In the last few years, there have been significant shifts within the economy owing to financial uncertainties and high levels of inflation arising from the post-COVID-19 period. While normal operations have resumed over the past year, its adverse effects are likely still being felt across the economy at present.
During such times of volatility, market-linked tools may not be a viable option to get good returns. Fixed deposits can be immensely useful in generating assured earnings on your sum deposited in such cases. These can help meet your financial goals with the right planning, and provide financial stability and protection, while also serving as a corpus for emergency requirements.
Learn about some of the reasons why choosing FDs can be beneficial in today’s economy:
Assured Earnings
Since FDs are not linked to the market, you will earn guaranteed returns on your deposited amount, regardless of how much funds have been parked. Most banks and NBFCs provide an interest calculator on their websites which can help you determine your potential earnings with a given amount, tenure, and interest rate.
Flexibility
FDs are considered to be one of the most flexible savings schemes available, as the tenure can range between 7 days and even 10 years. This can allow you to plan accordingly and opt for either a short or long term FD. Additionally, most of them feature minimal deposits, thereby increasing its accessibility.
High Returns
As of late, many banks and NBFCs have been offering competitive rates on most FD tenures, with the highest fd rates going up to 9.00% p.a. or more at times. Factors like growing repo rates, declining currency value, and a growth in the loan to deposit ratio have contributed to a rise in these rates. This can result in significantly high returns, which can be redeemable as per the chosen interest payout cycle.
Easy Liquidation
Unlike most investment schemes, certain FD schemes come with the added benefit of premature or partial withdrawals. While these may incur a penalty in the form of added costs or lowered interest rates, this feature allows you to gain access to your funds quickly. These funds can be especially handy during emergencies or be used for any specific requirements.
Tax benefits
Some FD schemes also come with tax-saving benefits that have a specified lock-in period. The amount invested in such schemes can be deductible from your overall taxable income under Section 80C of the Income Tax Act, 1961.
Furthermore, banks cannot deduct taxes on the earnable interest unless it crosses a certain threshold, according to the income tax guidelines This can thereby prove beneficial for FD account holders with smaller sums.
Diversification
There are various types of FD schemes that you can choose from and park your funds into in order to build a well-rounded and diverse portfolio that can help you avoid market volatility.
Senior Citizen Benefit
If you are a senior citizen, then you will be eligible for a higher interest rate on your FD deposits that are over and above the usual rate. For example, the Bajaj Finance FD rates for senior citizens are 0.25% over the regular interest rates. This can help offer you significantly more returns than your deposited lump sum, and also include additional tax-saving benefits. Through this, you will be assured of a steady and reliable source of income in your best years.
Loan against FDs
One useful feature of availing FDs is the feature of taking a loan against your FD amount while keeping your deposited amount intact. This allows you to get funds of up to 90% of the FD amount at short notice and is repayable at a specified interest rate.
Here are some features of Fixed Deposits that make it an attractive choice for saving in today’s economy:
Low deposit requirements
You can open a fixed-deposit account with as little as ₹5,000, and certain schemes can allow deposits as low as ₹1,000 in certain cases. This means that even if you do not have a sizable corpus saved up to make a lump sum deposit amounting to many lakhs of Rupees, you can still begin your investment journey with fixed deposits.
Easy application process
Nowadays, most NBFCs and banks offer the option of booking an FD account from the comfort of your homes and within a few clicks. The only requirements here are minimal documentation, such as your Aadhaar/PAN number, bank account and personal details. With this, you do not have to plan a visit to the bank for this purpose anymore.
Auto-renewals
Before you commence booking an FD, you will be given the option of choosing whether you would like to auto-renew your FD amount. This means that on the maturity date, the funds will be put back into the same scheme and feature a similar tenure, thereby growing your savings eventually over the years. This can help do away with the hassles of manually renewing your FD amount by yourself.
Systematic Deposit Plans
Certain FD plans also permit you to regularly make deposits into your FD account. You have the choice of selecting a single maturity plan, in which you receive your returns as a lump sum at maturity, or a monthly maturity plan, which ensures you get a steady income from your FD account on a monthly basis.
