A fixed deposit is a financial instrument where an investor gives a certain sum of money to a bank or a financial institution(company) and the entity pays interest for the duration of the deposit. The rate of interest paid varies depending on the amount and tenure. Investor’s, especially conservative investors, prefer to open fixed deposits as it is a safe investment option and it can be opened easily and quickly.
The reason why fixed deposits are an ideal form of investment are as follows:
Unlike investment in the stock market or commodity market, fixed deposits are not a risky investment as they do not depend on fluctuating market rates. Investors can rest assured that his investments are safe and he will be getting back a guaranteed amount at the end of the tenure.
The amount that is invested in fixed deposit can be withdrawn at any time for a small penalty. The investor may have a financial emergency to meet financial needs during marriage, sickness or when his business is in loss. The penalty is less than that of selling stocks or real estate as the asset cannot be sold easily because of its high value and if you are in a distressed situation, you will sell it for a much lower rate. Whereas, fixed deposits can be withdrawn at any time and all you lose is a certain interest income.
Fixed deposits can be taken for a tenure of 1 month or 1 year or 10 years based on your needs and for whatever amount that you can invest. Fixed deposits can be invested for a tenure of your choice. If you have planned for a big event in 5 years, then you can have a fixed deposit kept for 5 years to meet your financial requirement in 5 years. You can have various fixed deposit accounts to save for different goals.
Fixed deposits require you to keep the amount for a certain period to accumulate the said interest amount. This encourages the saving habit of an individual. He will not be tempted to spend the money and find a way to manage his finances more efficiently.
The interest rate offered on fixed deposits are higher than that on savings account. It is also a safe form of investment where returns are guaranteed.
Interest can be paid at different intervals depending on the term you choose. Interest rates are paid at maturity, annually or monthly. Monthly and annual interest rate pay-out ensure that you have the extra income flow and can be reinvested for higher maturity benefits.
When it comes to Non-Resident Indians making investments in India, the tax angle always comes into picture and it can often get messy. One among the best tax-free investments in India is an NRE account.
When it comes to an NRE term deposit, the interest earned is free from tax and tax need not be paid for two years after the account holder comes back to India.
Another good way of saving tax is to make investments in fixed deposits in the name of the spouse or children. This is if the family members are residents in India.
6th November 2017
The BMC has said that all fixed deposits amounting to a high amount to the tune of Rs.61,510 crore kept in numerous banks will be used only for city development projects. Corporators from various parties had said that the money should not be used for any purpose other than for Mumbaikars instead of burdening them with hikes. Sanjay Mukherjee, the Additional Municipal Commissioner said that these funds would be used purely for development purposes.
According to civic officials, BMC makes provision of large scale for capital works in the budget and takes a year or more for these works to be completed. Delay in procuring no-objection certificates, permissions from departments such as railway, forest and environment occurs frequently.
3rd April 2017