Fixed deposits (FDs) are regarded as one of the safest ways to invest one’s hard-earned money in India. FDs offer significant returns in addition to being simple to get started with. Investing in an Fixed Deposit is one of the best solutions if one’s top priority is to save money to fulfill their financial goals without incurring risks and earning assured returns.
Read: What Is An Equity-Linked Savings Scheme (ELSS)?
Read: What is The Difference Between SIP and Mutual Fund?
What is a Fixed Deposit?
Banks, non-banking financial companies, and the Indian Post Office all provide fixed deposits, which are investments with a guaranteed return. You can do this to be able to invest a one-time lump sum for a defined period and get interest that is higher than what you would get from a savings account at a bank or post office.
An FD could endure anywhere from seven days to ten years. When you deposit money with your bank, depending on how long it has been there, it starts to earn interest. The main prerequisite for a fixed deposit is the possibility of withdrawing money before it matures. If you want to prematurely withdraw from your FD, there will be a fine or penalty.
You have the option to choose the length of a fixed deposit. In other words, you can use it as long as you want, as per your requirements.
Few banks have the option of premature withdrawal of Fixed deposits, although the rate of interest is reduced. The bank transfers the principle and interest to the account holder’s bank account on the day of maturity.
Types of Fixed Deposits
There are different types of Fixed deposits. You can choose any of them according to your requirements and capacity. These are as follows:
1- Standard Fixed Deposit
With a normal fixed deposit, the investor invests his funds for a certain period at a predetermined interest rate. The standard fixed deposit can last anywhere from seven days to ten years. Stakeholders most frequently select this FD option.
2- Tax-Saving Fixed Deposit
In tax-saving fixed deposits, the amount cannot be reserved for terms shorter than five years. According to Section 80C of the Income Tax Act of 1961, the sum invested in a fixed deposit is considered tax-free, but the interest earned on the FD is subject to taxation.
3- Senior Citizens’ Fixed Deposit
Banks and NBFCs often provide between 25 to 50 basis points (0.25-0.50%) more in interest on FDs for investors over the age of 60 than they do for other investors. A further tax advantage is also offered by them. The older citizens are benefitted if the amount does not exceed INR 50,000 per year, FDs are exempt from source taxation.
For seniors, this benefit is not offered by other investing options. The maximum TDS deduction is set at INR 40,000 per year for people who are not senior citizens. FD investments will lower your overall tax burden and, as a result, boost returns for older citizens.
4- Flexi Fixed Deposit
You can link your savings account to a flexible fixed deposit. You can use the auto-sweep-in function of this instrument to direct your bank to automatically move any amount above a certain balance to a fixed deposit. Any surplus will be transferred to an FD, for instance, if you desire to keep a balance of INR 20,000 each month.
In contrast, the bank will sell a portion of your FD to keep your balance above INR 20,000 if your balance goes below that amount. You receive the advantages of investing and liquidity. Although lower than rates on traditional fixed deposits, the interest on Flexi-deposits is higher than savings account interest rates.
Benefits of a Fixed Deposit
1- Safe Investment Alternative
Since fixed deposits (FDs) offer a guaranteed interest rate that is unaffected by market conditions, they are regarded as one of the safest investment options. They are thus a trustworthy and secure investment choice.
2- Assured Return
A fixed deposit offers assured returns. The return promised when you opened your FD will be honored. The returns on market-led investments, which are based on changes in market interest rates, are not dependent on such swings. Even if interest rates decrease, you will still receive the agreed-upon amount of interest. In comparison to other investments, a fixed deposit is safer because of this.
3- High-Interest Rate
According to the term you select, the interest rate on a fixed deposit fluctuates. Although it is fixed, the interest rate Please click here to see the IDFC FIRST Bank website and view the current FD interest rates.
4- Flexible Tenure
For an FD with IDFC First Bank, you can select a duration between 8 days and 10 years.
5- Return Based on Investment
The return that is generated on a fixed deposit depends on its maturity duration. The longer the tenure, the more interest you will receive. If you invest your money for a longer period, you will receive a higher interest rate. Moreover, the return you receive on your invested amount depends on whether you want to receive the interest periodically or reinvest it. If you reinvest the amount, it is known as a cumulative fixed deposit (FD). With this FD, you are benefitted from compounding.
6- Loan Against FD
If you urgently require some financial help, you have the option of applying for a loan against your fixed deposit. This gives you great relief from prematurely closing your FD. If you are a new customer and wish to open an FD, you can do so online, or you can open an FD quickly and easily by downloading a mobile banking app.
7- Free of Hassle Investment
A savings account can be used to invest in fixed deposits (FDs). You can make an FD investment by going to a bank branch or investing online. If you don’t want the money credited back to your account, you can choose to renew the FD when it matures.
8- Compound Interest
The amount of your matured fixed deposit (FD) may be reinvested, and you may be eligible to receive compound interest. Compound interest is the term used to describe interest that is paid on both the initial principal of your FD and any accumulated interest. An increased overall return on investment may be the result of this.
- Liquidity: Early withdrawal of FDs is allowed, but you will forfeit a portion of the interest earned during that period. You still have the benefit of liquidity since you can liquidate the FD in a pinch.
- Easy process
The simplest investments to make are FDs, whether they are done offline or online, using net banking or mobile banking.
9- Senior Citizens Benefitted From a Higher Interest Rate.
By paying higher rates, senior citizens can increase the return on their life savings and move one step closer to retirement without sacrificing.
How To Open FD Account with a Bank
With high-interest rates, flexible tenure options, and a variety of interest payment methods, Indian banks provide their customers with a wide variety of fixed deposit options. Numerous banks provide older citizens with regular fixed-term investments and tax-saving FDs with high-interest rates and additional perks.
Online Application For FD
For opening an online FD account, you should follow the instructions given below:
- Go to the bank’s official website and log in using the User ID and Password for the relevant Net Banking account.
- Choose the Fixed Deposit Schemes option under the Deposit option.
- Complete the relevant fields with the necessary information, such as the bank’s branch, the FD’s term, and the deposit amount.
- Select the bank account you wish to debit the money from, then click Continue.
- Check the information you filled in and click on ‘confirm’.
- You will receive a confirmation SMS on your registered mobile number. Save its printout for further use.
How To Apply For FD Offline
- Go to the bank’s nearest branch and open an FD account there.
- Speak with a bank representative and request an FD application form.
- Complete the necessary information, or ask a bank representative for assistance.
- Deposit the amount you wish to invest in FD with the form and the necessary documentation.
- The bank will issue an FD receipt following a successful money deposit.
Conclusion
Fixed deposits have been a popular kind of investment for Indians for a very long time because of the security of the original amount and how the money develops, in addition to an assured rate of interest.
It also provides consumers with a consistent source of income in the form of interest, which they may either use directly or reinvest. The popularity of fixed deposits will undoubtedly rise over time as banks give their investors better interest rates.