What is a Fixed Deposit?

Fixed deposit is an investment instruments offered by banks, Co-operatives, and non-banking financial companies, where you can deposit money for a higher rate of interest than savings accounts. You can deposit in lump sum in fixed deposit for a specific period and earn attractive interest.

Once the money is invested with a reliable organisation, it starts earning an interest based on the duration of the deposit. Usually, the defining criteria for FD is that the money cannot be withdrawn before maturity, but you may withdraw them after paying a penalty.

Features of Fixed Deposit

• Fixed deposit enables investors to earn higher interest on their surplus funds.
• You can deposit money in a fixed deposit account only once, but to deposit more money, you need to create another account.
• Though liquidity in fixed deposit is lesser, you can look for higher rates of interests.
• Fixed deposit can be easily renewed.
• Tax is NOT deducted at source at present, from interest on Fixed Deposit. Since Co-operatives are exempt from deducting TDS. However, it is the responsibility of the depositor/s to include the interest income on deposits to their income and pay the applicable Income Tax on such interest income on their own.

Benefits of Fixed Deposit

There are several advantages of fixed deposit investments, some of which have been given below:

• They are the safest investment instruments, and offer greater stability.
• Returns on fixed deposit are assured, and there is no risk of loss of principal.
• You can opt for periodic interest payouts, to help you manage your monthly expenses.
• There is no effect of market fluctuations on your fixed deposit, which ensures greater safety of your investment capital.
• You can benefit from higher interest rates offered by Co-operative’s fixed deposit.