Do You Know All the Advantages of a Fixed Deposit Account?
As the world is growing fast and people on it live in major hustle bustle, everyone looks for immediate results. They want their investments to give instant results. As investing in higher risk generated area gives high returns people often opt for investments like mutual funds, shares, equity, etc.
But not everyone wants investments which involve high risk in it. Fixed deposits can be the one if you are in search of low risk involved investment. FD is safe options and also gives easy and high returns.
Now, fixed deposits are the easiest way and a commonly preferred to save some funds. Fixed deposits are measured as a safer option as opposed to the stock market and mutual funds. Term deposits can be of two types: fixed deposits and recurring deposits.
Fixed deposits are the best investment option for the salaried individual because you will have to devote your funds only once. Since the rate of returns is high, they are considered as the best option for the masses. One of the advantages of fixed deposit is that the rate of interest is not easily affected by the volatility of the market. Another advantage is that the amount that you invest gets an insurance of about INR 1 lakh so even if the financial institution goes into a loss, your money is safe.
Since the tax is levied if you earn more than INR 10, 000 as interest returns from your fixed deposit in one financial year, you need to calculate in advance how much return you will be earning. There are many online calculators available where you can check your interest returns. If you are earning more than INR 10, 000 in tax returns then you can split the investment amount into smaller amounts and invest them in different fixed deposits.
With the fixed deposit market changing drastically over the past few decades, it is not known to a lot of people that even companies provide the facility of fixed deposits. While both banks fixed deposits and company fixed deposits have their own attraction, it is necessary to know which is better.
Fixed deposits are a onetime investment option where you will devote all your funds at a single 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.
The interest rates on fixed deposits are high which enables you to earn high returns. Interest rates offered by different banks on fixed deposits differ. They also depend on the funds you invest plus the tenure of your investments.
How to Invest in FDs
If you are going for banks fixed deposits, banks offer you an insurance worth INR 1 lakh. In case you are investing a huge amount then this can sound a bit low. So, here you can split up the surplus amount that you have and invest these split up amounts in various different investment options or fixed deposits. This will not only make sure that you do not go broke if you face a loss in an investment, but it will also give you a higher rate of returns.
This can be also done when you want to earn high returns. You can simply split your amount and deposit into different FD accounts as this can give you high returns over your lump sum amount.
Withdrawing from an FD
Withdrawing your funds from a fixed deposit is difficult as FD restricts you from withdrawal. In the case of withdrawing your funds, you need to break your FD which can cost you a penalty to the bank and will also make your interest rates low.
But in a case of financial emergency, you can use the overdraft facility as this allows you to withdraw up to 90% of the amount of your account. You can simply write a cheque and withdraw the amount. But, here you have to pay the interest on the amount you withdrew on the last day of your overdraft.
Also, you must know that fixed deposits offer a fixed interest rate which remains constant irrespective of the market conditions. The interest doesn't change, unlike the mutual funds which get affected by market conditions.
Also if you have invested in tax-saving fixed deposits which come under the Section 80C, you will be eligible to claim tax benefits. The interest helps you save a major sum of tax. The tax is deducted to the only ones who have an interest rate above INR 10,000.
If you are a senior citizen you will be benefiting with higher interest rates on FD than others. Also, you may earn higher returns if you go for reinvestments. Thus, investing in a fixed deposit can be a safe and beneficial option for investing your funds.