The government’s demonetisation move is a big step to curb black money and promote a healthy economy. In fact, the government expects to collect a lot of money from the demonetisation drive. That is why bankers are suggesting that you open fixed deposit (FD) accounts. This way, you could still earn good rates of interest on your money. This article looks at whether this is the right time to invest in FDs.

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Should you open a Fixed Deposit account?

FDs are the most reliable and secure savings instruments. They guarantee the safety of your principal. They also assure you a fixed percentage of returns. Given the current scenario, it is judicious to park your funds in FD accounts. This way, you can take advantage of the assured returns.

The withdrawal of Rs 500 and Rs 1,000 notes has triggered huge deposits in the bank. Some analysts estimate that around Rs 4 lakh crore to Rs 5 lakh crore worth of deposits have already been made in the banks.

Leaving cash in your savings account will not yield good returns. After all, the interest rates on savings accounts are low. A more lucrative option is to open an FD online or offline. That will give you better returns.

Plan a fixed deposit to safeguard your capital

It is better to lock your money in a long-term FD. Given the demonetisation move of the government, anything can happen in future. FD accounts promise safety of capital and surety of returns. Earn a fixed income off your FDs and avail the interest rates while they are still high.

But the rates may not remain high for long. Some public sector banks have already lowered their interest rates for FD accounts. Soon, other private banks may follow suit.

For an investor, this is a good time to open an FD account. After all, interest rates are still on the higher side. It is certainly better than stashing your money away in a regular savings account.

Apply for a fixed deposit account

Opening an FD account is simple and quick nowadays. The online platform has made things even easier. Just log on to the bank’s website. Plan an FD by choosing the tenure and the principal amount that you would like to invest. Then, transfer funds from your bank account to the FD account.
Apply for an FD account online with the click of a button. Fill in your personal details. Then attach the needed documents as proof of identity and address. That is all you need to open an FD account nowadays.

You may be worried about the long queues of people waiting to change or deposit their old currency notes. But you can skip the queue and open an FD online with ease.

Besides, you can also take this time to do a bit of tax planning. Typically, the Fixed Deposit interest rate is added to your income. You have to pay tax on it if your income exceeds the tax-free limit. But there is a benefit as well. You can apply for a tax-saving FD with a tenure of five years. The investment you make in this FD is tax-free under Section 80C of the Income Tax Act. But the benefit applies only up to an amount of Rs 1.5 lakh. And the interest would still be taxable.

The last word

Now is the right time to open an FD account. Act quickly before the interest rates drop. A lowering of interest rates is likely as a result of demonetisation. Convert your savings to FDs soon to earn steady returns. At the same time, save tax by investing in a five-year tax-saving FD. Think smart and plan your fixed deposits now.

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