Benefits of investing in Fixed Deposit

What Are the Features & Benefits of Investing in FDs?

You can enjoy the following advantages if you invest in fixed deposits:

• Fixed deposit accounts offer guaranteed returns.  

• The rate of interest offered is also higher than savings accounts and recurring deposit accounts.

• Opting for the old tax regime will enable you to avail tax benefits of up to Rs. 1.5 lakh as mentioned under Section 80C of the Income Tax  Act, 1961.

• You can also get a major percentage of your fixed deposit amount as overdraft  .

• You can benefit from the power of compounding 

What Are the Disadvantages of Investing in FDs?

There are certain cons of investing in fixed deposits that you should know about: 

• Since FDs are one of the safest forms of investments, the rate of return is comparatively not as high as those of mutual funds and stock-oriented investments.

• There is a lock-in period of 3-5 years for certain FDs which means that you cannot withdraw your money before the specified time period. If you withdraw money from your FD before maturity, you may have to pay a penalty and the rate of interest on your FD might reduce.

What Are the Eligibility Criteria to Open an FD Account?

The following categories of individuals and entities are eligible to open FD accounts in India:

1. Indian citizens/NRIs

2. Hindu Undivided Families (HUFs)

3. Partnership firms, public/private limited companies/ sole proprietorship firms

4. Clubs, Societies, Associations, Trust accounts

Prerequisite Documents to Open an FD Account

The general documents required for individuals to open FD accounts are:

1. Recent photographs

2. Documents for KYC verification like PAN card, Aadhaar card, driving licence, Voter ID card or passport

How to Open an FD Account Offline?

Here are the steps that you need to follow if you wish to open an FD account offline: 

Step 1: Visit your preferred bank branch and fill out the fixed deposit account form. Make sure to read the terms and conditions carefully. 

Step 2: Provide all the required documents required for KYC verification.

Step 3: Submit your application form along with the supporting documents. 

Step 4: Once all the documents and information provided by you are verified from the bank’s end, your FD account will be ready and you need to deposit the lump sum amount.

Most banks and NBFCs also offer FD account services online. Hence, you can open a fixed deposit account online provided you already have a savings account with the bank.

How to Open an FD Account Online?

Here is a step-by-step process for opening an FD account online:

Step 1: First and foremost, research the interest rates and the terms and conditions of different banks before opening an FD account.

Step 2: If you do not have any account associated with the bank, you will have to register yourself as a customer and complete the KYC verification process. Some banks allow fast registrations and remote KYC. If you already have a savings account with a bank, log in to their net banking app or online portal.

Step 3: Once you have access to the dashboard, look for the ‘Open new account’ option, and select Fixed Deposit. 

Step 4: Once you click on the option, you will be redirected to an application form. Fill out the necessary sections and upload all the required documents. Carefully choose the tenure and the amount you would like to invest.

Step 5: Verify all the information and submit the form.

Step 6: subsequently, you will be forwarded to a payment window. You can pay the FD amount via any of the specified payment modes like net banking, UPI, Debit Card, etc. Post payment, download the receipt for future reference.

Please note that the steps mentioned above can differ from one bank’s website to another. 

Takeaway

Fixed deposits are one of the safest investment instruments; banks and NBFCs will pay a set rate of interest to you throughout the f investment tenure. 

RBI also provides insurance for each FD account if you have fixed deposits with more than one bank. Moreover, the market risks do not affect the rate of interest generated from an FD.

Frequently Asked Questions

Q1.Can I withdraw money from FD before maturity date?

Ans. Yes, you can withdraw FD amount before maturity. However, you will have to pay the premature withdrawal penalty to the bank.

Q2. What are the minimum and maximum deposit amounts for FDs?

Ans. The minimum and maximum investment that can be made in a fixed deposit varies as per different lenders. Usually, you can open an FD account by depositing a sum as low Rs. 5000. However, any investment beyond Rs. 1 crore or more has to be informed in advance.

Q3. How does the rate of interest of an FD vary with its tenure?