The high volatility in the stock market and mutual fund investment, together with growing inflation, is what has always kept popular FDs as an attractive investment tool for the people wanting fixed returns. Fixed Deposits provide guaranteed return to the investors at the time of maturity. An FD account is still lucrative as banks have increased their interest rates.
Benefits of a Fixed Deposit Account
- Guaranteed returns:
You get guaranteed returns on your FDs. Market fluctuations won’t affect your returns. This is what makes Fixed Deposits a preferred investment avenue.
- Better interest rate for senior citizens
Because of higher interest rates, FDs are more popular among senior citizens are compared to a senior citizen savings account.
- More profits
The interest rate on FD accounts is higher than that of the savings account. So, you can get more profit from investing your money in FDs.
- Helpful in emergency cash needs
During emergencies, you can break your FD and withdraw your money. However, you can also avail a loan against your FD, if you want to save the penalty on withdrawing FD before its due date.
Fixed Deposits – Creating a financial corpus
1. Do complete research
Before going for an FD account, look at its interest rate. You need to decide the FD’s tenure as well. The interest rate on an FD may differ across different banks and tenures. The interest amount on an FD is calculated yearly, half-yearly or quarterly or at maturity. So, you must compare and calculate to find out which bank is offering you the best, highest rate of interest.
2. Reinvest interest income
With FDs, you can either withdraw your interest or can reinvest it. If you choose to withdraw it, the interest will be credited in your saving account and will be the same every year. However, if you go with the reinvestment option, your interest for next year will become higher than the last year.
3. Split your FD
TDS at 10% is charged on FDs if your interest income goes above Rs. 10,000, in a given financial year. The TDS tax liability is determined at the bank’s branch level. You can also avoid TDS by opening your FD account in different banks. Splitting your FD have one more benefit. If you have an urgent requirement of money, you don’t need to break all your fixed deposits. Breaking one or two FDs only can help you, and the rest of your FDs will still earn you predetermined interest.
Make the best use of this stable and popular investment tool to strengthen your financial portfolio.
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