Investments are the way to grow your idle funds. They let your income compound overtime for financial growth. Among the various avenues, Bank Deposits get favoured for safety. They offer substantial growth without affecting your principal amount. You get back the invested amount with the accumulated interest at a predetermined rate. This eliminates risks to your hard-earned money.

Hence, Fixed and Recurring Deposit Accounts are the best choices for safe returns. Despite their popularity and wide usage, there is a lack of awareness of their salient features. This limits the optimal use of your parked funds. If you want to benefit from these investment tools, you must understand the facilities comprehensively. Here are some facts to shed light on the potential of Bank Deposits:

Fixed income

You get assured gains on your investments in Bank Deposits. These returns get fixed before starting the deposits. This means you get a clear picture of the expected income upon maturity. You may use this information for effective financial planning for future goals. The pre-decided interest rate remains constant throughout the tenure. Hence, you need not worry about getting mismatched returns on FD or RD.

Tax benefits

Investment income is subject to a tax deduction in India. Hence, you cannot forego the tax rules. However, FD and RD Account makes this reasonable considering your earnings. Your interest income is taxable only when it falls under the tax slab. As a result, a proportionate tax gets levied if you come under the 30% slab rate. The interest earned on Fixed investments gets deducted at the source, whereas Recurring Account does not levy TDS.

Collateral for Loans

You can never stay entirely prepared for emergencies despite your savings and investments. This is where Loans come to aid. But they require collateral submission to get a lower interest rate. Your RD and FD Account comes in handy in such times. You get to use them as collateral to avail of credit. Banks lend up to 90% of the deposits as the Loan amount.

Premature withdrawals

It is commonly advised to freeze your funds in Recurring and Fixed Deposit. Withdrawing them before maturity affects your long-term gains. Hence, banks charge a penalty for the same. Therefore, you should avoid withdrawal unless there is an emergency need. But this does not mean Deposit Accounts lack liquidity. They offer flexibility in choosing the tenure. Hence, if you decide the duration wisely, you need not resort to premature withdrawals.

Interest pay-out

The interest income gets accrued in different methods for Fixed and Recurring investments. In the case of Term Deposits, you select monthly, quarterly, half-yearly, or yearly pay-outs. This creates a regular income. But in the case of Recurring funds, you get to withdraw the accumulated interest only upon maturity. You get to track the process of the same on banking apps.