Fixed Deposits: A Woman Investor’s Safe Investment Choice
It was a special gathering for the women of the building in Vadodara. All the ladies gathered in the community hall. Aditi Doshi came to the podium. She was giving a talk on how she began investing without her husband’s help. Discussing investments was not common among the housewives in the room. They became curious. Aditi addressed their curiosity. She discussed the benefits women can get from fixed deposits (FDs).
Here Are All The Points That She Covered:
Aditi opened an FD of Rs.10 lakh. She managed to do so because of her frugal habits. It does not matter whether you are a working professional or a homemaker. Saving money is a matter of discipline. FDs encourage such savings by offering guaranteed returns. When you open such an account, your money is in safe hands. Financial institutions tend not to default on FD payouts. In rare cases of defaults, you can get up to Rs.1 lakh as compensation.
It was the smart investor’s diamond necklace that caught everybody’s attention. While flaunting her necklace, Aditi mentioned the attractive returns available on FDs. You can earn up to 8.05% on such investments. Some lenders offer a slightly higher rate to women. This may be 0.5% higher than the regular interest rate.
A famous American politician once said that a woman’s best protection is a little money of her own. A little extra money always makes you feel secure. You can use FDs to turn a small investment into a big sum. This is possible because of the principle of compounding of interest. Say, you choose to reinvest the interest proceeds and not get a payout. Then you earn interest on the original principal and on the interest component. So, FDs can be efficient savings tools for women. This is useful for housewives because they can earn returns on their savings. FDs help you build a fund that you can bank on.
Loan against FD
Aditi was regaling her neighbours with many stories. She told them how her sister got a loan against her FD. To get such a loan with ease, your documents must be in order. The lender can reject your application if you lack certain documents. So, getting a loan becomes difficult for unemployed women. The lender may be unsure about their repaying capacity. But if you have an FD, you can get a loan against it. You can borrow up to 90% of your FD amount.
The evening could not get better for Aditi. She talked about how her domestic help opened an FD account with just Rs.100. This is another advantage of investing in an FD. You can park even small savings in an account. The minimum amount may vary across vendors, though.
Women are known for balancing everything. That is helpful while investing. You would want to strike a balance between the risks and rewards. You want your funds to grow. But you also want to ensure ready availability of cash for the future. Flexible tenors of FD come handy in such cases. FDs have tenors ranging from 7 days to 20 years. Besides, you can have more than one FD account. You can invest in several FDs of different tenors.
Say you open an FD account for a period of 5 years. This gives you certain tax benefits. The amount you invest in such FDs is deductible from your taxable income. But you can claim a deduction of only up to Rs.1.5 lakh. The interest on your FD is taxable, though. You will have to pay tax at the rate applicable to your income tax slab. Your lender deducts tax at source (TDS) if your interest income is more than Rs.10,000 in a year. What if you do not have a taxable income and your interest income exceeds Rs.10,000 in any year? You must submit certain forms to your lender. Only then will the lender not deduct TDS.
To Sum Up
Aditi inspired her neighbours to open FD accounts. They asked Aditi to repeat the points she had made. She was kind enough to tell them that FDs are safe investment tools. You get attractive returns on such investments. Some FDs offer tax benefits too. They also double up as a fallback option since you can take a loan against them.