A Fixed Deposit or FD refers to the process of depositing a certain amount with a banking or a non-banking institution for a specified period and availing a fixed rate of interest.
The depositor will get the interest on a monthly, quarterly or annual basis for the fixed tenure according to the scheme. After the tenure, the principal amount will be returned to the investor. The amount that can be deposited in an FD changes with banks. Some banks have upper limits, and some not.
A Fixed Deposit helps cultivate the habit of saving. Here are some reasons to invest in fixed deposits:
FD is considered to be the safest form of investment when compared to the stock market, mutual funds, etc. Because, you will get a guaranteed return after the tenure is over. The return is certain and fixed.
Fixed deposits come with a fixed rate or interest that are specific to the duration of your FD. A Fixed Deposit gives higher interest rates compared to a normal savings account. Some banks offer higher interest rates on Fixed Deposits to attract investors. There are different interest rates available for women, senior citizens, etc.
Fixed deposits can help you in emergency situations. Instead of applying for a personal loan, getting credit from companies you can choose your FD to rescue. There is an option to request a loan against your FD. You will get up to 90% of the FD amount as loan. What is the Difference Between a Cumulative and a Non Cumulative Fixed Deposit?
Interest earned on an FD is subject to TDS based on certain conditions. Now, most banks offer tax saving fixed deposits meant to help their customers to save on income tax under section 80C.
FDs are highly flexible. The investor can deposit any amount of his or her choice. The minimum tenure is seven days. You don't need to invest heavily in the initial stage itself. However, there are some charges that coudl be applicable if you withdraw early. Best Deposits That Give Higher Interest Than Bank FDs