In today's time, everyone wants to increase their income. In such a situation, people think about investing and look for schemes where the money is completely safe and gets high returns. When it comes to low risk and high interest, there is no better option than a fixed deposit.
People have the most trust in Fixed Deposit Interest. From youth to senior citizens, everyone likes to invest in FD. At the same time, financial experts advise investors to include FD in their portfolios. But on the one hand, there are many benefits of investing money in FD.
At the same time, there are also disadvantages of investing in fixed deposits. Most people are not aware of the disadvantages of fixed deposits. Let us know in detail about the advantages and disadvantages of fixed deposits in the news below-
Most people in the country like to invest in fixed deposits. Most people believe that money is completely safe in fixed deposits. And there is a guarantee of return in it. At the same time, if seen, this is also true to a large extent. But have you ever wondered if your bank sinks, what happens to your FD or the amount deposited in the account? There are many such things about which you are not told by the bank. Know about it here and about all the other benefits available on fixed deposits-
Amounts up to 5 lakhs remain safe-
If the bank in which you have made an FD goes bankrupt, then you get an insurance cover of up to 5 lakhs. Most people do not have this information. This insurance cover is given on the amount deposited in the bank under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. Earlier the deposit insurance on bank deposits was one lakh rupees but now it has been increased to five lakhs.
But the thing to note here is that if your deposit amount is more than 5 lakh rupees and the bank collapses, even then you will be given only up to 5 lakhs by the bank. The remaining amount will be lost. For example- if you have made an FD of 10 lakh rupees in a bank and that bank collapses, then you will get back only 5 lakh rupees, and you will have to bear a loss of 5 lakh rupees.
Also, know about these benefits of FD-
- Whether you get FD done for one year, 5 years, or 10 years, you know how much money you will get at the time of maturity. This is the reason why FD is considered an investment with guaranteed returns.
- You can keep the tenure of FD according to your needs. In many banks, you are given the option of FD from 7 days to 10 years. You also get interest in it according to the tenure. Apart from this, you get the benefit of compounding interest on FD, that is, you get interest on the amount invested, as well as interest on interest.
If you suddenly need money, then without breaking the FD, you can take a loan against it. Banks give 90 to 95 percent of the total amount of FD as a loan. Usually, the interest on the loan received against the FD is one percent more than the FD.
If you get FD for 5 years or more, then you get a chance to claim tax exemption under 80C. If you get FD for less than 5 years, then you will have to pay tax.
Most banks give 50 basis points i.e. 0.50% more interest to senior citizens than common people. Apart from this, some banks give an additional interest of 0.25% to 'Super Senior Citizens' aged 80 years or above. In such a situation, this is a beneficial deal for senior citizens.
Know what are the disadvantages of investing in fixed deposits-
Money experts believe that despite being a great investment option, FDs also have drawbacks. Therefore, an investor needs to be aware of it. There are many advantages of investing in FDs and some disadvantages too. Today we are going to tell you about 9 disadvantages of investing in FDs.
1. Low Return
The disadvantage of investing in fixed deposits is that fixed deposits offer a fixed rate of interest, which is usually lower than the returns given by other investment options like stocks or mutual funds.
2. Fixed interest rate
Another drawback of fixed deposits (FDs) is that the interest rate is fixed at the time of application. When you open an FD at a fixed interest rate, you continue to receive interest at that rate till the end of the term.
3. Lock-in-period
Once you invest in a fixed deposit, your money is locked for the period of the deposit. This means that you cannot use your money until the period is over, even if you have an emergency.
4. TDS
The interest you earn on FDs is taxable income. This means that you have to pay tax on the interest earned. FD interest falls under the category of 'Income from Other Sources'.
5. Inflation
Even after taxes are taken into account, the return on investment should ideally be higher than the rate of inflation. The interest rate on FDs is mostly lower than the rate of inflation.
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