With a fixed deposit, you can deposit money for a predetermined amount of time and earn interest on your account. In India, all of the major banks provide a variety of FD account options.
Risk-averse investors would benefit most from a fixed deposit, so that they receive interest on their initial investment gradually. Your money is locked in the minute it is deposited, and you can access the interest amount when it matures. Learn the different types of fixed deposit accounts:
Consistent Fixed Deposits:
Financial organizations typically offer Regular Fixed Deposits as their standard product. These fixed deposit options offer a strong defense against inflation. The scheme terms determine whether the interest is paid out monthly, quarterly, half-yearly, or annually.
With this kind of FD, the investor parks the money for a predetermined time, between seven days and ten years.
Compared to saving bank deposits, the interest rate offered is higher. Depositors may obtain loans and overdraft privileges on these deposits. These have an early maturity penalty that is less than the interest.
Tax Saver Fixed Deposits:
Tax Saver Fixed Deposits are the ideal investment option for reducing your taxes. However, due to their five-year lock-in term, premature withdrawal may result in the reversal of tax benefits.
Tax-Saver Fixed Deposits offer a return rate comparable to that of regular FDs. For investments made in this kind of FD, a Section 80C deduction of up to Rs. 1.5 lakh from taxable income is available. This FD has a taxable interest.
Because of the five-year lock-in term, it is not possible to withdraw the tax-saving FD early. This kind of FD does not offer loans or overdraft capabilities. You can access this fixed deposit account via the money sharing or UPI apps.
Floating Rate Fixed Deposits
A floating-rate fixed deposit has an interest rate that fluctuates in line with a reference rate, such as the Treasury Bill Yield or the RBI’s Repo Rate, during the deposit’s duration.
In contrast to other kinds of fixed deposits, movements in the reference rate affect the returns on this particular one.
This suggests that the interest rates on floating-rate fixed-income securities (FDs) will rise if the RBI raises the repo rate, enhancing the investment’s returns without requiring conversion to cash or an automatic renewal. Additionally, it guards against inflation and potential interest rate directionality for investments.
Senior Citizen Fixed Deposit
The Senior Citizen FD Scheme is a specific fixed deposit program for people 60 years of age and older. Banks and NBFCs offer an extra interest rate that is typically 50 basis points higher than the ordinary fixed deposit interest rate.
Additionally, a few banks and non-bank financial institutions (NBFCs) provide extra interest rates, ranging from 0.20% to 0.30%, on top of the senior citizen fixed deposit rates. However, These higher interest rates are only offered for a limited time under a few unique FD plans.
Wrapping it up:
If you are in your 20s or 60s, you can consider fixed deposit accounts according to your favorable interest rates. For instance, if you inherit assets, one of the best investments is a fixed deposit. Once you do it, you can send cash whenever you want, as you can generate a fixed amount in a fixed time period.