Investors have always preferred Fixed Deposits (FD) for parking their money over a shorter term than mutual funds. This is mainly because of attractive SBI FD rate of interest and other factors. Keep reading to know them in detail and understand their popularity.
Benefits of FD over Mutual Funds
The benefits of selecting FD over mutual funds for the purpose of investment are as follows:
- Guaranteed returns: You can get assured returns in the form of interest at fixed intervals. This is beneficial as you can estimate them beforehand and accordingly plan your finances.
- Simple financial instrument: There are not many complications associated with opening your account. Also, the functioning of this scheme is simple and easy to understand.
- Extremely safe to invest: This is a less volatile investment when compared to mutual funds. Hence, if you have a low risk appetite, you can consider this scheme as a good option.
- Availability of tax benefit: You can receive tax benefits of up to Rs. 1.5 Lakhs per year according to Section 80C of the Income Tax Act. Thus it aids you to save sufficiently on your investments as well.
Apart from this, there are several other benefits of FD that investors consider to make this choice.
Advantages of FD Accounts
Other advantages of FD account are as follows:
- Lower deposit amount: The minimum deposit amount is Rs. 1,000 for FD scheme. Hence, it proves to be an easily accessible option as you can instantly start your investment.
- Attractive interest rate: Financial institutions offer competitive interests on FDs. Thus, you can earn sufficiently from this investment, without any threat to your current finances.
- Periodic pay-outs available: You have the flexibility to select the frequency of pay-out as per your convenience. This is beneficial as it can act as a regular source of income.
- Availability of auto-renewal: Several financial institutions offer option of auto-renewal of your FD accounts. This is advantageous as you can periodically increase your investments.
- Flexible tenure options present: You have the flexibility to select an appropriate tenure considering your financial goals. So, if you have a short-term goal, you can choose a lesser duration and vice versa.
However, you should note that there are some specific people and entities who can invest in FDs.
Eligibility Criteria for FD Scheme
The following people are eligible for depositing money under this scheme:
- Non-Resident Indian individuals
- Sole proprietorship firms
- Partnership firms
- Resident Indian individuals
- Hindu Undivided Families (HUFs)
- Private limited companies
- Trust accounts
If you belong to one of the above categories, you can proceed with the application to invest in this scheme.
Steps to Apply for FD Scheme
Below are the steps that you should follow to apply online for this scheme:
Step 1: Visit the online portal of financial institution.
Step 2: Log in to your profile using your credentials.
Step 3: Click on ‘Deposit Schemes’ tab.
Step 4: Select ‘Term Deposits’ from the available options.
Step 5: Once done, click on ‘e-fixed deposit’.
Step 6: Choose the type and tenure of FD.
Step 7: Select the account from where you want to withdraw money for FD.
Step 8: Input the amount that you want to invest in this scheme. Tick the checkbox if you are eligible for special interest rates.
Step 9: Choose the frequency of interests that you want to receive. Choose auto-renewal if you want to automatically renew your FDs.
Step 10: Finally click on ‘Submit’ button.
Furthermore, you can also choose to apply for it offline by following the steps below:
Step 1: Visit the physical branch of your preferred financial institution.
Step 2: Fill out the FD application form with accurate details.
Step 3: Review the form and sign it in the required areas.
Step 4: Attach all the essential documents carefully while submitting the form.
Step 5: Complete the payment to open the FD account.
Additionally, you should also keep the necessary documents ready to instantly produce them when required.
Documents Required While Applying for FD scheme
You will need the following documents while opening an FD account:
- Identity proof documents like Aadhaar card, driving licence, passport, and voter’s ID card.
- Age-proof documents like birth certificate and matriculation certificate.
- Address proof documents like utility bills, ration card, driving licence, and passport.
- PAN card or Form 60/61.
- Bank account detail papers.
However, you need to carefully analyse certain before proceeding to make the most out of your investment.
Things to Analyse before Investing in FD Scheme
Following are some crucial things that you should analyse before investing in an FD scheme:
- Compare the interest rates that various financial institutions offer to their customers. Accordingly, select the right one to maximise your income.
- You should choose between a cumulative FD and a non-cumulative FD as per your financial goals for catering to your financial needs.
- Select an appropriate tenure of investment to withdraw the entire amount along with the interest at the correct time you need the fund.
- You should carefully determine the mode of depositing your money. You can go for online modes if you are accustomed to them otherwise opt for online mode.
Considering these benefits, investors often prefer FDs as an investment option over mutual funds. However, before proceeding, it becomes essential to determine SBI FD rate of interest to estimate your income from investment and accordingly select the tenure.