Monday, November 20, 2017
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What should you know about fixed deposits?

Most of the people go for investment as it helps them earn a profit without taking a lot of efforts. Investing your funds can help you earn profit easily. Usually, people go for investing their surplus income instead of saving them. Investments can be risky at times but they help you earn higher returns over them.

There are many ways you can come across some extra cash like profits from your investment, your savings or even your salary appraisal or bonus. There are a few people who even choose to invest their old age pension as it benefits them in the long run.

Now investments can be of two types: high-risk investments and low-risk investments. Investments in mutual funds, shares, and gold are the investments that involve high risk whereas fixed deposit is an investment which involves low risk.

Fixed deposits (FD) investments are the more preferred in India as they involve low risk. Investing in a fixed deposit is generally considered as a one-time investment. You have to deposit all your funds at a single time while investing in fixed deposits. Also, it’s important to know that the interest rate that you earn over the amount that you have deposited in a fixed deposit is fixed and don’t fluctuate.  

  • Fixed deposit interest rates:

Interest rates are considered most important when it comes to investments. The interest rate that you get over your investment is what determines your profit. The higher the interest rate the higher you earn a profit. Now interest rates offered by different banks differ. Some banks may offer you with higher interest rates whereas some may offer you with the low-interest rate on the same amount.

The interest rate that you are offered on your fixed deposit depends upon two factors: the amount and the tenure. If the amount you deposit is huge than the interest rate you will be earning will be high and if the amount you are depositing is small, you will earn low returns comparatively. Also, your investment tenure affects your interest rates. If you go for a long-term investment you would get higher interest rate whereas a short-term investment will give you lower returns. It’s important that one opts for a bank that offers high-interest rates. And in case you are a senior citizen you can opt for senior citizen fixed deposit as banks offer higher interest rates on senior citizen fixed deposit scheme.

  • Taxation:

If you earn more than INR 10, 000 on the fixed deposit, you will have to pay tax on the exceeding amount. So if you are earning lower interest rate than this amount in the given financial year then you don’t need to worry. There are free FD calculators available online which can help you understand how much rate of interest you will be receiving in a financial year. If you have a lump sum amount to invest, you can split this amount into smaller portions and invest them in different branches or even different banks. In this way, you can continue getting profits on the amount that you invest in and you will be saved from paying extra taxes.

  • Overdraft:

One of the downfalls of investing in a fixed deposit is that you will not be able to withdraw this money once you invest it. If you are in urgent need of some funds you will either have to break our FD or you can opt for an overdraft facility. An overdraft facility allows you to withdraw up to 90% of your funds in a financial emergency. But you have to repay this amount with the interest on the last day of your overdraft facility.

Another advantage of investing in a fixed deposit is that your money will be safe because the amount that you invest is insured up to the amount of INR 1 lakh. So even if the bank goes into a financial loss, you will get all the money that you’ve invested back. Fixed deposit investments are very useful in the long run as you know that your money is safe and you keep earning a profit on the same. They also provide the online FD calculator tool that will help you to analyse how many interest you will returns through FD investment.

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