Savita is a homemaker who makes sure to save money every month. Someone told her she should invest her savings in a Fixed Deposit to keep earning fixed interest on it for a fixed period. But she was sceptical, as she picked up facts from everyday life, which she attempted to share with her family and friends. Here is a list:
- You can open an FD with a small amount
To open an FD, you do not need too much money. Nowadays, banks offer FDs at a minimum amount. You can open them with a minimum balance of Rs. 5,000. They are a source of guaranteed returns with attractive interest rates ranging from 3.5% to 7.75%, depending on the tenure, deposit amount, and customer type.
- You earn more if you take interest payments at maturity
Generally, you earn more on FDs if you take an interest at the maturity of the deposit. If you take interest payments regularly like monthly, quarterly, or yearly, your interest gets divided. But if you take the money at maturity, you get your initial invested money with compounded interest, which is more profitable.
- You need to pay tax on FDs over Rs. 10,000
This is good news because now, you have options for opening Tax-Saving FDs. Moreover, if your annual income from the FD does not exceed Rs. 10,000, you are exempted from paying tax. Other options for senior citizens include filling out Form 15G and 15H to save taxes on FD earnings.
- Sweep-in facility
If you have an emergency and need money, you can withdraw some amount from your FD and keep on earning interest on the remaining amount. If it is linked to a Savings Account, money could be swept in from the latter to the former.
- Opening and closing this account is quick, paperless, and hassle-free
Once you open an FD, you can keep it operational or close it after a few years. If you want to close it, you need not submit lots of documents or wait several days to receive the bank’s interest, principal, and maturity amounts. Since they already have all your details, they will accept your FD closure request and transfer the funds to your Bank Account.
The Fixed Deposit calculator calculates the maturity amount by entering the amount, tenure, interest rate, and compounding frequency. It is an easy tool on most platforms to help depositors evaluate their earnings. Closing the FD should be taken as a last resort, as a premature FD closure penalty may be payable to the bank.
Conclusion
When Savita resolved all her apprehensions, she started considering an FD as an option for investing her savings and began advising others to do so. You, too, can study more about FDs, invest in this risk-free instrument, and see your returns and savings grow multiple times.
