Fixed Deposit

What is a Fixed Deposit?

  • Fixed Deposit is the safest investment avenue depending on where you have invested. FDs help you grow your savings. They also offer stability and safety of principal amount. By investing in a FD, you can take control of your investments. You have reasonable flexibility, assured returns and high stability. FDs can be done with recognized banks and eligible non-banking financial companies (NBFCs) which are allowed to collect deposits.
  • Bank FDs are the more secured in comparison to corporate/NBFC FDs. FDs require one-time investment. If you want to open new FDs, you need to invest more separately. FDs can generate interest income for a wide range of time, from 1 day to 10 years. You can choose your interest payment frequency, i.e. after a fixed interval or at the end of the tenure (cumulative). The interest income generated by FDs are taxed at the rate of your respective income slab.
  • Some FDs come with premature withdrawal facility, and some FD comes with no premature withdrawal facility. The interest rate of the FDs in the latter basket i.e. no premature withdrawal space, are typically higher.
  • FDs are extremely popular investment avenue, because of the principal and interest protection. There are some FDs that offer tax-saving facility. Tax Saving fixed deposits are a good way to get tax deduction under Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to a maximum of ₹ 1.5 lakh by investing in them. The booking period for tax saving fixed deposits is a minimum of five years. No partial or premature withdrawal is allowed.
  • There are some deposits that give you the benefit of regular investing. These are called recurring deposits or RDs. A fixed sum of money is invested in an RD and the interest rate is often similar to FDs. RDs give you the benefit of regular investing and you can invest a small amount. All the other features are similar. You can withdraw money from RDs, after paying a penalty. RDs are often used by depositors for goal planning, as they allow regular investments.
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