you go for a fixed deposit you can save your penalty as well as save the interest rates which would go down. In an overdraft, you can withdraw up to 90% of the amount which you will have to repay with the interest rate at the end of your overdraft facility.
- Taxation:
Your investment tenure is what decides your taxation. Bank only charges you with tax if you get an interest which is above INR 10,000. Also, you can escape paying tax if you reinvest your funds after the maturity of your fixed deposit account. With the help of online calculator for FD you can check out the interest rate that will help you to know about you need to pay tax or not. The ones who are having taxable income have to submit their declaration form 15G in order to avoid the TDS and form 15H if you are senior citizens.
- Insurance:
Banks offers an insurance of about INR 1 lakh to its investors that invest their money in a fixed deposit. If you are investing a huge amount this can be very less, instead, you can divide the amount and invest it in many fixed deposit accounts which will give you the benefit of enjoying many insurances from different FDs.
As mentioned above, there are various benefits of availing a fixed deposit. It will not only help you grow your money but it will also provide you with financial stability.
