Magazine : 
Fixed Deposit Investing - 6 Things to Know Before Investing in FD
Among the myriad of investment avenues available in India, fixed deposits (FDs) have consistently been a preferred investment option. A survey undertaken by the SEBI in 2017 revealed that an impressive 95% of the population preferred to invest their funds in FD schemes.
A primary reason behind the massive popularity of fixed deposits is the inherent stability they offer. Offering consistent income generation with zero risks, this investment vehicle has stood the test of time to cement its status as an evergreen asset class.
Additionally, it is easy to start your investment journey by opening an FD online. Before you apply for a scheme, you must familiarise yourself with some of its unique features and benefits.
1. Fixed Deposit Interest Rates
The growth of your corpus depends on the rate of interest offered by the fixed deposit scheme. Unlike other forms of investment, FDs offer guaranteed returns, which may also increase with longer tenures. However, not all institutions offer the same fixed deposit interest rate. Hence, investing time in a proper analysis and comparison of interest rates is recommended before initiating any investment.
2. Fixed Deposit Tenure
Fixed deposits provide investors with the flexibility of choosing an investment tenure ranging from a few days to a few years. When you open a fixed deposit, you will be required to opt for a tenure for the duration of which your funds are locked away. If you wish to withdraw the amount before the date of maturity, you must pay a penalty. When investing in an FD, choose a tenure based on your convenience and financial goals.
3. Risk-free Investment
Fixed deposits are risk-free investment instruments, promoting gradual and continuous returns. Unlike market-linked instruments, fixed deposits are not subject to market fluctuations. In an FD scheme, you are assured of getting your principal amount and an interest component at the end of the tenure.
4. Flexible Interest Payouts
Flexibility in terms of interest payouts is one of the primary benefits of an FD investment. When you apply for a fixed deposit, you can either opt for a cumulative or non-cumulative payout. A cumulative payout will grant interest payment at maturity. Conversely, a non-cumulative payout will credit the interest in your account on a monthly, quarterly, half-yearly, or annual basis. The interest payout option you choose should align with your financial goals.
5. Tax Saving Options
Section 80C of the Income Tax Act allows you to claim a tax deduction of up to INR 1.5 Lakhs through tax-saving FDs. To take advantage of this benefit, you strictly cannot withdraw your funds within 5 years from account opening. Do note that the interest received through the fixed deposit will still be treated as taxable income.
6. Seamless Application Process
Owing to increased digitisation in banking, the process of applying for a fixed deposit has become more stream- lined and user-friendly over time. Today, fixed deposits can be conveniently set up online, allowing you to manage your finances without leaving your home. This efficiency is enhanced by rapid cross-bank fund transfers and video-based KYC verification.
The Bottom Line
Fixed deposits offer a secure and reliable investment option for those who prefer steady wealth growth with zero risks. Guaranteed returns, flexible tenures, flexible interest payout options, and tax benefits make FDs an attractive choice for investors of all types. With a strategic plan, investors can enjoy long-term growth with this evergreen investment avenue.
.jpg "Gurbinder Singh Punn: Enabling Leaders To Achieve Unencumbered Success Through Effective Coaching")
.jpg "Navigating Success Presenting Innovative Insights")
