Fixed deposits are a form of term deposit offered by various financial companies including NBFCs. It is a safer investment option ensuring assured returns. Investors prefer FDs because of their higher interest rates, ability to select a tenor according to one’s financial requirements, and various other features and benefits.
The eligibility criteria to apply for a fixed deposit are also simple and easy to meet. Companies like Bajaj Finserv require an applicant to meet the following conditions to invest in an FD.
- The applicant should be a residing Indian citizen.
- A Hindu Undivided Family (HUF) can also invest in an FD.
- Family trusts are eligible to apply for an FD.
- Partnership firms, proprietorships, and several other types of companies can invest in an FD.
- Societies like clubs and local associations can apply.
Investors need to deposit a minimum amount to open an FD account which may vary between different financial institutions. For example, Bajaj Finserv requires Rs. 25,000 as the minimum amount to open a Bajaj Finance Fixed Deposit.
Let’s take a look at the several benefits of investing in a fixed deposit.
Benefits of a fixed deposit
- High interest rate – An investor can grow his or her return significantly by investing in an FD. Companies offer up to 8.75% interest rate, which can increase to 9.10% for senior citizens. Furthermore, one has the option to invest in a cumulative or non-cumulative FD to grow one’s funds according to requirements.
- Flexible tenor – Investors can choose an investment tenor between 12 and 60 months. The flexible tenor allows an applicant to earn returns according to his/her requirements.
The applicant can also withdraw the FD prematurely in case of an emergency. In that case, he/she has to pay a premature withdrawal charge to the company.
- Special tenor schemes – Someone eligible for an FD can also apply for special tenor schemes offered by financial institutions. These schemes offer a fixed investment tenor (usually of up to 15 months) with a higher than usual rate of interest.
- Benefits of senior citizens – Senior citizens can enjoy an additional 0.35% rate of interest over the usual rate if they invest in an FD. This additional interest helps them grow their life’s savings effectively within the pre-set tenor.
- Tax benefits – Applicants can claim a refund of Tax Deducted at Source (TDS) if their total interest income is lower than Rs. 10,000. They have to submit Form 15G to their respective financial institution to apply for the exemption. Senior citizens can submit Form 15H to apply for the same.
- Guaranteed return – FDs are independent of market fluctuations. These schemes are rated secured by CRISIL (FAAA rated) and ICRA (MAAA rated), making them assured and eliminating any risk of loss of payment.
Fixed deposits are a great alternative for investors who want an assured high-return against their investments. It is also a relatively hassle-free process, as the investor has to deposit the money only once to start earning a fixed rate of interest. Together, it makes FDs the most preferred term-deposit plans available in India.Recommended for you: India fintech report 2019