What is The Fixed Deposit(FD)
The Fixed deposits (FD) is a financial investment instrument offered by banks and NBFCs in which investors can deposit money and get higher interest rates than normal savings account.
Advantages of Fixed Deposit
Encourages savings
"Don't save what is left after spending, but spend what is left after saving. " - Warren BuffettIt
Emphasizes the importance of saving. A fixed deposit account holder will inadvertently save money as the FD requires the holder to invest a lump sum amount for a certain period of time. The Premature withdrawal attracts penalties.For example, an FD of rupees. 100,000 invested for 3 years at 9% interest rate If withdrawn after one year, interest will be available at the rate applicable at that time, which will be less than 9%. Loss of interest becomes the penalty you pay for premature withdrawal.
Tax Benefits
Tax saver FD are tax benefits under section 80C of the Income Tax Act, 1961. It falls under the exempt-tax-exempt category. While interest on such FD is taxed, you can claim a maximum deduction of Rs. 1,50,000 for the amount invested.Safe Investment
FD are risk free investments. Unlike other investment instruments, FDs markets are not operational. You get a sure amount at the end of the maturity period. Thus, it is an attractive investment for risk-arising investors.High rate of interest
The interest rate on FDs is higher than the rate of interest on savings deposits. For example, Axis Bank offers 4% interest on savings bank accounts, while the minimum interest attracted by FDs is 5.5%.Liquidity
An asset is liquid when you can easily convert it into cash. FD are liquid. Though the holder will be fined, the FD can be withdrawn if required. Thus, you always have a certain amount for the bank.FLEXIBILITY The duration of FD ranges from 7 days to 10 years. You can invest in FD for a period that matches your business or personal needs.
Suppose you are planning to bring your child to a particular school in the next 5 years, you can opt for a tax saving FD as it has a lock-in period of 5 years.
Hi , This is Pramod Choudhary from Nagaur Rajasthan India. I an student and I would like to share my positive thinking with everyone that's my passion . Thank you
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