Fixed Deposits (FDs) come with a commitment to capital safety, and it ensures that your invested money stays safe even when the market volatilities increase. You can affirmatively receive the benefits of stable capital appreciation along with the advantages of a secure investment with FDs.
FD is a safe and secure investment option that guarantees consistent return rates, and there are special rates for senior citizens. The best Fixed Deposit plans are the ones that get keep the best possible returns and have fewer restrictions.
Six Things to Check before Investing in an FD
As you plan to choose the best Fixed Deposit plan, there are a few things that you should keep in mind. These factors are:
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Interest rates
Interest rates are undoubtedly the most important factor of each Fixed Deposit plan. The interest rates vary from one bank to another. For first-time investors, it is essential to compare the interest rates of different types of FD to get an idea of the market. As FD has a fixed interest rate, by comparing it, you will be able to know the amount of money you will get after maturity. It means interest rates play a crucial role in how you will receive your returns, so better be prepared for it before the FD opening to have hassle-free interest earning.
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Credibility
Go for a safe, reliable bank with a good reputation. Choosing an “A” rated investment scheme with credible ratings from a reputed organisation helps you make a decision.
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Deposit tenure
The tenure of an FD generally ranges between seven days and 10 years, thus, making it a brilliant option for your investment for both short-term and long-term savings. So FD is also an amazing option if you want to deposit your excess savings for a short period or grow those savings in a fixed manner for a longer period. Identify your goals and choose your Fixed Deposit type on the basis of that. In this regard, you can take the help of an FD calculator. This tool generates the maturity amount you’ll receive.
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Payout frequency
There are two types of FD available that are completely based on the financial needs and ambitions of the investor. These are cumulative and non-cumulative FDs. In cumulative FDs, you get to receive the ensued interest amount along with the principal amount at the time of maturity. However, in non-cumulative FDs, you will receive yearly, monthly or quarterly payouts of the earned interest on the capital amount you have deposited.
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Penalty for premature withdrawal
One of the many important factors that should be considered before investing in an FD is checking the penalty for premature withdrawal. You may have to break your FD before the maturation in case of an emergency. In such situations, FDs usually attract penalty charges. So take care of this before choosing the best Fixed Deposit plan to invest your money in.
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Taxation
Your interest income from the FDs will come under taxation when it crosses Rs. 10,000 for investors under 60 and Rs. 50,000 for senior citizens. On the other hand, you can also opt for a 5 year Fixed Deposit tax free plan that enables you to earn income tax benefits as per the Income tax act of India. However, they come with a lock-in period where you cannot withdraw the deposited amount and the earned interest prematurely.
These are the main factors that should be kept in mind before choosing a Fixed Deposit scheme. After that, you can then invest easily through the online banking facility at any financial institution of your choice or do it physically by visiting their branches.
Final thoughts
FDs can help you grow your money in a very steady manner and without taking any unnecessary risks. Furthermore, it also brings variety and stability to your investment portfolio. So if you are planning to invest, it is imperative to consider the points mentioned above. Decide your goals and then choose the best Fixed Deposit plan that suits your requirements.