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Fixed deposit has remained the most favored investment option as it not only preserves your capital but also provides surety of returns that are going to be only profitable. Even though the trend is changing and investors are moving on to other preferred modes of investment the old world charm of a fixed deposit remains the same.

Despite the shift and the changing market dynamics, fixed deposit continues being a prominent investment avenue for people because of the surety of returns it offers. Not only fixed deposit remains a stable investment vehicle for traditional investors, its simple application process and low risk has made it a popular choice even among the new investors.

No matter how enticing it may sound to begin investing in fixed deposit, there are a certain things that you must know about this particular investment option that has been going really strong for so many years.

Here are the things that no one ever told you about investing in a fixed deposit schemes:

They are a Relatively Safer Investment Option

It is true that opening a fixed deposit  account keeps your money safe and secure with ensures interest. All the financial institutes in India are regulated by the Reserve Bank Of India, which ensures that no fixed deposit scheme offering entity defaults on the interest payment to the investor and also pays the principal amount without fail at the time of maturity.

Your Deposit Will be Insured

When you open a fixed deposit account with any financial institution for up to Rs.1 lakh you get an insurance cover from the institution. This means, even if the lender gets into any financial crisis they are bound to pay your money back, thus you will not lose your money.

It Offers Tax Benefits

Under the section 80C of Income Tax act, any fixed deposit up to Rs.1 lakh is tax exempted, however one must invest for the fixed deposit scheme for at least 5 years to get the tax benefit on their FD. This way, you will not be eligible to withdraw your FD amount until maturity.

FD Interest is Taxable

If the interest accrued on your fixed deposit exceeds Rs.10,000 per year than that interest amount becomes taxable as per the income tax and comes under the ‘other income’ head at the time of filing your income tax return. However, this will further depend on your tax bracket whether the total income is taxable or not.

It Offers Steady Income

Once you invest your money in fixed deposit you get the option to realize its interest amount on the monthly, quarterly and annual basis. So, if you are looking for some steady and sure shot monthly income, then FD can be your option as it will not only help you meet your regular expenses but will also keep your money safe.

You Can Opt For Best Rates on Investment

Every financial institution or bank offer different tenures and interest rates on their fixed deposit schemes, which means you get the flexibility to chose the best interest rate offer. Also, fixed deposits with longer tenure offer higher rate of interest as compared to the short term investments. Though, your funds will be locked for a longer period of time, you can be assured of regular income. To understand the interest and tenure for every fixed deposit scheme you can use any only fixed deposit interest calculator and find the best investment rate and tenure for your money.

You Can Take Loan Against Your Fixed Deposit

If you are facing any immediate need of money than you get an option of taking loan against your FD instead of withdrawing the money from the investment scheme. Even though the interest charged on your loan against FD will be a little higher than the interest you are getting on your FD, your hard earned money will remain safe and you can repay the loan in equal monthly installments. You can get up to 90% of your FD amount as loan from any financial institution.

You Can Invest in Various FD Schemes Together

Say, you have RS.5 lakhs for investment and you want to go for a safer option that is fixed deposit. So, instead of investing the entire Rs. 5 lakhs in one FD scheme, break the amount in five parts and make 5 Rs. 1 lakh each FDs in different financial institutions. This way, you can also get insurance on every FD investment that you have made for Rs.1 lakh as only that much amount is insured under FD scheme.

With so many features and benefits, it can be easily concluded that bank fixed deposits are safest to invest, especially when you are not up for any risks involved. However, if you are open to other investment options then you can consider stocks, mutual funds, etc. as well while keeping some amount safe in your fixed deposit scheme.

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  1. prakash p.Lonkar says:

    Information provided by you that each F.D. enjoys insurance cover of Rs. one lakh is not correct.Depositors get insurance cover of maximum one lakh per bank.Deposit includes amount kept in Savings a/c,current a/c,interest thereon in addition to amount invested in F.D.So even if one invests in more than one F.Ds and in many branches of one branch,he is entitled for insurance cover of Rs.One lakh only.Therefore one also should consider the reputation,size of operations,financial condition,etc of the bank before investing.Co.operative banks are more prone for mismanagement and one should avoid depositing money in such banks except same big multi state co operative banks like Saraswat bank.

  2. Subramanian says:

    It is not correct to say that interest from FD up to Rs 10000/- is exempt from tax. (Such an exemption is allowed only for interest from SB accounts). The limit of Rs.10000/- for interest from FD’s applies to Tax Deduction at Source. If interest is below Rs.10000/- there will be no TDS but the interest will still be part of income for tax calculation

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April 2024