Safety....Safety...Safety... your money needs to be safe. The first thing you look for in an investment. "Safe". One of the safest investments around "Fixed Deposit".
You deposit your money with a bank for a fixed time period. The bank pays you interest on the money you deposit with them. You agree not to withdraw money from the fixed deposit for the time period, you make the deposit. In case of an emergency (you need money in a hurry), you can break your fixed deposit (exit prematurely from the fixed deposit), by paying a penalty. The penalty is as follows: Interest rate which is applicable for the time period of the fixed deposit - 1%.
In a fixed deposit, interest is paid to you on maturity (end of the term period of the fixed deposit).The interest on the fixed deposit and the time period is fixed and this means you know the amount you will get on maturity of the fixed deposit, at the time of making the fixed deposit itself.
The money you invest is safe, and the interest you earn is guaranteed. You get an assured return on your investment.
Investing in a fixed deposit encourages you to save your money for difficult times. It inculcates the saving habit in you.
You can pledge your fixed deposit, as collateral for a loan. You also avail the loan at a lower interest rate.
You get a deduction on your taxable salary, if you invest in a 5 year tax saver fixed deposit. A special product, just to save tax.
If you are a resident of India (Minor or even a HUF), you can invest in a fixed deposit in India.
You deposit your money with a bank for a fixed time period called tenure of the fixed deposit. You get a higher interest on the money which you deposit in your fixed deposit, than in a savings bank account. On maturity of your fixed deposit, you are paid back your principal with interest.
You are not supposed to touch the money in the fixed deposit for the time you make the deposit. If you are in urgent need of money, you can break your fixed deposit (Withdraw money from your fixed deposit).
You have a penalty of 0.5-1% lower interest on your fixed deposit than promised if you do so.
In a flexi fixed deposit, your fixed deposit is linked to a savings bank account. Your money moves between the fixed deposit and your savings bank account.
The flexi fixed deposit is also called the sweep in - sweep out fixed deposit.
The 5 year tax saver fixed deposit is unique from other fixed deposits. You enjoy a deduction of INR 1.5 Lakhs a year under Section 80 C of the income tax act, if you deposit your money in a 5 year tax saver fixed deposit.
Not all fixed deposits enjoy the Section 80 C benefits. You have to invest your money in a tax saver 5 year fixed deposit to avail this tax saving benefit.
You need to deposit a minimum amount of INR 10,000.
You don't need to have a savings bank account. If you have one, it does have some benefits.
You require proof of identity and address: passport/ driving license/ voter's identity card/ PAN card/ ration card/ recent utility bills/ credit card bill. This is necessary for the KYC (Know Your Customer), procedure.
You might require a letter of introduction to open a fixed deposit.
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