An Insight into Different Types of Fixed Deposits

A fixed deposit is a time-based investment, where the amount invested is returned at a pre-determined date. Fixed deposits are one of the most common ways to save money in India.

FD online may be opened for periods ranging from 7 days to 10 years and offer an interest rate that varies according to the term chosen. The longer the term, the higher the interest rate. Interest can be paid out at maturity, or it can be reinvested into the fixed deposit account.

Several different types of fixed deposit accounts are available in India, each with its own features and benefits. Let’s talk about the common type of Fixed Deposits.

Cumulative Fixed Deposit

The interest earned is reinvested into the account and compounds over time. This type of account offers a higher interest rate than a regular fixed deposit account, as the funds are locked in for a longer period.

Non-Cumulative Fixed Deposit

The interest earned is paid out to the account holder at regular intervals. This type of account offers a lower interest rate than a cumulative fixed deposit account, as the funds are not locked in for a longer period.

Tax-Saver Fixed Deposit

A special fixed deposit account that offers tax benefits under Section 80C of the Income Tax Act. The minimum investment period for a tax-saver fixed deposit is 5 years, and the interest earned is taxable.

Recurring Deposit

The account holder agrees to regularly deposit a fixed sum of money into the account. The funds are then reinvested into a fixed deposit for the chosen tenure. Recurring deposits offer an attractive interest rate, as the funds are locked in longer.

Joint Fixed Deposit

This fixed deposit is an account held by two or more people. This type of account offers the same features and benefits as a regular fixed deposit account but with the added security of multiple account holders.

Senior Citizen FD

It offers a higher interest rate than a regular fixed deposit account, as the funds are locked in for a longer period. In addition, senior citizens are exempt from paying tax on the interest earned from a senior citizen FD.

Company Deposits

Company deposits are fixed deposits offered by companies other than banks. These deposits offer a higher interest rate than bank deposits, as they are considered to be a higher risk investment.

NRIs FDs

Non-resident Indians (NRIs) can also open fixed deposit accounts in India. These accounts offer the same features and benefits as regular fixed deposit accounts, but with the added benefit of earning interest in a foreign currency.

Flexi Fixed Deposits

It allows the account holder to make partial withdrawals from the account without breaking the fixed deposit. This type of account offers a higher interest rate than a regular fixed deposit account, as the funds are locked in for a longer period.

Final Word

Now that you know about the different types of fixed deposit accounts available in India, you can choose to open FD account per your needs. Talk to your bank today about opening a fixed deposit account. The best part is now you can open a fixed deposit account online from the comfort of your home. So, if you are looking for a risk-free and profitable investment option, choose fixed deposit.