7 Awesome Reasons to Invest in a Fixed Deposit
When you open a Fixed Deposit with a bank or NBFC, you agree to park the money with that financial institution for a stipulated period of time, for which you will be paid interest. There are currently many ways to invest your money and see it grow, so why should you open a Fixed Deposit account?
- Assured Security : Fixed Deposits are relatively safe investments as they are regulated by the Reserve Bank of India. They are also less risky since they are not sensitive to market fluctuations as investments in stock.
- Easy to Open and Maintain : All you need to do is open an FD account with a bank or other financial institution and deposit the amount. Unlike investing on the stock market, you won’t need to keep a close watch on your FDs. Bajaj Finserv explains the eligibility criteria for opening a Fixed Deposit. If you want to find out how much interest your investment would get, you can make use of an FD calculator.
- A Source of Regular Income : Interest on an FD is paid out regularly, generally on a quarterly basis. If you are a retiree, this is a good way to keep your money safe and also earn some extra income. Apply for a Fixed Deposit now or review the features of a Fixed Deposit with Bajaj Finserv.
- Tax Benefits on Fixed Deposits : You can open a tax-saving Fixed Deposit and get an exemption on the amount invested when paying your taxes. Under Section 80C of the Income Tax Act, you can open a 5-year fixed deposit, for amounts ranging from INR 100 to INR 1,50,000 and the principal amount would be exempt from taxation. However, the interest paid on the FD is taxable. Interest amounts above a certain limit per annum are taxable. You can still gain exemption by submitting Form 15G to clarify that you have no other source of income other than the interest derived from the FD. If you are a senior citizen, submitting Form 15H will fetch you tax exemptions.
- Compound Interest for More Earnings : If you do not need the regular pay-out of interest on your FD, you can choose to add the interest to your deposit amount. This earns you more interest in the long term because you increase your principal amount each time you add the interest pay-out to it. You can opt for monthly, or quarterly pay-out and reinvest to increase your earnings from the FD. If you are looking into multiple policies, you can use an FD calculator to find out which one pays out the best.
- Loan Against FD: If you need cash and you close your FD before the end of the tenure, you will lose out on the full interest and may also incur a penalty charge. Instead, you can opt for a loan against the FD. The bank or the finance company will loan you an amount that ranges from 70% to 90% of the total deposit. The interest rates will be lower than those for a personal loan as your FD is considered as security for the loan. Generally, the interest charged will be around 2% above the interest rate that is paid on the FD. Check out the benefits of a Loan Against Fixed Deposit. Also, you can use Bajaj Finance FD calculator to figure out how much interest your FD will generate each month and the amount it gets you once it reaches maturity. There are plenty of FD calculators available online which will also help you figure out the loan amount you are going to take on your FDs.
- Credit Card Against Fixed Deposit : You can also opt for a secured credit card against the Fixed Deposit. These credit cards are backed by your FD, and the credit limit is fixed at a percentage of the deposit amount. As this is a secured card, the interest charged for your purchases will be less than on ordinary unsecured credit cards.
These are some of the many benefits of Fixed Deposits in India. It is a safe investment that provides you with many advantages. You can easily open an FD by just providing identity proof, address proof, and if you are a senior citizen, proof of age to acquire the associated benefits. Eligibility documents required for Fixed Deposits include the documents you provide for all the above verification.