5 Myths about Fixed Deposits

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Fixed Deposits

Over the years, there have been a lot of debates surrounding the best investment modules on the market. While several investment types erupt carrying their own benefits, Fixed deposits continue to be a widely picked choice even today. The assurance and simplicity brought by a fixed deposit is undeniable. It thus comes as no surprise that it still stands as one of the most preferred instruments used when undertaking financial planning. 

While Fixed Deposits do maintain their status as being a good mode of investment, they are also surrounded by several myths. It is important to be aware of the same in order to make an informed decision when making fixed deposit investments. Read on to know some of the most common myths that you should be aware of: 

Fixed deposits are always safe – The investment option is offered by a wide number of institutions including private companies and banks. While fixed deposits are regarded to be an extremely safe mode of investment, this factor depends upon the institution your pick. Opt for a financial institution or bank that is reputed. Invest in a leading bank with high safety ratings. The returns through your fixed deposit account must be assured and should not be affected by the market fluctuations. 

No way to avoid tax – Yes, fixed deposits are taxed but you can also safely save on your taxes when you come under certain categories. You are not taxed if your income is below INR 5,000 from an institution during a single financial year. Senior citizen on the other hand, enjoy a much higher limit of INR 50,000. 

Fixed deposit have to be prematurely withdrawn during financial emergencies – In times of an urgent financial requirement, you need not make a premature withdrawal of your fixed deposit. You can conveniently take a loan against your fixed deposits. The loan is offered at nominal interest rates and allow you to save on your fixed deposit interest returns.

No Fixed deposits allow tax benefits – Apart from the above stated ways to avoid tax, you may think that there are no other ways to avail tax benefits with fixed deposits. Well, you can if you lock-in your fixed deposits for a minimum term of 5 years. The tax-saving is offered under the section 80C of the Income Tax Act. However, you must note that the amount cannot be withdraw nor pledged during the period. 

Now that you have a better understanding of fixed deposits, it is a good time to begin your investments through the mode. The interest rates are attractive and you can rest assured of your returns upon the term completion. 

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