FIXED DEPOSITS

Overview

Fixed deposits (FDs) are a safe investment option offered by banks and financial institutions. They provide a fixed rate of interest over a specific period, guaranteeing returns. FDs have a fixed tenure, and premature withdrawal may incur penalties.
The interest rates vary based on tenure and market conditions. The interest earned is taxable, and FDs offer the option of compound interest.

It's essential to consider investment goals and consult our team at Sure Tax Fincare for personalized advice.

Types of Fixed Deposits

01

Traditional Fixed Deposit

This is the most common type of fixed deposit where you deposit a lump sum amount for a fixed period at a predetermined interest rate.

02

Senior Citizen Fixed Deposit

This type of fixed deposit is specifically designed for senior citizens and offers higher interest rates compared to regular fixed deposits.

03

Tax-Saving Fixed Deposit

Also known as Tax-Saver FDs, these deposits come with a lock-in period of 5 years and offer tax benefits under section 80C of the Income Tax Act in many countries.

03

Cumulative Fixed Deposit

In this type, the interest earned is compounded and paid along with the principal amount at the time of maturity. It allows for the growth of the investment over time.

04

Non-Cumulative Fixed Deposit

In contrast to cumulative deposits, non-cumulative fixed deposits pay out the interest at regular intervals, such as monthly, quarterly, half-yearly, or annually.

05

Corporate Fixed Deposit

Offered by corporate entities, these fixed deposits may provide higher interest rates compared to bank FDs but involve a higher level of risk.

06

Flexi Fixed Deposit

This type of deposit provides flexibility in terms of deposit amount and tenure. It allows you to deposit and withdraw funds while still earning a fixed interest rate on the remaining amount.

07

Callable Fixed Deposit

Callable FDs give the issuing institution the right to recall or terminate the deposit before the maturity date, typically after providing a certain notice period.

Advantages

Safety and Security

Fixed deposits are considered to be one of the safest investment options. They are backed by the bank or financial institution offering them, reducing the risk of losing your principal amount.

Capital Preservation

Fixed deposits help in preserving your capital. Unlike investments in the stock market or mutual funds, where the value can fluctuate, fixed deposits offer a stable and predictable return on your investment.

Tax Planning

Fixed deposits can be used for tax planning purposes. Certain countries provide tax benefits on tax-saving fixed deposits under specific sections of the income tax laws, helping investors reduce their tax liabilities.

Guaranteed Returns

When you invest in a fixed deposit, the interest rate is fixed and predetermined. This guarantees a fixed return on your investment, which is particularly appealing for risk-averse investors who seek stability and predictability.

Flexibility in Tenure

Fixed deposits come with various tenure options, ranging from a few months to several years. This flexibility allows you to choose a tenure that aligns with your financial goals, whether short-term or long-term.

Ease of Investment

Investing in fixed deposits is straightforward and convenient. Most banks and financial institutions offer online and offline channels to open and manage fixed deposits, making it easily accessible to investors.

Frequently Asked Question

When you invest in a fixed deposit, you deposit a specific amount for a fixed period, typically ranging from a few months to several years. The bank pays you interest on the deposited amount, and the interest rate is determined at the time of deposit.

The minimum deposit amount required to open a fixed deposit varies from bank to bank. It can range from a few hundred units of the local currency to a higher amount. Banks usually specify their minimum deposit requirements.

Yes, you can typically withdraw money from your fixed deposit before the maturity date, but it may attract penalties or a reduction in the interest rate. These penalties vary across banks, so it's important to check the terms and conditions at the time of opening the FD.

Yes, in most cases, the interest earned on fixed deposits is taxable as per the individual's income tax slab. Tax Deducted at Source (TDS) may be applicable if the interest earned exceeds a certain threshold, but you can claim a tax refund or adjust it against your tax liability while filing income tax returns.

Many banks allow you to take a loan against your fixed deposit. The loan amount can be a percentage of the deposit's value, typically ranging from 70% to 90%. The interest rate on such loans is generally slightly higher than the FD interest rate.

In many countries, there is a deposit insurance scheme provided by the government or regulatory bodies. This scheme protects depositors' funds up to a certain limit in case the bank goes bankrupt. It's advisable to check the deposit insurance coverage offered by your country's regulatory authority.

Yes, most banks allow you to open a fixed deposit account jointly with one or more individuals. Joint FDs can be opened with family members, spouses, or business partners.

Fixed deposits are considered a safe and stable investment option. They offer guaranteed returns and capital preservation. However, the interest rates on fixed deposits may be lower compared to other investment options, and the returns may not outpace inflation. It's important to assess your financial goals, risk tolerance, and consider diversifying your investment portfolio.

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