Fixed Deposit is a financial provision offered by various banks and NBFCs(non-banking financial institutions) for you to deposit money in a lump sum to avail higher interest rates compared to your savings account.
Once the Deposit has been made, you earn an interest depending on the time duration for which the Deposit has been completed. The primary rule of a fixed deposit is that the money can be withdrawn before the maturity date; in such a case, a penalty is to be borne by you.
In this article, we will tell you regarding the features and benefits of fixed Deposits.
- 1. What is a Fixed Deposit?
- 2. Features of a Fixed Deposit
- 3. Benefits of a Fixed Deposit
- 4. Conclusion
What is a Fixed Deposit?
A fixed deposit is a deposit in which money is locked for a fixed time. However, the duration is decided by you. It could range from anywhere between a few days, months, or even years.
You receive interest from the bank at a fixed rate in return for locking the money. Opening an FD is extremely simple and can be done offline or online. It is a great way of saving money and one of the best investment options.
Features of a Fixed Deposit
- The amount in the FD can only be deposited once, and additional deposits can be made in separate accounts
- The interest rate is higher as compared to a savings account
- The duration can range from days to years
- FD is renewed hassle-free
- Penalty on an early withdrawal
Benefits of a Fixed Deposit
● Rate of interest
This varies and depends on the term you choose. However, it is fixed by banks. But you are guaranteed to receive interest on your FD.
● Guaranteed returns
The returns on an FD are assured. You will receive the same returns as agreed earlier when opening an FD. Even when the interest rate fluctuates, you will receive the interest as pre-decided.
● Return on investment
A fixed deposit assures you to earn interest. It depends on whether you want to get interest periodically or reinvest the interest, which is known as a cumulative fixed Deposit.
● Loan against FD
Another great feature of an FD is that you can avail a loan against it in case of urgent need of funds. This can help you in not close your fixed Deposit premature
● Tax benefit
Under the Income Tax Act of India, you can claim tax exemption under section 80 C. This amount can go up to Rs.1,50,000
● Flexible tenure
The term period or the tenure of FD is flexible and can range from 7 days to 10 years.
● Easy to open
Another great benefit of a fixed deposit account is that you can open it in a matter of minutes. You can even apply for it online or visit the nearest bank branch to open it.
● Multiple fixed deposit account
You can have more than a single FD account at any given time. For additional investments, you can always open a new FD account.
A fixed deposit is a dependable way if you’re looking for savings. It is an excellent way to initiate a savings habit that is healthy, and it can come to your rescue in times of financial emergencies.
An FD is the most accessible investment option that is available and secure. One of the tremendous benefits of a fixed deposit is that it gives assured returns. This helps you in fixing a flexible tenure. It is considered an excellent way to initiate a healthy saving habit, and you can use the FD amounts in dire times of need.
However, you must know that a corporate FD can help you avail higher rates of interest relative to all other banks.