Fixed Deposits are one of India’s most popular investment options. They also offer the most stable and safest way to grow your savings with time. However, if you are a first-time investor looking for portfolio diversification, correctly opening an FD is crucial. Here are essential tips to have a smooth FD opening process:
Interest rates
When opening the account, FD interest rates play a crucial role. The interest rate offered on FDs changes from bank to bank and depends on your chosen tenure. Longer tenures provide mainly higher interest rates. So, before opening an FS, research the current interest rates and opt for the one that matches your financial goals perfectly.
Tax implications
While FDs are a safe investment option, it is essential to consider their tax implications. The interest earned on FDs is taxable, and the rate entirely depends on your income tax bracket. Choosing an institution that offers tax-saving FDs that not only come with a lock-in period but also provide tax benefits under Section 80C of the Tax Act is advisable.
Nominee
You should nominate your loved ones when you open a Fixed Deposit. Your nominee will get the entire amount in your absence in unforeseen situations. By choosing a nominee, you can ensure that your invested amount will safely be given to your loved one without complications. If you need to fill in the nominee details, it can get complicated for your loved ones to claim your FD investment returns.
Auto-renewal
If you wish for a hassle-free FD investment, opting for an auto-renewal facility can be a wise yet helpful route. All FD holders provide it. When you invest in an FD through a Banking app or a bank, you must instruct them to auto-renew. This way, upon maturity, the principal amount and the accrued interest will automatically get reinvested for a further tenure chosen by you.
Tenure
Choosing a suitable tenure is crucial for your FD. It comes with various tenure options ranging from a few months to several years. So, you must align your investment horizon with your FD tenure. So, opt for a shorter tenure if you seek liquidity and a longer tenure if you aim for better returns.
Credibility of the bank
Before you open an account or invest your hard-earned money through any financial institution, it is essential to check their credibility. You should always opt for well-established, trustworthy banks with a proven track record. A reliable bank ensures the safety of your principal amount and minimises any chances of default.
Conclusion
FDs offer a stable and low-risk opportunity if you wish to safeguard and increase your savings. However, taking care of certain aspects is of utmost importance. By following the tips mentioned, you can make the right choices and maximise the benefits of your FD investments with time.