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Exploring the Key Features of a Fixed Deposit Account

Fixed Deposit (FD) accounts offer unique features that make them a popular investment option for many individuals. Features such as flexible tenures to higher interest rates and tax benefits shape the overall appeal of an FD Account. Fixed Deposit accounts offer guaranteed returns and safety on your investment. These guaranteed FD returns can either be availed periodically or reinvested in the account and paid out on maturity. 

Conducting research and seeking professional advice is a better option for making informed investment decisions while investing in an FD. Potential investors must understand the key Features of Fixed Deposit Accounts to make informed decisions and maximise their returns. Let us explore them below.

  1. Flexibility of Tenure

FD Accounts offer flexibility in terms of tenure; you can choose the duration of your investment as per your requirements. The tenure can range from 7 days to 10 years, and you can select the tenure that suits your financial goals. The tenure you choose also affects the interest rate offered on FD accounts. Typically, the longer the FD tenure, the higher the interest rate. 

  1. Higher Rate of Interest

These accounts offer a higher rate of interest compared to savings accounts. Interest rates depend on tenure, investment amount, and prevailing market conditions. You can choose between a fixed or floating rate of interest while opening an FD Account. The interest rate offered on FD accounts varies from bank to bank. Interest rates for individuals can range from 3.00% to 7.50% per annum. Senior citizens can earn some extra interest rates. 

  1. Interest Pay-outs

In the non-cumulative option, interest is not compounded and credited at the end of the tenure. Interest on the principal amount in FD Accounts can be collected in two ways – cumulative or non-cumulative. In the cumulative option

If you are looking for a regular source of income, you can opt for the interest to be paid out at regular intervals. However, if you want to earn a lump sum return on your investment, it is advisable to choose the cumulative option.

  1. Loan against FD

FD accounts also offer the option of taking a loan against the deposit. It can typically range from approximately 60% to 90% of the total deposit amount. The interest rate on FD loans is generally lower compared to other types of loans. Taking a loan against your FD Account is a good option if you need funds urgently and do not want to break your deposit. 

  1. Automatic Renewal

FDs offer a very good option for automatic renewal. The deposit is automatically renewed at the time of maturity for the same tenure and interest rate. This feature is useful if you want to continue the investment without any hassle or paperwork. It is advised to check your interest rate at the time of renewal and compare it with other investment options before opting for automatic renewal.

  1. Tax-Saving Fixed Deposit

FD Accounts also offer the option of a tax-saving deposit. This means that you can claim up to Rs 1.5 lakh per annum as a deduction under Section 80C of the Income Tax Act. The Tax-Saving FD has a 5 year lock-in period and may offer a higher rate of interest compared to regular FD Accounts. 

But keep in mind that the tax-saving deposit cannot be withdrawn before the lock-in period, and the interest earned on the deposit is taxable.

  1. Hassle-Free Application Process

Existing bank customers can open a Fixed Deposit Account online with most banks and NBFCs nowadays. The application process for opening an FD account online is simple and requires minimal documentation. You need to provide identity proof such as an Aadhaar card or passport and address proof like a utility bill to open an FD Account. 

  1. Systematic Deposit Plan

FD accounts also offer a Systematic Deposit Plan (SDP) option for regular savings. SDP allows investors to deposit a fixed amount at regular intervals into their account. SDP offers flexibility in choosing the deposit amount, tenure, and frequency of deposits, making it convenient for investors. This helps with disciplined savings and investment planning. At maturity, the accumulated deposits earn interest as per the prevailing fixed deposit interest rate.

  1. Affordable Minimum Deposits

FD Accounts also offer affordable minimum deposit requirements as per financial capabilities. Investors can open an FD account with as little as Rs 10,000 for general customers and Rs 2,000 for minors. Even without a large sum saved up for a lump sum deposit, one can begin investing in FDs. It provides an opportunity for small investors to start saving and growing their funds through a secure and reliable investment option. 

Conclusion

FD accounts offer several features that make them ideal for those who want to save money and earn a good return on their investment. The key Features of Fixed Deposit Accounts include guaranteed returns, safety, and flexibility. With the flexibility of a SDP and affordable minimum deposits, an FD is one of the best investment options. The hassle-free application process and automatic renewal make it easy to invest and manage your funds. So, invest wisely and secure your financial future with an FD today!

Read also: 5 Essential Factors For A Successful Home Loan Application

Uneeb Khan
Uneeb Khan
Uneeb Khan CEO at blogili.com. Have 4 years of experience in the websites field. Uneeb Khan is the premier and most trustworthy informer for technology, telecom, business, auto news, games review in World.

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