One of the best and most preferred investment options available to those who are reluctant to invest in risk instruments such as equity and mutual funds is fixed deposits. FDs allow you to control your financial risks and help achieve the goals you aspire to at various stages of your life. It may include securing the future of your child, his or her education and marriage, or as a protection against unforeseen expenses.
However, you need to remember the following points before you invest in an FD:
Safety: FDs are secured investments which provide guaranteed returns. Credit rating agencies rate fixed deposits provided by companies and HFCs so that investors can choose wisely. If you intend to invest in a corporate FD, always go to companies with high ratings such as 'AAA' or similar.
Minimum Deposit: Many businesses have varying minimum and maximum deposit amounts. Checking with the company before investing is advisable.
Tenure: For a term of somewhere between one year and ten years, most businesses provide deposits. As premature closing of an FD attracts a penalty that will decrease the cumulative interest received on your investment, choose your tenure carefully. For instance, if you think after two years you would need the money, then make sure you invest for two years or less.
Interest rates: Corporations, depending on the option the applicant makes, offer fixed deposit plans that pay interest on a cumulative and non-cumulative basis. On a monthly, quarterly, half-yearly or annual basis, customers seeking recurring revenue can opt for non-cumulative schemes. Cumulative schemes where both the principal and accrued fixed deposit interest rates are charged on maturity can be preferred by investors seeking savings and returns received over a long period.
Nomination: If you are the sole depositor, always exercise the nomination option in FD, more so. The nominee will demand the whole amount with FD interest rates in the event of the depositor's death.
Tax Deduction at source: The interest income from a single fixed corporate deposit is more than INR 5,000, and then the corporation must deduct tax above that amount at the source.
Benefit for senior citizens: Corporate fixed deposits are a right investment choice for senior citizens because, in their retirement years, they give them secure returns with an alternative to regular income. Generally, fixed deposit rates provided to senior citizens are 0.25 per cent higher than the standard rates offered.
Fixed deposits are a stable and strategic investment for all these purposes. By opening one over your mobile banking app or offline, you fulfil the twin purpose of providing daily income and building a corpus, with little to no risk to investors.
