Fixed deposits are a great way to reap the benefits of compounding interest and avail quick access to liquid funds. There are various types of fixed deposits to cater to different needs. Furthermore, they’re used to build wealth while saving on taxes. But what’s the maximum amount that can be invested?
The whole point of investing is to set aside your savings, no matter how small or large. So, you’re in for a treat – there is NO maximum limit as to how much you can invest in a Fixed Deposit! However, there is a minimum cap on the amount that you can invest to book an FD. It means you can invest a windfall or large portion of wealth into this investment avenue.
In India, older citizens or those with conservative financial practices prefer investing their savings in traditional investment avenues. Fixed deposits are one of them, but it’s comparatively safer than the rest! Unlike gold or real estate, or even stocks and mutual funds, they’re unbothered by the state of market volatility. In most cases, they have a pre-determined interest rate with a tenure. However, the interest earned is taxable.
While that may seem like a glaring problem to some, it’s not quite the case! Choose the best type of fixed deposits and employ tips and tricks to avail certain tax benefits.
You might also like: How to Choose the Right Fixed Deposit Scheme
Regular Fixed Deposit
Choose between a fixed tenure between 1 week to 10 days. The interest rate is pre-determined, and the interest earned is liable to TDS. Though, the amount deposited is eligible for tax deductions.
Special Fixed Deposit
Remain invested for a special period like 333, 399, or 555 days. Also, this type of fixed deposit offers a higher rate of interest with similar tax benefits as a regular term fixed deposit.
Floating Fixed Deposit
Earn interest as per fluctuating market-based interest rates. The rate of interest will be automatically renewed whenever there’s a change in the base rate. It offers tax deductions under Section 80C of the Income Tax Act, 1961.
To learn more check out: Floating Rate FDs Or Fixed Rate FDs — Which should you choose?
Tax Saving-Fixed Deposit
Receive additional tax benefits through this type of fixed deposit. Furthermore, there is a compulsory lock-in period of five years to promote savings and investments. Until the fund has matured, no withdrawals are allowed.
Regularly invest in small intervals for a long time to receive the benefits of compounded interest and tax benefits. If the interest earned is less than ₹10,000, it’s not liable for TDS.
FDs are excellent investment tools for those wishing to avoid the tension of market risks.
If you wish to save up a lumpsum over the years and are happy with steady returns instead of fast wealth accumulation, you can go for FDs.
Pensioners with a lump sum after retirement can invest in FDs and benefit from the monthly interest payout as an income source.
You can also set aside a lumpsum for your children that can be used later for their higher education or other expenses.
You can also build an emergency fund with an FD account.
With these simple ways to save on taxes, you can quickly rise up the financial ladder! Fixed deposits are a great way to let idle savings bloom into a lucrative investment. Looking for the best interest rates and regular payouts on fixed deposits? Hurry up and head over to Bajaj Markets to start investing today!