Fixed deposits comprise approximately 57.7% of the total investment made through financial institutions in India. Such popularity of the investment scheme is due to its secure nature, along with high returns generated. You can also plan your finances based on total profits generated by using a fixed deposit calculator, helping you keep track of the total funds available.
Advantages of fixed deposit
FD is one of the best investment schemes available in the country, owing to the following reasons –
- Ease of investment
Fixed deposit investment schemes can be made online by submitting a duly filled application form through the official portal of select financial institutions. Scanned copies of related documents can be uploaded simultaneously, while deposit amount can be transferred through NEFT or RTGS. Top financers further allow individuals to invest in using their debit cards as well. You can also opt for auto-renewal facility if you wish to reinvest the total amount in a stipulated fixed deposit plan.
Such benefits are not extended on several government-mandated investment tools like Public Provident Fund, National Savings Certificates, etc. However, you can undertake a provident fund check online facility to track total deposits maintained under this scheme.
- Premature withdrawal benefits
Total deposit amount along with accrued interest, can be withdrawn from an FD scheme prior to completion of deposit tenor. However, such withdrawal is subject to a nominal penalty fee deduction of 1% of the total value of the deposit. Such easy and feasible withdrawal pointers help you plan your liquidity needs while generating high returns.
Investment in alternate tools, on the other hand, is not eligible for such facilities, as all such government-mandated schemes come with stringent premature withdrawal rules.
- Accurate financial planning
As fixed deposits are provided against a stipulated interest rate for a specific tenor, total returns generated can be easily determined. You can use a fixed deposit calculator for this purpose to determine the total returns under both cumulative and non-cumulative schemes. Such calculators are available on the official website of all major financial institutions.
On the contrary, government-backed investment schemes are subject to a quarterly interest adjustment as per market conditions, as well as yearly deposit benefits. In such cases, as the principal amount and interest rate is variable, determining total returns on maturity can be challenging.
- High deposit amount
Under FD, a minimum investment amount of Rs.25,000 has to be undertaken, which can go up to Rs.5 crore. Multiple fixed deposits can be opened by an individual in the same financial institution or various NBFCs as well.
Such benefits are not available on the government-oriented schemes, as they usually have an upper cap of Rs.1.5 lakh on total yearly investments, along with a limitation of only one account under each respective individual.
- Immune to market risks
Fixed deposits are primarily non-market oriented tools, designed to ensure the preservation of the corpus amount. Individuals looking to safeguard their funds primarily opt for fixed deposits, as they assure high returns with negligible associated risks.
Also, investors having a diverse portfolio decide often choose to park a stipulated portion in fixed deposits, to balance risk to reward of their total investment corpus. Similar benefits are extended under government-mandated schemes.
- Benefits for senior citizens
Aged individuals choosing to invest in fixed deposits are often extended higher interest rates. Such high returns offered on both cumulative and non-cumulative investments are beneficial to individuals relying on a fixed source income to park a certain portion of it for substantial returns.
- Tax benefits
5 year fixed deposits provide tax exemptions on the total investment amount, provided the amount invested is under Rs.1.5 lakh. Such a tax rebate is maintained under Section 80C of the income tax act. Tax deducted at source is only applied on fixed deposits if the total earnings through interest income on maturity are higher than Rs. 10,000. Senior citizens, on the other hand, are eligible for a tax waiver on interest income of up to Rs.50,000 under Section 80TTB.
Such comprehensive facilities, along with high FD rates of up to 8.35% offered by top NBFCs such as Bajaj Finance make it a suitable tool for investment. With increasing fluctuations in the stock market and periodic changes in interest rates adopted by government-mandated schemes, fixed deposits continue as an ideal form of investment.