Planning To Invest In Fixed Deposit? It Offers Guaranteed Returns and Much More

There are many investment schemes out there in the market, several traditional and many new. However, a time-tested safe and sturdy investment plan is investing in a fixed deposit. It is a preferred mode of investment for a wide demographic because it has guaranteed returns and most importantly, the money is safe and secure. The interest rates on FD depend on the tenure of the investment and vary from bank to bank. However, do you know that the security of your money is not the only advantage of FDs. Let us list some pros of investing in an FD.

Loan against FD

When you apply for a loan at a bank, you have to provide them with a security asset against which they grant you the loan. However, if you have an FD account in the bank, you can use it as an asset that you can get a loan against. In some banks, you also get the facility of overdraft on FD. In this, the bank provides you with a loan on the guarantee of FD. The loan amount is decided according to your FD.

Useful in saving income tax

You can reduce your income tax by using a bank FD. Section 80C of the Income Tax Act of 1961 permits you to claim a tax exemption. Your FD’s stay must be five years or longer for you to avail of this. Another requirement is that the interest received on FD in any one of the 5 years should not be more than 40 thousand rupees.

Insurance cover up to Rs 5 lakh in case of bank insolvency/Insurance offer

If the bank that you have your FD account in becomes insolvent, you are still protected by an insurance cover by the Deposit Insurance and Credit Guarantee Corporation on the FD. Under this, you are given an insurance cover of up to 5 lakhs. If your FD amount is Rs 5 lakh or less, then you will get the entire amount through insurance coverage. On the other hand, even in case of a higher amount, you get a cover of Rs 5 lakh only. Apart from this, some banks have different offers many to attract more and more people to invest in their FD scheme. There are some banks which also provide the facility of life insurance on FD.

Guaranteed return at the time of maturity

The rates of interest available on FD in banks are already fixed. These rates are affected by the repo rate of RBI and they change due to its decrease or increase. The rate of interest earned on the FD is decided according to the tenure of the FD. You can calculate how many returns you get on maturity on the very day you open your FD account.

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