Fixed deposits are one of the most secured forms of investment plans which offer high returns. Most of the investments work with the phenomena of high returns directly proportional to the investment risk. This is where fixed deposits outshine the fact. Fixed deposits work with phenomena of minimum risk factor. Its value in no way depends on or changes with the market value.
A few reasons which that makes fixed deposits one of the best investment options are:
Fixed tenure and Benefits to senior citizens:
Fixed deposits are again based on a fixed period. The money which the individuals invest is customized to a fixed period after which the individuals can break their fixed deposit account and earn the amount in addition to the FD interest rate applied on the amount.
Banks and financial institutions have now started to provide extra benefits to senior citizens to expand their range of customers. Senior citizens, now, can enjoy higher FD interest rates on the same principal amount. This accounts for an increase of approximately 0.5 per cent on the interest rate as compared to the FD interest rate provided to the regular investors.
Also, senior citizens generally would look for investment options that could be reliable and could offer guaranteed good returns. Fixed deposits single-handedly fulfil all these criteria.
The fixed deposit doesn’t only ensure secured returns but in addition to this, provides much better returns.
This is what makes fixed deposits a great choice for the later years for the senior citizens.
A rigid system which ensures fixed returns & Tax exemption::
As the name suggests, a fixed deposit ensures fixed returns to its customers. An individual is required to invest a certain fixed amount every month on which the individual earns a fixed interest based on the FD interest rate.
This ensures that the person knows the exact amount which he or she would earn at the end of the tenure.
The fixed deposit returns are independent and do not depend on the market value. This is the topmost benefit of the fixed deposit as most other investments are driven to market risk.
Another significant benefit of a fixed deposit is that the interest or returns which an individual earns on the fixed amount deposited are exempted from any tax payment when up to a sum of ten thousand rupees for a full economic year.
Even if an individual is still looking for options that involve high savings in taxes, there still are many options that ensure tax savings.
The fixed deposits mostly range for a period of five years. Also, the investments which are made in such fixed deposits are exempted from paying any taxes when the sum of money is up to rupees one lakh fifty thousand in one financial year.
All this comes under Section 80C.
This ensures that an individual at any cost earns a high post-tax return from the money invested towards the fixed deposit.
Withdrawal options:
Most of the investing options have a condition for a fixed tenure. Under this, individuals are not allowed to withdraw their invested funds before the maturity period ends.
This could prove to be a disadvantage in cases of crises where there is an urgent requirement for money.
This situation is again solved by fixed deposits. These provide investing options where an individual gets an opportunity to withdraw the amount before the maturity period. This proves to be helpful in situations of crisis and need. However, a small premature withdrawal fee applicable which an individual is bound to pay for the withdrawal.
Some banks also have provisions of partial withdrawal. With this, the individuals get the opportunity to continue with the fixed deposit with the balance amount and continue earning interest on the same until the maturity period.
Features of loan against an FD & Liquidity form of fixed deposits:
Other benefits that are provided by a fixed deposit are the features of a loan against FD. under this, the account holders of a fixed deposit can now apply for loans under their fixed deposit account and can borrow loans accounting as high as 90 per cent of the principal amount.
For emergencies and crises, this again proves to be a great help to borrow money instead of going to other banks and doing research for loans.
Liquid assets are very convenient as these could be easily converted to cash.
Apart from a single and small disadvantage of having to pay a premature withdrawal fee, it is still one of the best options amongst others.
Fixed deposit investors always have an assurance that whenever the need comes, they could always rely upon their investment and withdraw funds.
Moreover, the benefit provided to the senior citizens adds a cherry on top of the cake, providing extra hands to individuals at their old age!