Fixed deposit is one of the most popular investment schemes among Indian investors. Such popularity has maintained itself for a very long time due to the many benefits that fixed deposits have. It is a safe and sound way of growing your funds. Investing in fixed deposits involves no loss but guarantees high returns. This is why most Indians invest in fixed deposits as soon as they start earning.

But what is a fixed deposit and how does it work? Well, like all investments, you first deposit a principal amount for a fixed tenure at a pre-set interest rate. Once the amount attains maturity, you can enjoy the principal amount as well the interest earned throughout the tenure.

Some facts about Fixed Deposits
Below given is a list of facts about the most popular avenue of investment in India.

Company fixed deposits can earn you higher returns
One of the most attractive advantages of an FD is the high rate of interest that banks and non-banking financial companies (NBFC) offer. On top of this, fixed deposits with companies offer even higher interest and yield more returns. This means that your funds will grow more in the same tenure as compared to a bank FD. Many people consider banks the most reliable place to park your money, but that is just a myth. Plenty of companies in the market are extremely trustworthy and credible and handle your money with responsibility.

You can avail of a loan against your fixed deposit
You never know when sudden financial emergencies may come knocking at your door without you being prepared for it. Most people tend to take a personal loan to meet the requirements for money. Well, you can take a loan by putting up your fixed deposit as collateral security too. What’s more, loans against FD have lower interest rates than personal loans. While taking a loan against your FD, you don’t have to liquidate your deposit and instead can get a loan against it. Fixed deposits in the name of minors cannot get a loan against FD. FD accounts for the 5-year tax-saving scheme cannot get a loan against FD either.

Higher interest rates are offered for senior citizens
Non-cumulative fixed deposits often replace the salary for senior citizens who have retired. Children of senior citizens who didn’t have an income in their youth often set up fixed deposits for their parents, so that the returns can act as regular income to them. Thus it is a general rule to provide a higher rate of interest for all senior citizens. This ensures them high returns and comfortable life after retirement.

Fixed deposit can help you save on taxes
If you have invested in company fixed deposits and your total interest-earning is less than or equal to Rs. 50,000, that amount is free from taxation according to income tax guidelines. Apart from this if your total taxable income including the interest income for fixed deposits is less than the taxable amount, you simply have to submit a 15G/15H form to save on tax. There are also tax-saving fixed deposit schemes that you can opt for to save on tax.

The first account holder has to pay TDS for joint accounts
Opening a joint account with a family member is a very common practice while investing in fixed deposits. All joint accounts have a primary and secondary holder and the primary or first account holder has to pay the TDS or Tax Deducted at Source. The interest earned is also transferred to the account of the first account holder.

Fixed deposits offer great flexibility
An investment arrangement that can be tailored to serve the interests of the customer completely, is one of the more promising advantages of investing in fixed deposits. With this scheme, you can start with as low as Rs.1000 and gradually grow your funds over time. The tenure can be chosen according to your convenience and can range from one week to ten years. Most banks and NBFCs even offer customers the choice to break the FD amount before it reaches maturity without penalty charges. Such flexibility comes in handy in situations of dire financial emergencies.

You can calculate the details of your fixed deposit scheme before you invest using an FD calculator. With the investment tenure deposit amount, the tool will inform you of the other details such as interest rate, returns, and maturity amount. People are becoming more financially aware and prefer to invest in equities rather than FDs these days. Even with this shift, the popularity of FDs has ensued.

Aditya

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