Why FD is Good for Short Term Investment

Fixed deposits are a top favourite investment option for investors. The reason is the 100% security of funds and a higher rate of interest than a savings account or other investment plans. Fixed deposits can be for the long term or short term, based on the time for which you wish to invest your funds. The tenure of the FD account ranges from a minimum of 7 days to a maximum of 10 years. 

Short Term Fixed Deposits

You invest your funds for not lesser than seven days to a maximum of 12 months in the short term fixed deposit. Fixed Deposits interest rate vary for every bank or NBFC and depend upon the tenure of the FD. You may select between a long term and a short term FD depending upon the time for which you wish to invest your funds. Currently, the rate of interest for Short term FD ranges from 3.0% to 6.5% for regular customers and 3.5% to 7.0% for senior citizens per annum. 

Fixed Deposits for short term investments

A large proportion of the Indian investors invest in FD intending to meet some future expenses. Due to this, they generally prefer short term FDs as this facilitates them to have their funds on hand when they want. Small business people, private or government employees, and retired senior citizens find short term fixed deposits as a very lucrative investment option. Below are some of the features of short term FDs.

Some Features and benefits of short term FD

  • The tenure of a short time fixed deposit ranges from a minimum of 7 days to less than 12 months.

  • You have to deposit money in this term deposit only once.
  • You can renew the short term fixed deposit on maturity, if you wish, for one more run.
  • The interest income on the invested funds is taxable as per the Income Tax Act, 1961 of the Government of India.
  • In case of an emergency, you can withdraw your funds from the FD account before maturity after paying a fine. 
  • The minimum amount with which you can have your short term FD varies from Rs. 5,000/- to Rs.10,000. 
  • Short term FD provides greater liquidity at a high rate of return. 
  • You can avail of a loan equivalent to 95% of your FD funds without any guarantor or elaborate paperwork.
  • Short term FDs have provision for nomination. 
  • The fund in such FDs can are eligible for consideration as margin money for some non-fund based services.
  • It is one of the safest forms of investment and is not under the influence of market forces or fluctuations. 
  • The interest rates are attractive, usually, double the rate of interest of savings accounts.

Short term FD is an excellent investment tool that is an ideal option for brief or short term savings. It is easy to open a short term FD account, easy to monitor, and has many benefits.

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