Why to prefer Cumulative or Non-Cumulative FDs for Safe Investments?

Fixed deposits have been a tried and tested tool for long-term investment due to the security and guaranteed returns that they odder. It not only preserves your fund for the future but also increases your wealth. Moreover, with the updated Section 80C of Income Tax Act, senior citizens receive more tax exemption on FD. FD interest rate is also higher than the interest received on saving accounts, giving a huge financial benefit.

Tax Relief on Fixed Deposits

First and foremost, reason to consider FD as an investment option is the tax benefit one can avail by investing in fixed deposits. Under Section 80C of the Income Tax Act, investors can claim deduction up to Rs. 1.5 lakhs when they invest in tax saver fixed deposits. Moreover, according to the latest budget, earlier interests on fixed deposits were tax-free only up to Rs 10,000. However, now the limit has been increased to Rs. 50,000 for senior citizens. Hence, considering the latest budgetary changes, fixed deposits offer lucrative tax benefits for any investor.

Choose Fixed Deposits According to your Needs

You can choose any one FD depending upon your financial requirements:

Cumulative FDs – These types of FDs provide returns only once the deposit has reached maturity. Hence, if you are not in a hurry to get the returns and want to avail a huge amount beyond investment, opt for cumulative FDs. Bajaj Finance offers 7.85% interest on cumulative FDs which can increase till 8.20% interest rate for Senior Citizens.

Non-Cumulative FDs – If you want to generate a regular source of income through FDs you can choose non-cumulative FDs. They provide you a facility of pay-outs on a monthly, quarterly or half-yearly basis. This can be your post-retirement plan to meet the expenses on monthly basis.

Start FD with Minimal Investment and Tenor of your Choice

There is no huge, mandatory amount to start a fixed deposit account. You can invest in a FD with a small amount and choose the tenor to suit your needs. Company FD can be started from one year and can go up to five years whereas banks on the other hand offer FDs with higher durations. Along with that, short-term FDs help you get inflation-beating returns. Moreover, there is no limit to the number of FDs you can own. Choosing different tenors and different maturity dates give you more tax benefits on your annual interest earnings.

Fixed Deposits Can be Used to get Loan Against Securities

This is one of the important reasons to opt for fixed deposits as an investment option. At times, there may be unexpected financial requirement or family emergency for which you need to raise funds. Instead of going for other options, which provide money at exorbitant interest rates, FDs can be a smart option. Financial companies like Bajaj Finance provide an option to pledge securities like fixed deposits, shares and mutual funds to the NBFC, to receive loan against it. A loan against your fixed deposit can easily help you battle a financial crunch.

Stable Returns; Untouched by Market Fluctuations

Fixed deposits have no impact of market fluctuations on them. Hence, they are considered highly stable and safe investment option. Choosing a reliable company to invest your money is a good way to start. It is good to go for an AAA rated FD, so that your money remains safe. Bajaj Finance has the highest safety rating from agencies like CIBIL and ICRA which gives you the guarantee that your money is in safe hands when you invest with them.

Author’s BioAnkit Srivastava is a Google Certified Sr. Digital Marketing Strategist, Professional Blogger and Entrepreneur from New Delhi. He has already written many articles and blogs on various topics. You can follow his blogging journey on http://www.indiaataglance.com.