Why Do Indians Prefer Fixed Deposits?

Posted by Nidhi on November 10th, 2020

Fixed deposits are the most favoured investment avenue for many investors. Especially Indian investors especially prefer fixed deposits over other investment avenues because of the safety of returns that these deposits offer and also for other benefits available. Do you know what these benefits are which make fixed deposits attractive for Indians?

Let’s have a look –

• Guaranteed returns

One of the primary reasons why fixed deposits are attractive is the guarantee of returns which is offered by these schemes. When you invest in an online fixed deposit scheme, you get to know the rate of return which would be paid on your investment. This fixed deposit rate depends on the institution chosen, the amount of deposit, age of depositor and the tenure. Once the fixed deposit rate is guaranteed, it remains fixed throughout the investment tenure. Thereafter, if the markets become volatile or if the institution lowers the deposit rates, your investment would not be affected. You would get the guaranteed return on maturity which gives you secured incomes.

• Tax benefits

If you invest in 5-year fixed deposit schemes offered by banks and post offices, the amount deposited earns a tax benefit. The amount is allowed as a deduction from your taxable income up to a limit of Rs.1.5 lakhs under Section 80C of the Income Tax Act, 1961. Given this tax benefit, online fixed deposit schemes not only help you create wealth, but they also help in lowering your tax liability.

• Dual benefits for senior citizens

Fixed deposits are very highly favoured by senior citizens because of two additional benefits which they can avail from these schemes. Firstly, senior citizens earn a higher fixed deposit rate on their deposits. Financial institutions offer a higher interest rate of 0.25% to 0.75% to senior citizens thereby making these deposit schemes attractive. Secondly, interest income earned from deposits is also allowed as a tax-free income under Section 80TTB. Thus, for senior citizens, fixed deposits become the ideal investment avenue because of higher tax-saving returns which they can earn.

• Security of investment

Fixed deposits offered by banks are secured up to Rs.5 lakhs. This means that even if the bank winds up its business, your deposits, up to Rs.5 lakh, would be secured and returned to you. This security is offered by the RBI which protects your capital investment and makes fixed deposits a safe investment haven.

• Attractive returns

The returns offered by fixed deposit schemes are quite attractive. They range from 2.50% to up to 7.5% if you choose a deposit scheme offered by a bank or a financial institution. If, however, you choose to invest with non-banking financial companies (NBFCs) or opt for corporate deposits, you can earn interests up to 9%. These rates are attractive and help you get good returns on your investments.

• Ease of investment

Lastly, fixed deposits are quite easy to invest in Banks, post offices and NBFCs offer different types of fixed deposit schemes. You can, therefore, choose the best personal finance platform to invest. Moreover, fixed deposits are affordable as you can invest with as little as Rs.100. 

These reasons make fixed deposits popular among Indian investors. If you are also looking to invest in a suitable fixed deposit, you can choose ETMONEY’s best personal finance platform. ETMONEY allows you to invest in online fixed deposits. Moreover, on this best personal finance platform, you can compare and choose a scheme which offers the best interest rates. So, make a wise choice and invest in fixed deposits for guaranteed and safe returns.