Savings Accounts

Are Fixed Deposits Better Than Savings Accounts?

by Alison Davis
Published: Last Updated on 667 views

If you’ve ever opened a bank Savings account, you’ve probably heard the term “fixed deposit.” Fixed deposit is a type of bank account that offers high-interest rates on your deposits.

Storing your money in a savings account can be tempting, but the trade-off is the interest it earns. Savings accounts pay far less than what a fixed deposit return would yield. In this article, we’ll compare Fixed Deposits with Saving accounts for you and help you decide which your best investment options are.

What exactly are fixed deposits?

Fixed deposits are financial instruments offered by banking institutions, post offices, as well as non-bank financial companies (NBFCs). A fixed deposit provides better rates of interest than a standard savings account. Just like the name implies, the deposit amount, as well as the rate of interest, remain set during the lifetime of the bank fixed

deposit, which now offers interest ranging from 3% to 6% rates, which do not vary regardless of marketplace volatility. Furthermore, investors can choose tax-saving fixed deposit plans that allow them to get tax deductions under Section 80C of the Income Tax Act up to a limit of Rs.1.5 lakhs.

What exactly are savings accounts?

Savings accounts can be defined as deposit accounts created with a banking or any other non-banking institution that pays a reasonable rate of interest on the cash deposited. Various banks provide interest rates ranging from 2% to 4%. This account is by far the most liquid type of investing since it may be redeemed immediately. As a result, it is equivalent to having cash on hand but held in a secure location. Furthermore, a savings bank account is indeed a risk-free investment with guaranteed returns.

Under Section 80TTA of the Income Tax Act, interest income from any savings account is deductible from tax up to Rs 10,000; nevertheless, the interest generated over the given threshold is taxed according to the individual’s tax bracket.

Fixed deposits vs. savings accounts: which is the better option?

When saving money is your main objective in life, good saving habits are a must. You might consider yourself a disciplined person but no one can be very disciplined if they do not have the drive to save and invest. Fixed deposit offers the investor an opportunity to get high-interest returns by depositing regular funds to a bank or any other financial institution.

A Bank Fixed Deposit

The most popular investment choice in India since it provides guaranteed returns bank fixed deposit. Is an appropriate option for conservative individuals with lower-risk levels of tolerance who want to receive set returns for theirs. Financial objectives.

Similarly, by carefully determining the tenure, it may take into account the liquidity needs but also short-term aims. Furthermore, it offers older residents a larger rate of interest than traditional bank savings accounts. A bank fixed deposit might also be beneficial for income tax planning under Income Tax Act Section 80C. You can easily calculate an estimated return amount by using online FD calculator tools.

Bank savings accounts are the initial step in your investing path. It also takes good care of an individual’s liquidity needs. However, putting a significant quantity of money in any bank savings account and leaving it inactive is not a good idea because the returns are minimal. Experts recommend that you set aside a specific amount of cash for your daily necessities and emergencies, and then invest the remainder to help your wealth grow.

So, you need to have your investment objectives clear before choosing an investment choice and make educated judgments. Opening a savings account is just the first financial activity that every individual needs to do. Now, if you compare the traditional savings account to fixed deposits, the return rates are usually higher for the latter but they come with a lock-in period. So, it boils down to the preference of the investor in where he or she wants to invest the funds.

Why should you use online FD calculators?

With the help of online FD calculators, it is easy to come up with a plan for your investments. You can find out how much you’re entitled to at the conclusion of your maturity term, and arrange them appropriately. And remain on track for your financial goals.

The bottom line

The short answer is that both fixed deposits and savings accounts are great investment options for you. Both would help you invest in low-risk instruments. You must start with your personal finance goals. We recommend that you make whatever investment choices are best given your circumstances.

Ultimately, your choice of one over the other will depend on the terms of your current bank accounts (if any) and. What kind of returns you’re looking to receive. Also, be sure to compare the reviews on some of the top banking and non-banking financial institutions before opening a savings or fixed deposit account.

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