Benefits of FD Account
Explore the benefits of a Fixed Deposit that provide you with financial freedom
- A Fixed Deposit (FD) is a safe and steady investment option.
- It is useful in an emergency.
- You can even take a loan against an FD.
“Be prepared”-Scout & Guide motto
Given the uncertain times that we live in, this motto by Gen. Baden Powell is quite relevant. It is great to be optimistic and believe that we will lead a safe and financially secure life without unsurmountable struggles. However, the realist in us must be prepared for the bad days. Thankfully, there is a reliable financial safety net that we can invest in—Fixed Deposits (FDs).
By the time you reach the end of this article, you will understand the benefits of a fixed deposit account.
What Is a Fixed Deposit?
A fixed deposit is one of the most reliable financial instruments out there. It is also referred to as ‘term deposit’. The FD holder deposits a lump sum amount and chooses a tenure, from 7 days to 20 years (in some banks). If you open an FD today, you will see your money accrue interest over its term. The rate of interest offered on an FD may be higher than that of a savings account.
Let’s explore the reasons that make fixed deposits so popular amongst everyone. Whether you are a parent looking to save for your child’s higher education or a professional looking to retire into luxury; or even looking for funds in a contingency, an FD makes it possible.
Fixed Deposit Benefits
You can hold as many fixed deposits as you want and get these benefits out of them:
Safe and Steady Returns
The interest rate on your FD is fixed, which means irrespective of market situations, your investment is secure. You will continue to earn interest which will get back on maturity along with the principal amount.
You can start an FD for as less as Rs. 5,000 without an upper limit. There is no upper limit on how much you can put in an FD. You can choose your tenure (short-term, mid-term, or long-term). This makes it possible for anyone to open an FD.
In times of a cash crunch, you can use your fixed deposit to help you out. You can withdraw the principal amount of your FD along with whatever interest you may have accrued for that time. The process to withdraw the FD is quick, so you can access your cash almost as soon as you need it.
Looking for a loan but don’t have any collateral to offer? Don’t worry; you can pledge your FD and get you as much as 95% of the loan amount. The loan amount will depend on the FD amount and your bank’s terms and conditions.
Under u/s 80C of the Income Tax Act, 1961, an individual can claim up to ₹1,50,000 as deductions. Your investment qualifies as tax-deductible under this section if it is a tax-saving fixed deposit. This reduces your tax liability considerably.
The Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the RBI, insures your deposit for up to ₹5,00,000. This means that even if your bank is in a financial crisis, your FD is safe.
You don’t have to keep track of the market to understand how your FD is performing. Plus, there is no jargon involved. This makes it easy for someone new to the idea of savings and investment, such as a young student, to open an FD.
Now that you know the diverse advantages of fixed deposit, you can chart out a plan to secure your financial future.
Download the digibank by DBS app to start the paperless process of opening your fixed deposit account.