A Fixed Deposit (FD) is a type of investment offered by banks and financial institutions, where individuals can deposit a lump sum amount for a fixed period of time at a predetermined interest rate. The interest rate for a fixed deposit is typically higher than the interest rate offered on savings accounts, and the investor is guaranteed to receive the principal amount along with the interest earned at the end of the deposit term.
Fixed deposits typically have a minimum investment amount and a fixed investment tenure, ranging from a few months to several years. The interest rate offered by the bank or financial institution may vary based on the investment amount and tenure.
Fixed deposits offer a fixed interest rate for the entire tenure of the deposit, which remains constant regardless of changes in market conditions or interest rates.
Fixed deposits offer guaranteed returns, as the investor is guaranteed to receive the principal amount along with the interest earned at the end of the deposit term.
Fixed deposits are considered to be low-risk investments as they are offered by banks and financial institutions and are typically backed by government deposit insurance schemes.
In case of an emergency, the investor can withdraw the funds from the fixed deposit before the maturity date, but may be subject to a penalty.
The interest earned on fixed deposits is taxable as per the investor's income tax slab.
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