Fixed Deposits: Things you should know before investing in FDs

NEW DELHI: Fixed Deposit is a long-term investment tool that helps you save and invest money from your monthly income. The investments made in fixed deposits provide you guaranteed returns over a fixed period of time.
Amongst the most reliable and preferred means to invest, fixed deposits provide a fixed interest and profit when investments are made for a particular time period.Also, these are chosen by most of the people as a tax saving option.
What are the benefits of fixed deposits?
Provide fixed returns: You get assured returns when you invest in fixed deposits. Unlike other investment options where returns are not fixed due to the market volatility, fixed deposits offer fixed returns irrespective of the amount you have invested. This is amongst the main reasons that fixed deposits is the safest choice of many people and is a part of their investment portfolio.
Flexible investment tenure: Many banks allow you to invest in fixed deposits that have a duration of 7 days to up to 10 years. Owing to this, FDs are a good option for short-term, medium-term and long-term financial goals. Also, the rate of interest varies on the basis of the investment time period that you select.
FDs are liquid: Liquid assets are the ones that can be easily converted into cash as and when required. While you are required to pay a penalty for premature withdrawal of FD but still it is considered as the smartest and safest investment option. If there is an emergency, you will have to pay a small premature withdrawal fee and utilize the money for your expenses. Owing to this facility, you can always depend upon the amount saved in their fixed deposit amount.
Tax benefits: You can save on tax with the tax-saving FDs that have an investment time-period of 5 years. Under Section 80C of the Income Tax Act, you can claim a tax deduction of up to Rs. 1.5 lakh on interest earned on your FD.
Loan against FD: A fixed deposit is not just a smart saving option, but also provides numerous benefits. For instance, many banks provide the facility of loan against FD. The account holders are allowed to apply for a loan of 90% of their principal and interest amount. If there’s a requirement of a quick loan to handle a financial emergency then loan against FD can be a good and handy option.
How to open a fixed deposit account?
Users who are interested in opening a fixed deposit account can open one through two ways, online and offline. Opening an FD account online is easy nowadays. Those who have an internet banking account can open an FD account themselves. All you have to do is fill the online form with your bank and submit it.
Besides, one can open an FD account offline too. For this, you need to visit your nearest bank branch, get the application form and submit it with the required documents.
What are the documents required to open a fixed deposit account?
Every bank requires certain documents to open a fixed deposit account. The applicant is required to submit the documents along with the application form for opening a FD account. Here is the list of documents that you need to gather for submission:
Proof of identity:

Proof of address:

Passport size photographs