Traditionally, fixed deposit (FD) schemes have nurtured investors’ faith by offering them multiple benefits. Fixed deposits are lump sum investments that one can start for as low as Rs.10,000 and enjoy the benefits of secure investing.
Banks offer fixed deposit plans under various categories, like Regular Fixed Deposits, Tax-Saving Fixed Deposits, Flexi Sure Fixed Deposits, Senior Citizen Fixed Deposits, and Super Senior Citizen Fixed Deposits. One can choose the best-fixed deposit plan as per his requirement and enjoy high-interest and guaranteed returns on his hard-earned money, among several other benefits. Here is a detailed post on how a fixed deposit scheme can be an asset for the investor.
How is a Fixed Deposit Scheme an Asset
Fixed deposits are an asset for the depositor, especially when the economic or social environment is uncertain. A fixed deposit investor can leverage the benefits of an FD investment due to its various unique features.
- Assured returns: Unlike several market-linked investment schemes, the best fixed deposit plan comes with predetermined and guaranteed returns. Even if the bank changes the FD interest rates, the interest returns on a running fixed deposit account remain the same until maturity. Due to this, one can use a calculator fixed deposit to know his interest earnings beforehand and plan his financial goals accordingly. Investors who do not want to put their life savings or hard-earned money at risk can invest in a fixed deposit scheme and rest assured of the returns.
- Capital protection: A fixed deposit scheme keeps the investor’s capital safe. Once the fixed deposit matures, the depositor gets the invested amount and the interest returns. Unlike equity investment schemes, there is no risk to the invested capital in a fixed deposit scheme. Moreover, when one opens a fixed deposit account with a bank, his investment is protected by the DICGC (Deposit Insurance and Credit Guarantee Corporation) and governed by the apex bank of the country, the Reserve Bank of India. Fixed deposit schemes are insured up to a sum of Rs.5 lakh. Therefore, one does not need to worry about his capital even if the bank defaults.
- Flexible tenure: Fixed deposits offer reasonable liquidity to the depositor. A person with a financial requirement in the near future can invest in a fixed deposit account for a period as short as seven days. On the other hand, someone who wants to keep his money invested for a longer duration can opt for a term as long as 20 years. A calculator for fixed deposit will show the returns one can generate from investing for different durations in a fixed deposit account. One can also reinvest the amount he receives at maturity for enhanced wealth creation.
- Tax benefits: A depositor can invest in a tax-saving fixed deposit scheme and avail of tax deductions of up to Rs.1.5 lakh in every financial year. The tax-saving fixed deposit scheme has a fixed tenure of five years and offers similar interest returns as a regular fixed deposit scheme along with tax saving. The interest one earns on a tax-saving fixed deposit plan is subject to taxes.
- Higher interest rates: For investors who seek better interest returns on their fixed deposit investment, there are special FD schemes such as senior citizen and super senior citizen fixed deposit plans. The interest returns on a senior citizen fixed deposit are 0.5% more than a regular FD scheme. A super senior fixed deposit plan offers 0.75% higher interest returns than a regular FD scheme. Higher interest returns lead to a better return on investment for the investor.
- Loan against fixed deposit: An FD holder does need to liquidate his fixed deposit plan for short-term financial needs. One can opt for a loan against a fixed deposit to meet immediate cash requirements. Under this facility, one can continue to enjoy the interest returns on his FD scheme and meet his urgent cash requirement without facing the penalty charges of premature withdrawal from an FD.
- Credit card against fixed deposit: An individual who cannot avail of an unsecured credit card due to a low credit score can apply for a credit card against his fixed deposit scheme. It will help him improve his credit score through timely credit card bill payments over time and make him eligible for further credit.
A fixed deposit scheme is an asset in more than one way and offers peace of mind and sustained capital growth to the investor.