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Fixed Deposits - 5 Key Benefits that Make it a Trusted Investment Instrument


Fixed Deposit



FD full form is Fixed Deposit. FD is a type of investment in which an individual invests a lump sum amount for a specific period of time with a bank. The amount deposited in the FD earns interest at a fixed rate which is set at the time of the account opening. FD holders can choose to receive the interest earned either monthly, quarterly, half-yearly or annually as per their preference.

Fixed Deposits are popular as they are one of the safest investment options available in the market. The returns are guaranteed and there is no real risk of a capital loss. Moreover, they offer a better rate of interest when compared to Savings Accounts. This makes Fixed Deposits a safe yet attractive investment option for anyone looking to earn stable and predictable returns. Some tax-saving FDs can also help to save taxes.

1. Zero-Risk Saving + Investment Plan


A fixed deposit promises guaranteed returns and carries minimal to no risk to the investor. Preferred by most investors for its zero-risk, it is a great starting point if you wish to start saving. With an FD account, you can start putting aside your savings while it also helps you earn a guaranteed rate of interest. The announcement in the Union Budget 2020 about increased insurance of Rs 5 lakhs by the DICGC (Deposit Insurance and Credit Guarantee Corporation), RBI has made it even safer. This same limit was up to Rs 1 lakh until now.

2. Easy Liquidity


While they are safe, liquidating your deposits is easy as well. Most FDs barring, tax-saving FDs can be withdrawn prematurely by paying a small penalty. Moreover, the process is quick and easy. You can close your FD online using your bank’s net banking portal.


3. Better Interest Rate than Savings Account


A savings account helps you earn interest on the balance maintained. However, the interest rates of FD are comparatively higher. Some banks offer interest rates on FDs up to 7% or even more.

4. Tax-saving Option


Under section 80C of the Income Tax Act, fixed deposit investors can deduct up to 1,50,000 against the investment made from their taxable income in a year. This makes it a great tax-saving tool while helping you earn guaranteed returns. However, the tax-saving deposits come with a mandatory 5-year lock-in period and cannot be withdrawn before that under any circumstances.