One of the safest and most common forms of investment in India is a fixed deposit or term deposit. It has historically been regarded as a secure and stable money investment without the uncertainty and uncertainties associated with other investments, such as the stock market. A fixed deposit is easy to open and minimum paperwork is required.
FD is a financial tool that provides a higher interest rate relative to normal savings account interest. In addition, an FD is a fixed deposit. A fixed deposit is a safe choice if you have extra funds that you like to invest in low-risk opportunities.
Here are some of the main features of a fixed deposit:
- Period: As the name indicates, a fixed deposit is for a fixed period of time, typically from 15 to 10 days. You pay the initial deposit plus the interest received on the expiry of the deposit.
- Amount: You can only deposit the sum to be invested once. You would need a new FD account if you want to spend any additional amounts.
- Maturity: On maturity, the amount is credited to the customer’s specified bank account.
- Withdrawals: Often, you may want to split your FD and withdraw the entire money before the date of maturity when the money is desperately needed or you may spot a better investment opportunity. You will have to pay a penalty if you cancel your FD before maturity.
In other situations, you may decide to only partially withdraw your deposit – only delete a small sum. In such cases, too, a tax and interest due shall only be paid for the remainder.
- Renewals: On maturity, an FD can be renewed for a different tenure, or it can be auto-renewed in the absence of specific instructions.
- Interest rate: The interest rate depends on the number, deposit duration, and other factors, from bank to bank. This form of deposit is aimed primarily at allowing individuals to gain extra interest on their surplus cash. A higher rate of interest on fixed deposits is applied to senior citizens in India.
- Tax: You should invest your money in fixed deposit tax savings schemes. Bear in mind, however, that if you plan to invest in such a scheme, you need to retain your FD for a minimum of years.
ADVANTAGES OF FIXED DEPOSIT
- Fixed deposits encourage individuals to save money over a longer period of time.
- They enable the depositor to earn higher interest on their surplus money.
- Allows them to plan their fund’s allocations as they are assured of a fixed amount of funds over a fixed period.
