Things to remember while investing in Fixed Deposits

Fixed Deposits are one of the most popular investment options in India for a reason. Fixed Deposits are one of the few safest investment schemes with no risks or potential losses for investors. It offers guaranteed returns with an additional interest rate component added during the payout process post maturity. Many banks and NBFCs now offer Fixed Deposits with a plethora of benefits such as lucrative interest rates, and tenors that are flexible enough to meet the financial needs of the investor. However, just like any other investment option, it is important to firstly understand the features and benefits of the instrument and only then invest if it aligns to your financial goals.

Here are a few things that one should remember while investing in Fixed Deposits:

Tax Benefits

Under Section 80C of the Income Tax Act, 1961, an individual can claim a tax deduction for investments worth Rs.1.5 lakhs in a particular financial year, when it comes to tax saving Fixed Deposits. Senior Citizens can also get benefits of higher amounts through Fixed Deposits. It is important to note that in case you have availed a joint FD, only the primary holder will be eligible for tax deductions under Section 80C of the Income Tax Act. Banks are also likely to deduct TDS (Tax Deducted at Source) for the interest income that is generated by you on your Fixed Deposit scheme.

Interest Rates

Many banks and NBFCs offer competitive interest rates on Fixed Deposits, to encourage investors to add it in their investment portfolio. By setting aside a certain amount in an FD, one can make sure that they earn an additional interest rate for the tenor, thereby maximizing wealth growth for the individual. It is also worth noting that NBFCs like Bajaj Finance offers a higher rate of interest on Fixed Deposits than most banks and financial companies in the market.


Benefits for Senior Citizens

Some prominent NBFCs like Bajaj Finance even offer higher interest rates for senior citizens, thus making Fixed Deposits the ideal investment option for them. Senior citizens can also enjoy other benefits such as flexible tenors and complete online account management to facilitate convenience in managing their Fixed Deposit account. For emergency expenses, investors can also opt to avail a loan against their FD, which gets processed instantly with your Fixed Deposit as the collateral. This would ensure availability of funds in the times that you need it the most. Usually, banks and financial companies allow up to 90% of your FD principal amount as loan if you need one.

FD Laddering

For many, Fixed Deposits can be discouraging only because the amount has to be set aside for a specific time period. This is because, in case of an emergency if you need to discontinue your FD or go for a premature withdrawal of funds, the bank or NBFC might impose a penalty of up to 1% of the principal amount. However, a good solution to this is the concept of FD laddering wherein, investors can open FDs of different tenures and amounts scheduled to mature as per their financial goals. This would ensure that the investor has access to funds during the major milestones of their lives. This can come in handy, especially if you are planning Fixed Deposits as an investment option to cover the expenses for your children.

Apart from this, it is important to note that Fixed Deposits offer higher safety than most investment options as there are no risks associated with it. The process to apply for a Fixed Deposit is very simple and can easily be done online now. Furthermore, many financial companies offer a plethora of benefits on Fixed Deposits, thereby maximizing the investment to a larger extent. Most financial goals can easily be accomplished by the investor by choosing the right FD scheme and the right financial company to create the FD account with. Bajaj Finance, in this regard is one of the ideal options considering the various flexible options offered and the higher rate of interest offered, which is more than most banks and NBFCs. In order to make the most out of your investment, you should make sure that you choose the ideal tenure and financial company to invest with.


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