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All You Need To Know About Fixed Deposits In India
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A fixed deposit is a type of financial instrument which allows the individual to deposit a fixed sum of money with a financial institution for a tenure after which the amount will be returned with interest. The rate of interest which is provided to the individual differs depending on the financial institution. What makes this type of a deposit desirable for investors is the fact that it poses no risk. The investor is assured that at the end of the tenure he will not only have his money returned but also the interest promised. Another benefit of such an investment is that it allows the individual to take advantage of a higher rate of interest. Such a deposit can be used by an individual to build their savings as well. Such a deposit can be open from a minimum period of 7 days to a maximum period of 10 years.
There are a variety of fixed deposit options for individuals based on their needs besides the regular type offered. The special fixed deposit allows individuals to deposit their money for different time periods such as 333 days. A tax saving fixed deposit has a fixed lock down period of 5 years on the sum of money. During those 5 years the individual cannot withdraw the money however, the benefit is that no tax will be charged on the principal amount on the maturation date. A floating fixed rate amount allows individuals to take advantage to of the changing interest rates.
All individuals must understand that there is a possible tax which can be charged on such a deposit. If the interest earned by an individual on maturation of such deposits in one year surpasses ten thousand rupees, TDS will be charged by the bank. One way an individual can avoid having to pay TDS is by spreading their fixed deposits. One must ensure that all their FDs do not mature in one year so the interest earned is spread out and no tax is charged on it.
An FD requires commitment. On must never put in all their income in such a deposit. Even though one can withdraw the amount before the maturity period, doing so will cause a lesser interest rate. Another option one has to opting for a loan against the fixed deposit. This type of an investment is ideal for those who wish to receive high returns but do not want to take any risk. Any individual can deposit their excess money to earn an added income.
Author Bio :
An experienced writer on finance topics, the author articulates of investment choices such as fixed deposit products in India & recurring deposit schemes. She writes about a variety of topics including the benefits of recurring & tax saving fixed deposit and how to make the right investment choice.
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