Got The Salary Hike? Here's Why You Need An FD


The professional world of today has grown to be a highly competitive space where excellence is rewarded and you’re expected to give your very best. In such a scenario and with the risk of inflation it is important to make the best use of every salary appraisal you get.

And one great investment option is the Fixed Deposit.

Bank Fixed Deposits are commonly preferred to save some funds in India. FD investments  are measured as a safer option as opposed to the stock market and mutual funds. Term deposits can be of two types: Fixed Deposits and recurring deposits.

Fixed Deposits are a onetime investment option where you will devote all your funds at a single time. If you opt for recurring deposits, you will have to invest your funds regularly over a period of time. The procedure of the Fixed Deposit is very easy and it is considered extremely secure.

Here are some of the reasons why you should consider investing in a Fixed Deposit.

Assurance of returns

The rate of interest for an FD is more than that from a savings account. Moreover, returns from an FD are assured. This is because there are extremely strictly guidelines in place for any bank or financial institute that is offering an FD. As long as you go with a credible bank, your investment and the returns on it will remain secure.

Many tenure options

Banks provide you with numerous options for the tenure of an FD. This ranges from as less as 7 days to a maximum of 10 years. Usually, it can be possible to open an FD in any bank even if you don’t have an account with them. The rate of interest offered by banks is currently between 7-8%. But ensure that you do not withdraw an FD before it matures as this can affect your returns.

Helps manage risks

Investing in mutual funds can certainly help you get more returns. But at the same time, these also have a lot of risks associated with them, and every investment necessarily involves considerable risk analysis and research.

Thus to reduce the risk on your overall finances, it can be advisable to invest some funds in an FD. In this way, for all the investments you have in an FD, you can be sure about getting a return.

For urgent cash requirements

In the case of a situation wherein you immediately require cash, it can be possible for you to apply for a loan against your FD. In general, the loan amount is usually about 60-90% of the Fixed Deposit. A higher amount may be given, but it may involve a higher rate of interest.

Compounding your returns

The interest from an FD may be paid out in a month, quarter or on an annual basis. At the time you receive this interest you can either choose to have the amount transferred to a savings account or consider reinvesting the amount in your FD.

When you choose to reinvest, the principal amount in the FD increases and the new interest is now calculated on this amount. Thus, this gives you greater returns on your investment.

Clearly, there are a number of benefits to investing in a Fixed Deposit.  Especially for senior citizens who are given tax exemptions on the returns from their FD. But to avail this benefit they have to submit the 15H form to a bank for ensuring that TDS is not charged on the accumulated interest.

So get to evaluate the FD terms offered by different banks and choose the one that best suits your financial needs.