Fixed Deposits are the type of term deposit accounts that let you earn interest by depositing an amount for a certain period of time. There are different types of fixed deposits available by almost all the major banks in India. A fixed deposit is the best fit for risk-averse investors which lets them earn interest on the deposited amount over a period of time. The moment you put your money, it gets locked and you can avail the interest amount upon maturity.
Fixed Deposits |
A type of deposit where you can earn interest by depositing a fixed amount for certain tenure. |
Who Provides? |
All Banks and NBFCs |
How to Open |
Can be opened online and offline |
Risk Meter |
No risk as it is governed by RBI |
Types of FDs |
|
Is there any fixed deposit scheme for NRIs? |
Yes, NRE (Non-resident External) and NRO (Non-resident Ordinary) |
Premature Withdrawal |
Subject to Banks’ norms (Usually, there is a penalty on the interest rate) |
How to Calculate FD Interest? |
You can use the FD interest rate calculator available over the internet. |
There are different types of fixed deposits offered by various banks in India. However, the two major categories of FDs are cumulative and non-cumulative. In cumulative deposits, the interest is not paid during the currency of the deposit and is paid along with the principal amount upon maturity. Whereas, in the case of a non-cumulative deposit, interest is paid along with the currency of the deposit. However, the rate of interest is the same in both the schemes.
In non-cumulative deposits, interest is usually paid on a quarterly basis; if paid on a monthly basis, it is at a discounted rate. Furthermore, you can avail monthly, quarterly, half-yearly or yearly interest payout as per the convenience. Interest is compounded quarterly in case of cumulative deposit.
Talking about the common types of fixed deposit accounts available in India, banks provide different fixed deposit plans. Let’s have a look at the FD types right away:
It is the standard FD scheme available at all banks. Some of the features are:
As the name implies, these deposits are instrumental in saving tax and are available in almost all the banks.
Like standard FDs, these funds are also invested for specific time periods. The only difference is if you don't withdraw the money for the specified period, you will earn higher interest on it than Standard FDs.
If you have a limited income and depend on the interest from bank deposits for your monthly expenses, this type of FD is the best fit for you. You can opt for either monthly or quarterly interest payout.
The senior citizens’ fixed deposit scheme allows citizens with age more than 60 years to open an FD account.
These are the type of FDs that are linked to your savings account.
The deposit made by investors with companies for a fixed tenure and prescribed rate of interest is called Corporate/ Company Fixed Deposit. Financial institutions and Non-Banking Finance Companies (NBFCs) also offer this type of deposits.
Corporate Fixed Deposit schemes offer higher returns on your investment, but choosing the right company is imperative. If you choose a good Company FD scheme, you will generally earn more on your investment than bank FDs as these schemes offer the highest interest rate on FD. You can check the credit ratings of the company you want to invest from reputed credit rating agencies like CRISIL. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his/her investment, thus making it a bit risky investment option.
There are two different types of fixed deposit accounts for Non-resident Indians: Non-resident External (NRE) and Non-resident Ordinary (NRO) accounts.
NRE FDs are best suited for those who earn in foreign currency and who wishes to get the amount converted to Indian currency value. The interesting thing about an NRE FD account is that the interest earned on the deposit is tax-free and one can get both principal and the interest amount. The only downside is that the money deposited can be affected as per the currency rate fluctuations.
The interest income earned through NRO fixed deposit is taxable at 30% based on the Income Tax Act, 1961. Not only the interest earned can be completely repatriated, but also the principal amount within a certain bracket or set limit. However, the advantage here is that in the case of NRO fixed deposits, unlike NRE FDs, here are no risks for exchange rate fluctuation. You can deposit money in foreign or Indian currency in your NRO account. So, if you stay abroad and your total income also entails earnings from India, NRO FDs can be the best fit to manage your funds within India.
Fixed Deposits are the best fit for risk-averse investors and which is the reason why fixed deposits have always been one of the most preferred choices in India. However, there are various other key benefits of FDs explain below.