Top Benefits of Opening a Fixed Deposit (FD) Account in 2024

Fixed deposits (FDs) have been a famous investment avenue for Indians for decades. Even in 2024, FDs will continue to be a wise investment choice owing to their array of benefits. This article discusses the top payoffs of opening an FD account in 2024.

Top 5 Benefits of Opening a Fixed Deposit (FD) Account in 2024

Here are the top 5 benefits of opening a fixed deposit account in 2024.

1. Easy Accessibility During Emergencies

FDs come with flexible premature withdrawal options. Most financial institutions in India allow part or complete withdrawal of the FD amount in case of emergencies.  They would require you to pay a minor penalty.

You can access your funds instantly or within a few days to cover medical or financial exigencies without having to depend on external sources. This feature of the FDs makes them a reliable backup plan.

2. Flexibility of Tenure

FDs allow you to choose tenures ranging from 7 days to 10 years based on your liquidity needs and investment horizons. For example, short-term FDs with 7-29 days of tenure can help you manage surplus funds for the near future. FDs having medium-term tenures of 6 months to 1 year offer better returns.

Long-term FDs having tenures exceeding one year can help you fetch the highest interest rates. Notably, as an intelligent investor, you can park your FDs across several tenures to meet short- and long-term goals.

3. Guarantee of Returns

FDs offer guaranteed returns that are fixed at the time of investment. You get fixed returns irrespective of the market volatility or a crash in the economy. While the stock market investments in equities carry high risk, FDs can give you assured returns.

Opening an FD account with a reputable financial institution like IDFC First allows you to forecast returns more accurately. FD returns across financial institutions range from 5 – 8%, making them a reliable fixed-income investment instrument.

4. Safety and Security

FDs are incredibly safe. Financial institutions across India offer deposit insurance coverage to cover the rare case of their failure or collapse. Moreover, the regulations imposed by the RBI ensure solid checks and balances to protect your money.

Financial institutions in India also offer special (higher) interest rates on senior citizens’ FD accounts to provide them with fixed assured incomes. Hence, FDs can help investors eliminate market risks associated with equities and mutual funds.

5. Tax Benefits

FD interest income for senior citizens up to ₹ 50,000 is tax-free under Sec 80TTB of the Income Tax Act. The exemption limit for non-senior individuals is Rs. 40,000 under Sec 80TTA of the same act.

Thus, FDs can help you earn tax-free passive income. They also offer you better tax efficiency than savings accounts and cash holdings, which are fully taxable. Further, fixed deposit accounts come with a deduction benefit of up to ₹1.5 lakhs under Section 24 of the Income Tax Act. This makes FDs a prudent tax planning tool.

Conclusion

FDs will continue to be a wise investment choice for investors in 2024 due to their high liquidity, flexibility of tenure, guarantee of returns, high safety, and tax benefits. Depending on your income tax slab and liquidity needs, FDs can offer optimal risk-adjusted returns.

Fixed deposits (FDs) have been a famous investment avenue for Indians for decades. Even in 2024, FDs will continue to be a wise investment choice owing to their array of benefits. This article discusses the top payoffs of opening an FD account in 2024.