The financial instrument that pays a fixed interest rate till the deposit maturity, it is known to be a fixed deposit. The fixed deposit accounts will provide you with higher interest rates than what you get with a standard savings account. Other than the higher interest rate, a fixed deposit has many other benefits that make it the best investment plan for anyone.
When you are a first-time investor, you want to understand things about the investment method correctly, before making your investment. To start your investment portfolio or to increase your savings habit, a fixed deposit is the best option for you.
You should do detailed research on all the financial providers who offer you fixed deposit accounts and choose the one who offers it at best. Many NBFCs and banks in the country provide you with fixed deposit accounts that you can open in both online and offline methods.
Who Should Invest In An FD?
- When you are a person who wants to avoid market risks and require good returns, then FD is for you.
- When you have taxable income and look for a tax-saving option with safety, then this investment option will allow you to get Income Tax deductions up to Rs. 1.5 lakhs.
- When you are a retired person who wants regular income, then with a fixed deposit with a non-cumulative option you can get interest payouts regularly.
- When you are thinking about saving the extra money for the future and don’t want to take the risk, or want the money to be at easy access, then FD is for you.
Benefits Of A Fixed Deposit:
Here are the thirteen essential benefits of a fixed deposit that you should know to understand why it is the best investment option for you:
- Assured Returns:
The most prominent benefit of opening a fixed deposit account is because you will get assured returns for it. The deposit doesn’t involve the market for its returns, so there is no risk in the investment. When related to other investment options like mutual and debt funds that involve market changes for its returns, FD is different and more secured at that makes it most preferred. With a fixed deposit, you will get the amount you invested along with the interest it generated over the tenure.
- Easy To Open:
Initiating a fixed deposit account opening is very easy and doesn’t involve any lengthy documentation process. Also, opening a fixed deposit is now available in both online and offline methods that have made it more comfortable. Within minutes of completing the necessary documentation and submission of proofs and money you want to invest, you can start your fixed deposit account.
- Encourages Your Savings Habit:
When you open a fixed deposit account, it will mean you are starting to save the excess money you have in hand. It is an excellent start that will gradually increase your savings habit. When your discipline on saving money increases, you can highly benefit on a long-term basis.
- Higher Interest Rates:
The vital benefit that makes many people prefer fixed deposit over other investment options is its higher rate of interest. With a fixed deposit, the rate of interest at what your savings increase will be higher, so your returns will also be higher and more beneficial for you.
- Flexibility Investment:
With a fixed deposit, you will have all the flexibility to choose the amount you want to invest, the tenure you want to choose and the interest payouts you want to opt. Depending upon the amount you invest and the tenure, you choose your interest rate for your fixed deposit will vary. Usually, the tenure of the fixed deposit lasts from days to years that you can select as per your needs.
- Multiple Fixed Deposits:
An individual can hold as many as fixed deposits they want without any problem, that makes it better for them to split and make their investment more valuable.
- Backed Up With Deposit Insurance Of Rs.5 lakhs:
When you plan to apply for your fixed deposit in a financial institution that has a cover provided by DICGC (Deposit Insurance and Credit Guarantee Corporation), then you will have a wholly-owned subsidiary of the Reserve Bank of India. When there are any issues or when the financial institutions go bankrupt, then you can get the cover depending upon the amount you invested.
- Tax Benefit:
There is a separate fixed deposit that will help you get the tax benefit from your investment. Under the section 80C of your Income Tax Act, you can get up to Rs. 1.5 lakhs of tax exemption when you get your tax-saving fixed deposit. But, the only criteria for this fixed deposit is it has a lock-in period of five years that is mandatory.
- Risk-free Investment:
When you are not ready to invest your money where there will be a risk, then a fixed deposit is the most excellent investment option for you. Unlike other investment options like stocks, mutual funds and similar ones that revolve around the market for its changes, the fixed deposit will not depend on the market and provides assured returns.
- Loan Against Fixed Deposit:
When you are in an unexpected cash crunch, you can opt to get a loan against your fixed deposit rather than cancelling it. This option makes a fixed deposit as the best investment option to help you out with your finances at times of your needs. The amount that you can get will be dependent on your deposit amount. Also, the interest rate for the loan will be lower than that of a standard personal loan as the deposit itself will act as collateral for the loan.
- Highly Liquid Investment:
The most significant benefit of a fixed deposit is the liquidity advantage that comes along with it. When there is an emergency, you can always cancel and get the money when you cannot afford to get a loan over it.
- Flexible Interest Payout Options:
When you need a supplement for your regular income, then again a fixed deposit is the best option for you. You can choose to get your interest rates paid out on a monthly, bi-monthly, quarterly or half-yearly basis, that you select during your fixed deposit opening. It will act as a regular source of income for you when you are a retired person with having the money still safe.
- Higher Interest Rates For Senior Citizens:
Senior citizens will be able to avail higher interest rates than a standard individual. They can get up to 0.25 to 0.75% increased interest rate that will vary depending upon the financial institution they choose and the tenure they choose.
With the above benefits, you can now understand how significant and beneficial a fixed deposit investment might be for you. So please do thorough research and choose the best financial institution to open your fixed deposit and get benefited from it.
