Following the confirmation of the predetermined tenor, your deposit begins collecting interest as per the interest rate for the chosen duration of your deposit. Your investment amount is unaffected by interest rate changes in the future or market fluctuations once it has been locked in at a fixed interest rate. Therefore, you may expect assured returns on your deposit, and you may choose whether to receive your interest on a monthly or annual basis. Fixed Deposits are usually defined by the fact that money cannot be withdrawn before maturity, however, it is possible to do so by paying a penalty.
What Are The Key Features Of A Fixed Deposit?
The following are the main characteristics of a Fixed Deposit:
- The sum of money can only be deposited once. Any additional funds must be deposited in a separate account.
- The interest rate is always higher than that of a savings account.
- The period for maturity can range from 7 days to 10 years.
- Fixed deposit accounts can be easily renewed.
- Withdrawals are not permitted before the maturity date. A penalty must be paid by the consumer in the event of an emergency withdrawal.
The Benefits of Fixed Deposit:
Opening a fixed deposit account has numerous benefits. The following are a few of them:
- Guaranteed Returns:
One of the most appealing aspects of investing in a fixed deposit account is that it assures returns. In comparison to other types of investments, such as mutual funds, fixed deposits are not volatile at all and there are no risks involved. The invested amount will collect a fixed rate of interest which can be acquired when it matures.
- The Simplicity Of Starting A Fixed Deposit Account:
It only takes a few minutes to open an FD account. You can apply for it either online or in-person at your local bank. The ease of opening a fixed deposit account adds to it’s appeal.
- Higher rate of interest:
Customers can receive a higher rate of interest on fixed deposits than on savings accounts or other types of term deposits.
- Variable Tenure:
You can open a fixed deposit account for a duration ranging from seven days to ten years. This allows you to choose your tenure at your own convenience.
- Multiple FD accounts:
You can have multiple FD accounts open at the same time. You can always start a new FD account if you want to make a larger investment.
- Tax Exemptions:
You can claim a tax exemption for the sum of up to 1.5 lakh rupees under Section 80C of the Income Tax Act of India.
A fixed deposit is the most continent and reliable avenue for investments but is known to offer low returns compared to other options. However, if you do not want any risk involved with your investment, an FD account is ideal for you. For more information about Fixed Deposit, you may contact our experts.