Loan is also easily available from the bank on the FD you make. Some banks also offer overdraft facility on its basis. In Fixed Deposit, you have the opportunity to withdraw money even before maturity..
Fixed Deposit Benefits: Fixed Deposit or Fixed Deposit (FD) account is a popular scheme for common man’s investment. In FD, one needs to deposit a lump sum amount for a fixed period. Fixed interest is not only available on the amount deposited in the fixed deposit account, but the biggest advantage is that the money remains safe in it. All the fluctuations in the market have no effect on the FD.
Fixed deposits earn interest at a pre-determined rate. When the FD matures, interest is paid along with the principal amount. Here investors are given a fixed rate of interest and guaranteed safety of capital. Therefore, whenever it comes to investment, the first option appears to be Fixed Deposit i.e. FD. Different banks get different interest rates on FDs.
Types of FDs
You can also invest in FD in different ways. You have the option of investing in cumulative or non-cumulative FDs. The interest on cumulative FDs is accumulated during the tenure of the deposit and then the full return is given on maturity. Whereas on non-cumulative ie non-cumulative FD, you get interest monthly, half yearly or annually.
Fixed deposits can be made in government banks from 7 days to 10 years. You can also get FD of your money in the bank for 7 days and also invest money for 10 years. In such a situation, a different interest rate has been fixed according to every year. The longer you invest the money, the more interest you get.
Advantages of FD
In Fixed Deposit, you have the opportunity to withdraw money even before maturity. However, if you withdraw money before maturity, you have to pay some charges. Due to this feature of FD, it is also called liquid investment. If suddenly there is an emergency, you can withdraw money immediately.
Loan against FD
Loan is also easily available from the bank on the FD you make. Some banks also offer overdraft facility on its basis. Your FD acts as a guarantee for banks, if you are unable to repay the loan, then the loan money will be covered by your FD.
Benefit of tax exemption
If you make an FD for 5 years or more, then it also gets tax exemption under section 80C of Income Tax. Under this, you can get tax exemption up to Rs 1.5 lakh in a year. If you make an FD of less than 5 years, then you will have to pay tax.