A bank fixed deposit (FD) is a popular investment option where you deposit a lump sum of money with a bank for a fixed period, typically ranging from a few months to several years. In return, the bank pays you a fixed interest rate on your deposit, which is generally higher than a regular savings account.
FDs offer several advantages:
- Safety: FDs are considered a safe investment because they are backed by the bank, and your principal amount is usually insured up to a certain limit.
- Fixed Returns: You know the interest rate and maturity amount in advance, providing financial stability.
- Liquidity: While FDs have a fixed tenure, many banks offer premature withdrawal options with a penalty.
- Diverse Tenures: FDs come with various tenure options, allowing you to choose the one that suits your financial goals.
- Tax Benefits: Some FDs offer tax benefits under Section 80C of the Income Tax Act.