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Fixed Deposits: Your Evergreen Saving Option

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Here’s everything you ever wanted to know about investing in a fixed deposit.

They have always been, and continue to be, the most preferred investment option in India for those who have some surplus money on hand. Fixed deposits help you grow the size of your savings in a structured, safe manner.

If you wish to open a fixed deposit account with your bank but are not aware of all the facts pertaining to the product, then read on.

* Everybody can create it. The fixed deposit account can be opened by any Indian national and NRI holding an Indian bank account. The account is also opened by companies, associations, unions and trusts.

* How does it help? The fixed deposit is considered to be a fail-safe investment option. It pays a constant rate of interest throughout the deposit tenure. The rate of interest paid on senior citizen FDs is higher by 0.5% compared to other FD accounts. Thus, it is a predictable investment option, where you are aware of the capital appreciation on the account even before you start the FD account.

* It is highly liquid. You can start the FD account by transferring money from your account or senior citizens savings account online. At the end of the account tenure, the matured corpus is returned to your bank account. However, if you are in need of the money mid-way through the tenure, then it is possible to terminate the account at once, but without receiving the interest payable on it. It is a highly liquid investment option.

* Some more features to know. The fixed deposit interest rate is the most important component. The higher the rate of interest, the higher is the capital appreciation on it. Fixed deposits work on the principle of compounding, so the higher the size of the deposit, the more it earns by way of interest. But do note that you are charged TDS for interest earning exceeding Rs 10,000 in a year. You can save tax by opening a 5-year tax saver FD.

* It helps you save and create wealth. The fixed deposit grows due to the interest the bank pays on it. Since you set aside a large fund of money at one go, it creates a large savings fund with minimal intervention from your side. Over the tenure of the account, the size of the deposit goes on increasing and creates wealth for you. It is a much safer investment option as compared to mutual fund investments, and you can simply transfer reserve funds from your senior citizens savings account to the FD account to get it started.

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