A fixed deposit is a type of deposit in which the capital invested stays locked in till maturity. In return, a fixed rate of interest is paid out to the depositor. This interest can be paid monthly, quarterly or on maturity of the fixed deposit. An FD is one of the most popular investments offered by banks and the post office. Opening an FD is extremely simple and can be done both online and offline. With advances in mobile banking, it is possible to open a fixed deposit with the help of the bank’s mobile banking app as well in a matter of a few minutes. A fixed deposit is one of the most popular investment options in India and is preferred by many people, especially senior citizens.

It is not necessary to have a savings bank account in the bank where you want to open a fixed deposit. It is possible to deposit your funds and open a fixed deposit as well. This makes it extremely convenient and easy for all types of depositors to open a fixed deposit. To open a fixed deposit, you just need to visit the bank branch and fill in a fixed deposit account opening form. You may need to submit KYC documents in case you are not a customer with the bank. Once this is done, you need to deposit funds and the fixed deposit will be opened.

One of the best advantages of opening an FD is the assured rate of return. The depositor knows in advance the fd rates. This helps a lot while planning. Banks display their fixed deposit rates for different tenures on their website and at their branches.

Senior citizens get an additional 0.5% return on investments made in a fixed deposit. This is beneficial for them since a greater return helps with planning their incomes. Some banks offer additional benefits to senior citizens who open fixed deposit accounts with them.

Under Section 80C of the Income Tax Act, any investment made in a 5 year tax saving fixed deposit gets a deduction. This deduction is up to Rs. 1,50,000. Depositors can take advantage of this and save on their taxes.

As an investment, a fixed deposit is excellent simply because of the flexibility it gives the depositor. Any amount is allowed as a fixed deposit subject to the minimum requirements of the bank. The tenure also can be freely decided by the depositor based on the minimum tenure fixed by the bank. These two options make it possible for a depositor to open an extremely short tenure fixed deposit and earn some interest.

It is also possible to opt for a sweep in facility where additional funds above a particular limit in savings account get converted into a fixed deposit. Whenever funds are needed, the fixed deposit gets liquidated and the customer earns interest for the time the fixed deposit was active.

Read- 6 Advantages of Having a Fixed Deposit Account