There are a lot of investment options available in India, and term deposits are considered as the safest and easiest option. Term deposits are considered a better option when it comes to investments, as opposed to the stock market and mutual funds. Fixed deposit and recurring deposit are the two type of term deposit.
Fixed deposits are a onetime investment opportunity where you will dedicate all your funds at a single time whereas, in recurring deposits, you have to deposit the funds on a monthly basis.
Before you make your decision o investment in fixed deposit, here are a few things you should know:
- Safest Investment Option:
Since fixed deposits are associated with the Reserve Bank of India, it is highly unlikely that they will default on their interest payment. It will also reimburse the principal amount once your fixed deposit matures.
Since the fixed deposit in insured up to INR 1 lakh, if the financial institution or lenders face any financial difficulty, your investment is safe.
- You Have to Pay Tax on the Income:
If the rate of interest that you earn is more than INR 10,000 in one financial year, you will have to pay tax on the surplus income that you earn. The amount of tax that you have to pay is completely dependent on the tax bracket that you fall into.
- A Stable Source of Income:
If you are nearing retirement, the wisest way to invest your money is by investing in fixed deposits. This will provide a steady source of income apart from the pension that you will get. When opting for this option make sure that the tenure of all the fixed deposits is different so that you can continue getting benefits in a timely manner.
- The Overdraft Facility:
When you find yourself in a situation when you are in urgent need of some funds, instead of taking a new loan or breaking your fixed deposit, you can take a loan against your fixed deposit. This is called as an overdraft facility. This way you can continue getting interest on your fixed deposit and at the same time, your financial difficulty will be solved. The rate of interest that you have to pay on the overdraft facility is comparatively lesser than a personal loan.
- Opting for Multiple Fixed Deposits:
If you have a large amount that you want to invest, you can split this amount into smaller parts and invest in smaller fixed deposits. This is done by many people to avoid paying tax. Even in the case of a financial difficulty, you can just break one fixed deposit and continue getting timely payments from the others.
- The Different Rate of Interest:
This is something that you need to check before you invest your money. Different banks offer different rates of interest depending on their policies. If you invest in different banks you will receive different rates of interest and if you opt for a single bank, make sure that the interest you receive is the highest among all others for this analysis online FD interest calculator will help you to opt best bank for fixed deposit investment.
- Reinvesting the Interest:
When you open up an FD the banks give you an option to receive the interest on a monthly basis or to reinvest this invest. If you choose to reinvest the interest then you will get all the returns once the fixed deposit matures. This is a better option since you will receive more returns than you had imagined.
The only thing that we look forward to when we are investing our hard-earned money is that we can get good returns on it. To make sure you get good returns on your investments, you need to do a proper research so that your money doesn’t go down the drain.