Fixed Deposits are a popular investment choice for investors who look for capital preservation and stable returns. FDs come with a predetermined tenure and fixed interest rate, which helps grow savings.
Not just this, you can also do tax saving with Fixed Deposits and earn high returns. However, it is only possible if you choose the right fixed deposit scheme. In this blog, we will explore how to choose the right fixed deposit scheme for your needs.
Choosing the right FD that fits your needs
With so many Fixed Deposit options available, choosing the right scheme can be daunting. Hence, to ease the process, here are some factors that need to be considered while choosing the right FD.
Understand investment goals
Before venturing into the Fixed Deposit scheme, you should start considering your investment goals. It means whether you are saving for long-term milestones like retirement or short-term expenses like a vacation. By understanding investment needs, you will be able to decide on the FD tenure.
Compare interest rates
Another important thing to consider while choosing a Fixed Deposit scheme is the interest rates offered. This will help you decide the returns you will earn on your investment. The interest rates of financial institutions and banks may vary. It is best to compare the interest rates and choose one that offers competitive rates.
Tenure options
FD schemes have different tenure choices, from a few months to some years. It is best to compare tenure options based on liquidity requirements and financial goals. With shorter FD tenures, you will have quick access to funds, while longer FD tenures offer high interest rates.
Credibility of the institution
When choosing the right FD scheme, it is important to check the credibility and reputation of the institution. It is best to go with a bank and financial institution that has a good record of financial reliability and stability. Before investing in the scheme, it is necessary to check the customer reviews and credit ratings.
Premature withdrawal terms
Another crucial factor that needs to be considered while choosing an FD scheme is premature withdrawal terms. By knowing the premature withdrawal terms, you understand the penalty charged if you decide to withdraw funds before the completion of the tenure.
Tax implications
Knowing about Tax Saving Fixed Deposits is also crucial. Generally, the interest earned on the FD scheme is taxable, and the rate will depend on your income tax bracket. Certain banks and financial institutions provide tax-saving Fixed Deposits, with a mandatory lock-in period of 5 years.. The tax benefit is provided under Section 80 C of the Income Tax Act.
Frequency of Interest Payouts
Fixed Deposit schemes offer different types of interest payouts: monthly, half-yearly, yearly or at maturity. The frequency of interest payout can vary depending on the financial institutions or banks. It is best to check the interest payout before selecting an FD scheme.
Conclusion
Fixed Deposits are a smart and reliable investment option. However, choosing the right FD scheme requires careful consideration of interest rates, tenure options and more. It is best to choose a plan that aligns with your investment goals.
