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2 mins Read | 4 Years Ago

How to Save Money in Fixed Deposit


There is no investment option in India that is as popular as Fixed Deposit (FD). Check out this post to know some of the benefits of FDs and how it is one of the smartest ways to save.

While people are now getting financially aware and actively looking for investment options, most are unable to remain invested in the instrument of their choice for more than a few months.

This makes Fixed Deposit (FD) one of the best ways to save money and also earn interest on the same. As FDs require you to remain invested for a fixed duration and premature withdrawals result in a penalty, it helps you to save money. However, apart from helping you save, FDs also offer several other benefits. Let us have a look at some of the top benefits of investing in FDs in India:

1. Fixed Returns

When you invest in FD, you earn guaranteed returns which are fixed even before you make the investment. Unlike most other investment options where the returns vary depending on the market conditions, FDs offer fixed returns irrespective of the investment amount. This is one of the biggest reasons why even most experienced investors prefer having some part of their portfolio invested in FDs.

2. Flexible Investment Tenure

Most banks now allow you to invest in FDs for a duration of 7 days to up to 10 years. This makes FDs an excellent option for all of your short-term, medium-term and even long-term financial goals. The interest rate generally varies based on the investment tenure you select. Moreover, there are preferential rates for senior citizens to help them earn higher returns.

3. FDs are liquid

Liquid assets are the ones that can be easily converted into cash. While FDs require you to pay the penalty for premature withdrawal, it is still one of the best options if you want to invest smart. In case of an emergency, you can pay a small premature withdrawal fee and use the money for managing your expenses. With this facility, FD investors can be rest assured that they always have a certain amount of money that they can rely upon.

4. Tax benefits

There are also tax-saving FDs which come with an investment tenure of 5 years. Under Section 80C of the Income Tax Act, tax-saving FDs fall under the Exempt-Tax-Exempt category. While the interest that you earn from your FD investments is taxable, you can claim a deduction of up to Rs 1.5 lakh in a financial year for the amount you invest in these FDs.

5. Loan Against FD

Apart from being one of the smart ways to save money, FDs also offer a host of other benefits. For instance, many of the banks now allow FD account holders to borrow loans of as much as 90% of their principal and interest amount. In case you need a quick loan to manage a financial emergency, this loan against FD facility can come in very handy.

Fixed Deposits: Safe, Rewarding and Simple

Browse through the different investment options available in India, and you will see that most of them require a considerable amount of knowledge and experience.

FDs are one of the easiest and most reliable investment options with the help of which you can earn guaranteed returns and also enjoy a host of other benefits.

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