Over the years, the Indian economy has grown exponentially and so has its investing ecosystem. Many new alternatives to traditional investment plans like mutual funds and ETFs which offered superior returns have flooded the market.
But, fixed deposits stood the test of time, and are still the most sought-after financial instrument among the masses. It is the most versatile and flexible investment option, providing both safety and certainty in returns.
Top Reasons to Invest in a Fixed Deposit
Fixed Deposits are called a wealth creator. Investing wisely through fixed deposits can help you build wealth over a long period.
Investment in market-related securities are subject to market risks and returns and are volatile and uncertain, which make it an unsafe investment option. On the other hand, fixed deposits give a safe and guaranteed return on the investment.
You can determine the FD status at maturity using the FD return calculator before investing. Knowing how much returns will your investment generate will help you set your financial goals more efficiently.
The investment in fixed deposits are completely risk-free and don’t depend on the performance of the bank, company, or any other economic factors.
Fixed Deposits offer the much-needed flexibility to the depositors in terms of choosing the investment tenure, which can vary between 7 days to 10 years and interest payout terms (cumulative or non-cumulative).
Also, it is the most liquid investment option as banks allow premature withdrawals in full and partial, as and when required.
You can obtain a loan of up to 90% value of the fixed deposit when you need funds. And, the interest rate charged on the loan is just 25-50 basis points above the rate offered in the fixed deposit.
This makes it a go-to option for investors who don’t want to break their existing investments during financial distress.
Banks also offer tax-saving FDs of five years in which an individual can claim a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
Further, the interest income earned on any type of fixed deposit will not have TDS deducted unless it crosses the limit of Rs. 40,000, and Rs. 50,000 for senior citizens.
However, submission of Form 15G/15H to the bank will prevent any TDS deduction on interest income of Rs. 40,000 and above. This will help you realise the full benefits of fixed deposits without the worry of taxation.
Banks offer auto-renewal facility on deposits, which makes it extremely convenient for investors. Further, you get the benefit of compounding interest (if done in cumulative FD type) and continue to earn a higher yield on the investment.
There might be some argument over the returns offered in fixed deposits compared to mutual funds and other marketable securities. But, the multiple benefits offered in fixed deposits to investors definitely trumps all those arguments.
For both regular citizen or a senior citizen, fixed deposits continue to be the safest and most-preferred investment option in the country.