Term Deposits, Stocks and Mutual Funds are the three broad categories of investments in India. Out of which term deposits are considered the safest ones when compared to Stocks and Mutual Funds. Term Deposits are further divided into Fixed Deposits and Recurring deposits. The major difference between FDs and RDs is that in FD you invest only one time whereas in Recurring Deposit you invest regularly after an interval of a month. Here are some quick facts about FD before you invest in them:
One of the safest investment options- Since FDs are associated with the Reserve Bank of India the likelihood of default on your interest earnings is low. Your principal amount will also be reimbursed to you after the maturity of your FD. Since your FD amount is insured, it means your investments are safe even if your lender faces any challenges such as bankruptcy.
There is tax to be paid on the interest you earn- If your earnings are more than Rs.10000/- in a given financial year then you need to pay tax on additional income
Overdraft facility- This facility ensures that you can have a loan against your FD
The difference in Rates of Interest- Banks and NBFCs have their different policies and based on these policies they have different rates of interest. You have to put your efforts in checking with various banks and NBFCs for which one is providing more