Are Fixed Deposits Good or Bad Investments Full Details

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Investments Full Details

Important Reasons Why Fixed Deposit Accounts Are a Good Investment Option in India

FDs are one of the best investment options for those looking for stable returns without being exposed to volatile market conditions. A fixed deposit offers a better return and high FD rates than a savings account in comparison with any other type of account. 

Availability of overdrafts

Bank customers can apply for an overdraft against their fixed deposit. A customer can use this facility even if they have an emergency cash requirement in the form of sudden cash.

Exemption of taxes

It is also possible to get tax exemption benefits by investing in fixed deposits. According to Section 80C, customers can claim exemption from taxes on investments made in fixed deposits under tax saving schemes.

Assurance of return

It is essential to understand that fixed deposit funds come with potentially no risk to your investment, and the return is not fluctuating, unlike other investment instruments in the market. FDs are an excellent way for beginners to get to know investing in the banking industry as they can invest even smaller amounts for a shorter duration, such as 15 days or three months for a long term.

Management of FDs

Managing your banking has become easier for customers with the advent of the internet. They can now manage their money by using a phone or a computer connected to the internet. 

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Important Reasons Why Fixed Deposit Accounts Are a Bad Investment Option in India

Generally, a fixed deposit seems to be a safe investment, as, after a long period of time, you should be able to claim your money back. It is possible that bank FDs can negatively impact your savings over time.  

Low-inflation returns from FDs

It estimates an average inflation rate of 9.76% in India between 2012 and 2014. In most cases, it is usual for a fixed deposit to give you FD rates of around 8.5% before and 7% after tax. Consequently, you lose money each year when you invest your money in a fixed deposit.

Premature withdrawal penalties

In most cases, if you close your fixed deposit prematurely, the bank charges you a fee of up to 1%. It deducts from the effective rate of interest, which is less than the original FD rates prevalent at the time of booking the FD. When choosing your FD’s tenure, consider your liquidity and the time horizon of the financial goals you want to achieve.

No tax-on-tax savings FDs

As a rule of thumb, here is a good point to remember is that interest earned on bank FDs, like tax-saving FDs, is eligible to be deducted under section 80C and is taxed under the depositor’s tax bracket. In other words, those with higher incomes may not be able to generate post-tax returns that exceed inflation over time from bank FDs.


After considering the benefits and drawbacks of a fixed deposit account, it is evident that this is an investment scheme for people who do not have a high-risk tolerance. A fixed deposit is the best investment scheme if you want fixed income in your account. 

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On the other hand, nowadays, banks have a sweep in service via which savings account balances can be deposited into a fixed deposit account until the consumer needs these funds. You can boost the returns on your fixed deposit account by enabling this option. Homepage


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