Fixed Deposite
Simply put, a fixed deposit is a fixed amount of money deposited at a financial institution, for a fixed time period and for a fixed rate of interest throughout the period. The rate of investment on it is decided by the financial institution, and it is usually calculated based on the principle amount and the tenure of the fixed deposit. Once the term is over, a fixed deposit matures and the principle amount is available for withdrawal. The general thumb rule about fixed deposits is that the longer the money is invested, the better the returns.
these deposits score over other investment options in many areas of comparisons. The primary benefit of these deposits is that they are very safe investments. these deposits of RBI regulated financial institutions - banking and non-banking provide a secure investment option. Even the most severe and harsh markets do not affect fixed deposits. A large number of people turn to these deposits as their long term safe investment option.
Because the rate of interest earned on these deposits is constant throughout the term period and compounded every quarter, the interest earned is available for withdrawal every three months. Few other investment products have this benefit. these deposits can hence be used as regular income generators.
Although the principle amount in these deposits is locked during the tenure, loans can be availed almost instantly by keeping the these deposits as collateral. Although not a preferred arrangement to seek a loan when you have money invested, it provides an option during emergencies.
Another advantage of these deposits is the option of going in for tax exemptions under section 80C of the Income Tax. Fixed deposits of a maximum of Rs. 1,00,000 for five years are eligible for tax exemptions. However, the income earned from through the interest generated on these deposits is taxable.
Although these deposits are not the only investment option that one should look at, in the long run, they are vital to maintain the balance of other medium risk and highly volatile investments. Investing in these deposits is one assured way of learning continuous returns for many years.
