Investing does not have to be complicated. In fact, sometimes the simplest options are the best; take Fixed Deposits for example.
Offering a blend of flexible tenure options, low-risk advantage and attractive Fixed Deposit interest rate, this investment alternative has become a cornerstone of many investment portfolios.
But what makes Fixed Deposits a timeless favourite among Indian investors? Let us explore the reasons.
What contributes to the popularity of Fixed Deposits in India?
Low-risk profile and guaranteed returns
In an economic landscape marked by uncertainty and market volatility, FDs offer a safe haven for investors. By providing a fixed rate of return, FDs shield your investment from market ups and downs and allow you to know exactly how much you will earn on your investment.
Plus, the guaranteed returns and better Fixed Deposit interest rates also provide a sense of security and peace of mind, making them a top choice for millions of Indian investors.
Flexibility and Liquidity
Another significant benefit offered by Fixed Deposits is liquidity.
Even though they usually come with a predetermined tenure, many banks and financial institutions give you the flexibility to withdraw it when you need it most, for example in case of an emergency or unexpected expense. This flexibility is a major draw. However, it is important to note that this premature withdrawal service may come with some penalties.
Some fixed deposits also offer a loan facility that allows you to take out a loan against your FD investment as an added layer of liquidity.
This combination of flexibility and accessibility makes FDs a compelling option for those who seek a balance between attractive Fixed Deposit interest rates and liquidity.
Tax benefits
Investments made in Tax Saver FDs are eligible for tax deductions under Section 80C of the Income Tax Act.
According to this, you can claim up to ₹1,50,000 in deductions per year against your FD investments. This helps reduce taxable income and tax liabilities, creating a snowball effect where tax deductions boost savings which can be further invested to generate further returns.
This way, you can make steady progress towards your long-term financial goals, such as buying a home, retirement planning or funding your children’s education, and achieve financial independence and stability.
Fixed Deposits: A suitable option for different types of investors
Fixed Deposits occupy a unique position in the investment universe, providing a foundation for long-term wealth creation, capital preservation and predictable income while also offering liquidity, flexibility and tax benefits.
This makes them an ideal choice for individuals with specific financial goals, risk tolerance and investment horizons, including:
- Risk-averse investors:
- Retirees or senior citizens
- Short-term investors
- Low-income earners
- First-time investors
- Individuals who wish to build an emergency fund
Ending notes
Fixed Deposits offer a comprehensive investment solution that caters to diverse financial needs. Beyond their low-risk profile and assured returns, FDs provide several other benefits, such as competitive Fixed Deposit interest rates.
Additionally, senior citizens can enjoy some exclusive perks while the tax benefits help keep more money in your pocket. With flexible investment periods, automatic renewal options and competitive Fixed Deposit interest rate, you can customise your investment to fit your unique financial vision.
However, before investing, it is vital to consider Fixed Deposit interest rates, minimum deposit requirements, premature withdrawal penalties, TDS applicability and the reliability of the chosen bank.
So, whether you are a cautious saver, an ambitious investor or a person seeking stability and peace of mind, FDs are definitely worth considering.
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