Finance

Debunking a few Fixed Deposit myths.

4:14 AM Kapil Kumar 1 Comments

There are various ways that you can come across some extra funds. It can be through inheritance or you might have received a bonus or your other investments might have matured. The important thing to remember is that you will not be able to earn profits on these funds if they are sitting idle in your savings account. Therefore, if you want to invest your money, investing it in Fixed Deposits is always a great idea.


But there are a lot of myths surrounding the investment in a Fixed Deposit and when it comes to your hard-earned money, it is always better that you clear all your doubts to avoid falling into any sort of trouble. So, here are a few myths that people generally have and why you shouldn’t believe in them:
1.       Myth 1:Fixed Deposits are only offered by the banks.

This is one of the most common myths that people have. Not only the banks, but there are many Non-Banking Financial Companies as well who provide you with the option of investing in Fixed Deposits. You should know that the Non-Banking Financial Companies offer better interest rates than the banks.

2.       Myth 2: You do not have to pay taxes on your Fixed Deposit investment.

You have to pay taxes on the interest that you earn on your Fixed Deposits and this will be counted under ‘Income from other sources’ when you are paying your taxes. If you earn more than INR 10,000 as interest during one financial year, your Tax will be deducted at the source and the amount of tax that you pay will be dependent on the tax bracket that you fit into. If you do not have any taxable income then you can avoid paying tax by submitting Form 15G or 15H.

3.       Myth 3: Breaking your Fixed Deposit is the only way to overcome a financial emergency.

No matter what the situation is, it is imperative that you do not break your Fixed Deposit. If you break your Fixed Deposit, the banks and other financial institutions will give you a lower rate of interest the next time you choose to invest in Fixed Deposits. If you really need some money then you can always opt for an overdraft facility. In an overdraft facility, you can choose to withdraw up to 90% of the invested amount and continue getting benefits on the rest of the money.

4.       Myth 4: You can avail benefits on all your Fixed Deposits.

While it might be true that you can avail tax benefits under the Section 80C on your Fixed Deposit investments, you cannot avail the tax benefits on all your Fixed Deposit investments. You can only avail this tax benefit if your Fixed Deposit has a lock-in period of 5 years. So, if you are looking to get some tax benefits from your investments, you can choose to have a lock-in period of 5 years on your Fixed Deposit scheme.

5.       Myth 5: The higher the number of payouts, the greater will be the interest rate that you earn.

If you choose to receive your payout every month or every few months, you will not get the benefits of investing in Fixed Deposits. When you choose to compound the interest that you earn, the monthly interest amount gets reinvested, which will eventually lead to you getting better rate of interest on FD.

Whenever, you are looking to invest your money, investing them in Fixed Deposits is always a good idea because the returns that you earn are always better than any other investment options. 

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