Investing is crucial for individuals as it provides a safety net during financial emergencies. It also helps them achieve monetary goals efficiently. For this very reason, banks offer investment instruments like Fixed Deposits. They come with numerous benefits, including a competitive interest rate on FD.
They serve as a financial tool that accumulates funds in a lump sum and ensures returns on maturity. To delve further, let us explore these advantages in detail.
- Liquidity
We all face a financial crisis at some point in our lives. Such situations usually deprive us of all our savings. However, if you have an FD by your side, this scenario becomes more manageable. It lets you withdraw the principal amount and the interest rate you have accumulated so far. The process is quick and requires no additional formalities.
Plus, with the help of an FD Calculator, you may quickly compute your interest earnings. It is a free online tool that calculates FD-related values instantly.
- Customisation
In most cases, an FD is customisable. You could start with as little as Rs. 5,000 or as high as you want. There is no upper limit. It also allows you to personalise the tenure. For example, you may opt for a short-term FD if you are a beginner. Or a long-term one if you have bigger investment goals. It is flexible that way. In any case, you enjoy earnings through Fixed Deposit rates.
- Tax-saving
As per the Tax Act of 1961, an FD holder reaps certain tax benefits. They are permitted to claim up to Rs. 1.5 lakh as deductions. Plus, their investments qualify as tax-deductible if it is tax-saving FDs.
- Minimal effort
In the case of other investments, you need to keep constant track of the market. You need to have at least some market knowledge. However, that isn’t true for FDs. Investing in an FD is a one-time effort. You simply need to deposit your funds without worrying about the market situation. This way, it becomes an ideal option if you are a first-time investor or even a student.
- Steady returns
The interest rate on FD remains consistent. It does not get affected despite market fluctuations or irregularities. The holder continues to earn interest until maturity. This way, they don’t have to worry about losing out on their interest earnings. Their FD serves as a safe and steady source of returns.
- Collateral
If you want to opt for a Loan, you could pledge your FD as collateral. This way, you will quickly get at least 95% of your Loan amount. However, this percentage depends on your Loan provider’s terms and conditions.
