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Why prefer fixed deposit over other tax saving options?

Investment these days have become an alternative option to savings. Although savings being an age old method, you surely cannot earn higher returns over it. Rather, parking funds in an investment seems a good way to multiply it and earn profit. However, the interest rate offered on a savings account is very less in comparison to that of investments.

Talking about the investments, there are many investment options out there that offer you good returns. But, not all investments are safe. The investments which involve high risk depend upon market conditions and thus tend to offer fluctuating interest. Whereas, investments which involve low risk like fixed deposits offer a fixed rate of interest till its maturity.

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With other investment options being risky – many investors generally look for a safe investment avenue. The FD can be one such relief for many who are looking to invest. Since fixed deposits are a perfect blend of risk and returns; investors can experience both by investing in it. Besides this, FDs are a one-time investment wherein you lock your money for a fixed period of time. However, this makes it a safe place to allocate the funds in.

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Besides being so, there is one thing about FD that can bother the investors and, i.e. the tax. Unlike other investment avenues, fixed deposit charges tax on the account having an interest exceeding over INR 10,000. In case, if you are investing a lump sum amount then there are chances that the financial institution might levies taxes on you. However, this drawback of fixed deposit might lure you towards high-risk investments like mutual funds and shares.

Although, fixed deposit holds this drawback, here are some reasons why FD can still be a good investment avenue for you:

1. Fixed rate of interest:

FD offers a fixed rate of interest throughout the investment tenure. Unlike the high-risk investments, the returns offered on fixed deposit does not depend upon the market conditions. However, the returns remain constant and don’t fluctuate depending upon the market rates and situation. Furthermore, this assures the investors that no matter what, he is liable to fixed income throughout the tenure and also the invested money is safe.

2. Overdraft facility:

Other than safety and higher returns, fixed deposits also offer an overdraft facility. Now, an overdraft facility allows you to withdraw up to 90% of the amount from your account. Furthermore, this saves you from breaking your FD and paying that extra penalty charges. However, you have to pay interest over the departed amount on the last day of your overdraft facility.

3. Senior citizen fixed deposit:

If you are a senior citizen, then you can look forward to invest in the senior citizen fixed deposit. However, this helps you earn a little high interest than that of normal FDs. Besides, the financial institutions also offer you many benefits, which you can gain from.

4.  FD calculator:

Unlike the other investment avenues, you can calculate your earning with the help of FD calculators. There are three factors that can help you with the calculation – Interest rate, invested amount and the tenure. With the help of these three factors, you can calculate your interest amount. However, you can find the FD calculator on your lender’s website.Even though fixed deposit charges tax, there are still many benefits offered by FD which you can gain from. So far, it is also the only safe investment option available in the market. However, you can also invest in Non-Banking Financial Companies (NBFCs) as they provide higher interest than that of banks. Investing in NBFCs, the fixed deposit can help you earn higher returns.

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