A Fixed Deposit (FD) is a type of financial instrument offered by banks and NBFCs that gives investors a higher rate of interest.
Then compared to a regular savings account, till the fixed maturity date. There may or may not need to open a separate account.
Fixed Deposit Scheme Offered by Banks in IndiaAxis Bank Fixed Deposit | HDFC Bank Fixed Deposit | SBI Fixed Deposit
How Does a Fixed Deposit Account Work?
Whenever you open a fixed deposit account you put your money in a system where the amount gets locked for a specific tenure. You will get interest compound interest on the fixed deposit amount. This means the interest earned gets added to the principal in every specific period.
As you know the tenure period is flexible for fixed deposits you can manage multiple fixed deposit accounts across different tenures. By this, you can get more out of your investments.
Types of Fixed Deposit Schemes in India
Normal Fixed Deposit
In this type of fixed deposit account you can deposit you money for a fixed time period. Tenure can range from 7 days to 10 years. Interest rate you will get is higher than normal saving account.
Tax-Saving Fixed Deposits
Tax exemption up to 1.5 lakh one principal deposit in a calendar year. There is lock-in period of 5 year within you cannot withdraw deposit amount. It’s always only one time lump-sum deposit.
Senior Citizens’ Fixed Deposits
This fixed deposit scheme is available for the individual over and above 60 years of age. Senior citizens are eligible for special interest rates and flexible tenure.
Cumulative Fixed Deposits
In this fixed deposit scheme interest rate compounded every quarter or year and paid at the time of maturity. This is the best FD scheme helps you grow your savings.
Non-Cumulative Fixed Deposits
If you invest in non-cumulative fixed deposit you will get interest monthly, quarterly, yearly or half yearly as per your choice. This is best suited for pensioner people who are looking for regular source of income.
Flexi Fixed Deposits
This fixed deposit scheme is linked to your bank account. Here is monthly shuttle in between your savings account and fixed deposit.
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Fixed Deposit (FD) Key Features in 2022
- Guaranteed returns on the investment
- Monthly, quarterly, or yearly interest income
- Power of Compounding interest
- Loan against fixed deposit
- Senior citizen get higher interest rate compared to the general public
- Safe investment option
- Flexible tenure period
- No cap on the maximum deposits
- Option to earn over the period of time
Fixed Deposit (FD) Eligibility in 2022
Below are the most important eligibility criteria
- Indian resident
- Senior citizens
- Partnership firms
- Individuals or joint investors
- Societies or clubs
- Sole proprietorship
Documents Required for Open a Fixed Deposit Account
- Proof of Identity: PAN Card, Aadhaar Card, Voter ID, Photo Ration Card, Senior Citizen ID Card, Driving License
- Proof of Address: Post Office Identification card, Utility Bills, Bank statement with cheque
How to Obtain Fixed Deposit Form?
There are mainly two ways to collect fixed deposit form.
- Go to the nearest bank branch of your choice you want to invest in a fixed deposit
- You can also download the fixed deposit form from official bank website
Tips on How to Choose the Best Fixed Deposit
- Always compare different fixed deposit interest rate offer by different banks
- Decide which type of scheme you want to invest in like cumulative or non-cumulative FD
- Select the bank with good reputation in customer serving and smooth process of opening fixed deposit account
- Check the lender credibility in order to confirm fixed deposit safety
Advantages of Fixed Deposit in India
- Assured Returns: Fixed deposit scheme offered the guaranteed returns.
- Offers Great Flexibility: FD offers flexible tenure. Depending on the investor’s goal they can invest in a short-term fixed deposit or long-term fixed deposit.
- High Capital Appreciation: Under the cumulative fixed deposit the interest rates are compounded monthly quarterly, half-yearly and yearly.
- An additional Source of Income: People invested in a non-cumulative fixed deposit scheme can decide the interest payout that means the extra source of income.
- Low Risk: The market risk does not affect the returns on fixed deposits.
- Easy Liquidity: If you need funds immediately you can break your FD and get the required funds.
- Tax Benefits: You can invest in tax-saving fixed deposits to get the tax benefits up to 1.5 Lakh in a financial year.