FD Tips: Everyone knows the benefits of earning interest from FD, today know its major disadvantages...


Making FD in a bank can be said to be the most popular option for investment in India. In this, you get the facility to invest as per your choice in less money. This is why bank fixed deposit (FD) remains the most popular investment option. These benefits make FD very attractive. But FD also has some disadvantages which are important to know about. These disadvantages include low-interest rates, lock-in of funds, penalty on withdrawal of money (saving tax on interest), no tax benefits to some extent, and fixed interest rates, etc.


Talking about the deficit, the first issue is reducing interest rates. FD interest rates do not seem to beat inflation. Currently, even though FD rates are increasing due to an increase in repo rate, FD is still lagging in beating the inflation rate. This means that even after investing in FD, the income does not exceed the inflation rate. Although the rates are increasing now, there has been a continuous decline in FD rates in the past.

The second big loss is the lock-in of the fund. When money is deposited in FD, a period is also fixed at the same time that you cannot withdraw your money for so many years. In adverse circumstances, a withdrawal facility is available, but a penalty has to be paid. Due to this, your money gets stuck in a way. When you go to withdraw your own money, you have to pay a fine. This is considered a big loss. That means it is not so easy to redeem your FD in cash.

Withdrawal penalties are a pain for any customer. Firstly, it is the customer who faces difficulty in withdrawing money. Secondly, if there is any difficulty in withdrawing one's own money, banks charge a penalty. The big problem in this is that money is not taken as a penalty, rather the interest rate of FD is reduced. This does not happen on money deposited in a savings account. You also get interest on savings, but you can easily withdraw your money whenever you want.


The customer deposits money in FD so that he gets good returns. But if tax has to be paid on that return, then the profit gets reduced. The interest received on FD is added to the taxable income of the customer. Therefore, no tax deduction is available on the interest earned. However, senior citizens get a rebate of up to Rs 50,000 on interest. There is also a big disadvantage of fixed interest rate. The interest rate is fixed for the entire tenure of the FD. Even if the rate increases, the FD rate will remain the same which was fixed earlier. This is a loss-making deal for the customers.

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