Question

Write short notes on the following:
Fixed Deposit Account.

Answer 1

Fixed deposit is investment instruments offered by banks and non-banking financial companies, where you can deposit money for a higher rate of interest than savings accounts. You can deposit a lump sum of money in fixed deposit for a specific period, which varies for every financier.
Once the money is invested with a reliable financier, it starts earning an interest based on the duration of the deposit. Usually, the defining criteria for FD is that the money cannot be withdrawn before maturity, but you may withdraw them after paying a penalty.

Features of Fixed Deposit

• Fixed deposit enable investors to earn higher interest on their surplus funds
• You can deposit money in a fixed deposit account only once, but to deposit more money, you need to create another account
• Though liquidity in fixed deposit is lesser, you can look for higher rates of interests, which are higher in case of company fixed deposit
• Fixed deposit can be easily renewed
• Tax is deducted at source, from interest on Fixed Deposit as applicable, as per the Income Tax Act, 1961.