We all try to find ways to protect and grow our wealth for future financial stability. If you want to build your savings along with a guaranteed return, fixed deposits are a conservative avenue for the same. Many people in India opt for fixed deposits (FD) as a source to invest a significant amount of their savings. But what is a fixed deposit?
A fixed deposit (FD) is a kind of investment in which a sum of your money is locked in for a specific period, where you can select the tenure. It can range between a few days to several years. In return for locking these funds, fixed deposits pay a specified rate of interest. Different banks offer FD at different rates. Opening a fixed deposit is an easy process and can be done both offline and online. It is also advisable to use FD calculator to plan your investment easily.
What is an FD Calculator?
Just like any other investment decision, fixed deposits also need careful planning. You have to keep your budget in mind and align all investments with your financial goals. Using an FD calculator helps anticipate the funds and in planning future finances better. Moreover, the FD calculator helps in comparison to various types of FD schemes offered by different banks.
You can use an FD calculator online anytime and enter the details to calculate the principal amount, maturity, and interest earned. You need to know the deposit amount, rate of interest, and your chosen tenure to use an FD calculator in just a few clicks.
Benefits of Opening a Fixed Deposit Account
Guaranteed Investment Return
One of the essential reasons why people prefer investing in a fixed deposit is the guaranteed rate of return. When you invest your funds in a fixed deposit, you can be assured of receiving the stated rate of return without any risks. You can know the rate of interest of your preferred bank by either visiting their website or local branches. It makes it easy to ascertain how much return you will get.
Reputable banks such as Axis Bank also have an FD calculator on their websites where you can calculate the interest receivable on investing a particular sum of money for a defined period.
Encourages a Habit of Saving
Saving is a habit not many people can follow, but we all wish to maintain the right balance in times of need. Fixed deposits help to build a habit of saving. Let us see how.
Since investing in a fixed deposit does not involve any significant risk, people are less hesitant to invest. Also, as it is a liquid option, you have a sense of satisfaction in case an emergency arises.
Fixed deposits have certain penalties on premature withdrawals and therefore force you to save money aside. You must only withdraw funds in case of grave emergencies.
The tenure of Fixed deposits varies from 7 days to 10 years. You can invest in a fixed deposit account for a tenure that suits your business or personal requirements. For instance, if you plan to get your child in a particular school in the next five years, then you can opt for a tax-saving FD as it has a lock-in period of 5 years.
The Five-year Tax-Saver Fixed Deposit offers significant tax benefits under Section 80C of the Income Tax Act, 1961. You can claim a deduction of a maximum of Rs. 1,50,000 for the amount invested. But the interest earned on fixed deposits is taxable.
With several advantages, investing in a fixed deposit account can provide a good income source throughout the tenure of the investment. Fixed deposits may have lower interest rates compared to other investment tools, the security and assured returns make it an ideal option.