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5 myths about fixed deposits that you thought were true

  • Highlights

  • Get higher returns with company fixed deposits

  • Choose company FDs with high safety ratings

  • Learn how to avoid TDS on your FDs

  • Breaking an FD is a simple process

Fixed deposit is one of the most preferred investment avenues for investors, who are looking for guaranteed returns. While a fixed deposit is quite popular as an investment, there are several myths associated with it too. These myths may make it difficult for an investor to decide the best investment avenue.

To help you understand fixed deposits, here are popular myths and questions, most investors face. Read along to familiarise yourself with the right information on fixed deposits.


1. Company FDs offer more interest but how safe are they?

The truth is that company FDs can offer higher returns while ensuring higher safety than bank FDs. You must compare lenders, based on their safety ratings before selecting one. Bajaj Finance Fixed Deposit, for example, has MAAA (Stable) rating by ICRA and FAAA/stable rating by CRISIL.

This FD offers you guaranteed returns and is not affected by market fluctuations. Senior citizens can earn an attractive interest, and enjoy other benefits like flexible tenor and the option to choose your corpus as per your financial plan.

2. Is it impossible to avoid tax on FDs?

While FDs are taxable, it would be false to say that there is no way to avoid tax. You are taxed, only if your income exceeds Rs. 5,000 from a company in a single financial year. For senior citizens, this limit stands at Rs. 50,000 on a bank FD.

Also, if you don’t have any other source of income and your total income is lower than the tax bracket, you are exempted from paying tax. You just need to submit form 15G or 15H to avoid TDS. To fill 15G form without mistake, follow this "how to fill form 15G" guide.

3. More frequent interest payouts means higher income

You can choose to invest in a fixed deposit offering periodic interest payouts. With Bajaj Finance Fixed Deposit, you can choose the frequency of your interest payouts, from monthly, quarterly, half-yearly to annual options.

However, choosing a monthly interest payout doesn’t mean you’d gain a higher interest income. Rather, the FD interest rate is applicable for a period of 1 year and the gains are divided, based on the payout frequency that you choose.

Contrary to popular beliefs, a non-cumulative FD offers you lesser interest income than a cumulative FD, which adds your interest earnings to your corpus and allows your savings to compound over time.

4. It is difficult to break an FD

Breaking an FD is a simple process and depends on your fixed deposit provider and the terms governing your FD. You just need to be aware of the premature liquidation terms before you invest, to save yourself from heavy penalties. All you have to do is fill the application form, attach relevant documentation, pay any applicable charges and your FD will be liquidated.

5. Premature withdrawal is the only way to fund emergencies

This myth is absolutely untrue. Once you have invested a sum of cash in an FD, you will receive the amount, with interest upon maturity. If you withdraw prematurely, you could have to pay fines or penalties, which will be deducted directly from the amount that is due to you. Besides, another way of getting funds from your FD is to take a loan by using it as collateral.

Company fixed deposits have grown increasingly popular in the past few years, because of higher interest rates and exciting features they offer. Bajaj Finance Fixed Deposit is the safest company fixed deposit, which can enable you to gain high returns and grow your savings easily.

DISCLAIMER: The mentioned fixed deposit interest rates are indicative only, and may be subject to change periodically. Please check the interest rates on our website.

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