Summary-
Banks and Non-Banking Finance Companies (NBFCs) both provide fixed deposits, sometimes known as FDs, as investment products. For a set amount of time, you receive a fixed interest rate when you invest in FDs. You are aware of the FD return rate and the amount of money you will get at maturity when you make your investment. You also have the choice of selecting an interest payment schedule. A fixed deposit is the greatest option for risk-averse investors because it allows them to collect interest on the amount placed over time. Your funds are secured the minute you deposit them, and you can withdraw the interest at maturity.
Different financial institutions in India provide numerous fixed deposit kinds. The two main types of FDs are cumulative and non-cumulative. In cumulative deposits, the interest is paid at maturity along with the principal amount rather than during the currency of the deposit. In contrast, interest is paid along with the deposit’s payout frequency in the case of a non-cumulative deposit. However, the FD return rate is the same for both programs. You have the option of receiving interest payments on a monthly, quarterly, half-yearly, or annual basis.
Here are the different types of fixed deposits with different interest rates:
- Standard fixed deposits-
It is the common FD program offered by all financial institutions. You can start this FD with just Rs. 15,000 and get interest up to 8.35% per annum. Deposited funds have a set tenure. The financial institution has already decided on the interest rate. The length of tenure might be between 7 days and 10 years. More interest is paid than in a savings account.
- Tax-saving fixed deposits-
As their name suggests, these deposits help reduce taxes and are accessible at practically all financial institutions. One can get up to 7.65% interest rates on these investments. Tax exemptions are available up to Rs. 1.5 lakh each year. These FDs have a 5-year ‘lock-in’ term during which you are not permitted to withdraw money. All deposits must be made in one single sum.
- Special fixed deposits-
Similar to typical FDs, these investments are made for predetermined periods. The primary difference is that if you don’t remove the money within the designated time period, you will earn more interest than with Standard FDs. Here the interest rate that you can get is up to 8.60% per annum.
- Regular income fixed deposits-
You may rely on the money from your savings account to pay your monthly bills if your income is small. In this case, this FD type is ideal for you. You can invest the money in a regular income fixed deposit account rather than investing it in a savings account. Moreover, you will get more interest than you can earn from a savings account. Here, you will get up to 7.30% interest rates per annum.
- Senior citizen fixed deposit-
Citizens older than 60 years can open an FD account under the senior citizens’ fixed deposit scheme. These FD programs offer an interest rate that is approximately 0.50% higher than the standard interest rates. This plan also allows for flexible tenures. You can use a fixed deposit return calculator to understand the difference in the interest amount and FD calculation.
- Flexi fixed deposit-
FDs of this kind are those that are connected to your savings account. You can open an FD and link it to your savings account with the first deposit of your choice. Additionally, you can set a limit on your savings account, and any excess funds will be moved to the FD.
- Corporate fixed deposits-
Corporate fixed deposits are deposits made by investors with firms for a set period of time and a set interest rate. Financial institutions and Non-Banking Finance Companies (NBFCs) also provide this kind of deposit. Corporate Fixed Deposit plans provide greater returns on your investment, but picking the correct provider is crucial. A reputable company FD scheme would typically yield a higher return on investment than bank FDs because these plans offer the highest FD interest rates. Reputable credit rating companies like CRISIL allow you to verify the credit ratings of the company you want to invest in.
Fixed deposit accounts offer guaranteed returns on your investment since the RBI regulates them. As a result, these investments are less risky than other types of investments, and investors also earn a fixed rate of return on their investments.
Online FD account opening takes only a few minutes for depositors. You can determine the returns of various FD schemes and select the one that delivers the best interest rate with the least amount of paperwork.