If you want to invest your spare cash safely with guaranteed returns, your best option is to put it into a fixed deposit (FD). It’s better than leaving your money in a regular savings bank account because you get a higher interest rate.
There are multiple reasons to invest in an FD in India. Here are seven of them that will make you see sense in investing in this accessible investment instrument:
#1 Safest Investment Option
An FD is among the safest options you can have in wealth creation. The risk factor is a major consideration while investing money. There are many investment choices for you in the market. But those that offer the highest returns also present the highest risks.
The advantage of FD accounts is that they do not fluctuate in line with the market. Ultimately, your hard-earned money is safe in an FD. It is a great means of short-term and long-term savings in a planned manner.
#2 High-interest Rate
The interest rates offered by an FD may not be as high as those of other investment options. However, you will get better rates than your money in a regular savings account.
Moreover, if you are a senior citizen, you can avail of even better interest rates than the other customers.
#3 Easy Monitoring
One of the main advantages is that the interest on FD offered does not fluctuate in line with the market. You don’t need to monitor the performance constantly – your money grows in an extremely predictable manner.
However, one important thing you need to monitor is the maturity date of your FD. Most banks will renew your FD automatically. But whether or not this happens, it is always a good idea to keep a tab on the maturity date to have absolute control over your investment.
#4 Nomination and Sweep-in facility
Two lesser-known facilities that you get with an FD are nomination and sweep-in. You can nominate a beneficiary to your account in case of your unfortunate demise, and your nominated beneficiary would get the proceeds of your investment.
It is a frequently-neglected aspect of FDs, but you should ensure that you nominate a beneficiary at its inception.
The sweep-in facility is a safety mechanism your bank provides to ensure that your account is kept sufficiently funded at all times. It prevents embarrassing cheque-bounce situations.
#5 Hassle-free Investment
Investing in a fixed deposit is the easiest thing to do. You can open one online from your bank account or visit your bank branch to get it done. As we mentioned above, you don’t need to bother about your money until it matures.
Applying for an FD is quick and easy.
There will be a form to fill out. Once you have provided your details and submitted the application, the bank will transfer your selected amount from your bank account into your new FD account.
Typically, banks also offer opening multiple FDs, so you can repeat the process several times whenever you have spare funds available in your savings bank account.
#6 Built-in Flexibility
The word “fixed” in an FD can seem ominous to some people. But in reality, you can withdraw your money prematurely in case of an emergency. Agreed, the bank will charge you a penalty, but you may still get your money when you need it.
Also, you have the liberty to choose your tenures – banks usually offer tenures ranging from a week to ten years. It gives you a wide choice so that you can choose how long to put your money in an FD, according to when you expect to need it on maturity.
#7 Tax Relief
Income tax is a reality that every earning individual faces. Under Section 80C of the Income Tax Act, you can get a tax deduction by investing in FDs.
The tax exemption you get is particularly useful for FDs of five years and above. So, when you do your tax planning, ensure that you can show proof of investment in at least one FD for each financial year.
Whether you have a low, medium, or high-risk investment appetite, having at least one FD in the mix is a safe option to ensure that a portion of your money grows at a guaranteed rate.The interest on FD that banks offer makes sense to take advantage of this investment instrument. The seven advantages of FDs highlighted here should motivate you to invest in fixed deposits in India.