When it comes to savings, each individual has their own preferences in terms of time horizon, final goal for saving, etc. Moreover, many people have an affinity towards stability. As such, Fixed Deposits have always held the pole position among the most coveted saving tools in India. They offer risk-free, guaranteed, stable returns at moderate interest rates. Individuals also choose FDs due to enhanced flexibility in terms of the deposit amount and tenure.
To start a regular FD, you will usually have to submit a minimum deposit of ₹1,000. However, keep in mind that this amount could vary depending on the financial institution you choose. If you're interested in a tax-saving FD with a 5-year tenure, you enjoy the benefit of getting started with just ₹100.
Now, when it comes to senior citizens, they can open an FD with as little as ₹100 as well, regardless of whether it's a regular or tax-saving FD. However, if they opt for a tenure of less than 5 years, the minimum deposit might differ from bank to bank.
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When it comes to regular fixed deposits that aren't for tax-saving purposes, there isn't a specific maximum limit in India. However, individual banks may have their own policies regarding the maximum amount allowed for an FD.
Tax-saving FDs having a 5-year tenure come with a maximum investment limit of ₹1.5 Lakhs per individual in a single financial year. This is as per the tax benefits limit on investments, according to Section 80C of the Income Tax Act, 1961. These rules apply to both senior and non-senior citizens.
1. Attractive Interest Rates: Fixed deposits offer better interest rates compared to standard savings accounts, making them a lucrative choice for your idle funds. Sometimes, they could even outperform risk-free investments like Treasury Bills and Government Bonds.
2. Flexibility: FDs provide flexibility in terms of tenure, which ranges from 7 days to 10 years. You can opt for a cumulative FD to receive the interest at maturity or a non-cumulative FD with periodic interest payouts as per your financial needs.
3. Easy Accessibility: The ease of opening and managing FD accounts has been enhanced through digital fintech platforms that offer quick access to your funds in case of a financial emergency.
4. Tax Benefits: By investing in a 5-year tax-saving FD, you can claim a tax deduction of up to ₹1.5 Lakhs under Section 80C. Even in a regular FD, TDS is only deducted after the interest income exceeds ₹40,000 per year.
5. Loan Facility: FDs can serve as a dependable investment to secure loans or overdrafts during unforeseen financial challenges.
6. Low Maintenance: Unlike stocks or mutual funds, FDs require minimal monitoring, as the interest rate remains consistent throughout the tenure. Invest, relax, and wait for maturity.
Also check out: Floating Rate FDs Or Fixed Rate FDs — Which should you choose?
A fixed deposit’s minimum period is the least amount of time for which you can remain invested in such a saving scheme. For both domestic and Non-resident Ordinary (NRO) FD accounts, the journey begins with just 7 days. However, you have the option to extend this timeline anywhere between one month to over a year. The choice of period affects your returns and financial strategy, with the flexibility to opt for either short-term or long-term tenures.
In the short-term category, you embark on investments lasting 7 days to a maximum of 2 years. This is ideal for those seeking swift growth, as these deposits provide a quick route to expanding your financial corpus. On the other hand, long-term FDs allow you to invest for over 2 years, with an average duration of 5 years and a maximum investment period of 10 years.
Picture a ladder of financial growth, each step leading you closer to your goals. This is what FD laddering offers—an ingenious strategy to optimize your investments. You spread your funds across multiple FDs, each with different tenures and interest rates, ensuring that your funds mature at staggered intervals.
Consider an example: you have ₹90,000 to invest. Instead of locking it all into a single FD, you divide it into three parts, each worth ₹30,000, set to mature at 1 year, 2 years, and 4 years, respectively. With this financial ladder, when the first FD matures after a year, you have the option to use the funds for your needs or reinvest them for longer durations. Thus, you can continually keep growing your wealth.
Enhanced Returns: Diversify your investments to enjoy higher returns and compound interest.
Improved Liquidity: Maintain liquidity by staggering your investments, ensuring funds are accessible when needed.
Heightened Safety: Spread your investments to reduce risk. IndusInd Bank offers a range of FD options for security.
Tax Savings: Spread your investments across smaller FDs earning interest less than ₹40,000 (₹50,000 for seniors) per year to save tax.
Fixed deposits are an excellent instrument to gain interest with the power of compounding and avail quick access to emergency funds. You can choose from a wide range of fixed deposits that can cater to your different needs. To create a strong financial cushion, an individual can gather any sum that suits them and invest in fixed deposits. Explore varying tenures, return rates and other investment terms on Bajaj Markets and benefit from maximum flexibility and savings to achieve different future goals.