In India, there is no investment alternative as standard as a fixed deposit (FD). Check this article to find out some of FD’s advantages and how it is one of the smart ways to save.
While individuals are now becoming financially conscious and actively seeking investment alternatives, for more than a few months, most individuals are unable to stay invested in their choice of financial investment.
It makes a fixed deposit (FD) one of the best ways of saving funds and earning interest on it. Because FDs require you to stay invested for a set duration and early withdrawals result in a penalty, it helps save money. Besides assisting you to save, however, FDs also give several other advantages. Let us look at some of the benefits of investing in FDs:
Flexible investment period
Most banks now let you invest in FDs for a period of 7 days to up to 10 years. It makes FDs a perfect option for all your short-term, medium-term, and even long-term financial goals. The interest rate generally depends on the investment period you chose. Likewise, there are privileged rates for senior citizens to help them get higher returns. A fixed deposit calculator can help you make a wise choice.
Fixed returns
When you invest in FD, you earn assured returns, unlike most other investment instruments where the returns depend on the market conditions. Having a fixed deposit account offers you fixed returns irrespective of the investment amount. It is one of the main reasons why expert investors prefer a part of their portfolio invested in FDs. To know about the returns, an FD calculator will help you to calculate the returns.
Tax benefits
There are also tax-saving FDs with an investment duration of 5 years. Under Section 80C of the Income Tax Act, tax-saving FDs come under the Exempt-Tax-Exempt type. While the interest you earn from your FD investments is taxable, for the amount you invest in these FDs, you can claim a tax deduction of up to INR 1.5 lakh in a financial year.
Liquid asset
Liquid assets can be easily transferred into cash. While FDs charge you penalty for early withdrawal, if you want to invest smart, it’s still one of the best options. You can pay a small amount of early withdrawal fees in case of an emergency and use the funds to manage your expenses. FD investors can be ensured with this facility that they will always have a certain quantity of funds to depend on.
Borrow loan
Besides being one of the smart ways to save money, FDs also give a host of other advantages. For example, many of the banks now permit holders of FD accounts to borrow loans of up to 90 per cent of their principal and interest amount. If you need a fast loan to handle a financial emergency, this loan can come in handy against the fixed deposit account.
For determining the interest earned on FD, use the FD interest calculator. They are freely available online.
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