Investing in a fixed deposit could help you secure your financial future. Choose from various FD types as per your investment goals and finances. Also, enjoy competitive interest rates and special tenors from multiple partners.
There are Different types of FD schemes available in India, with tenors ranging from 7 days to 10 years. In addition, certain types of FDs permit premature withdrawals against a penalty, while others do not offer this benefit.
FDs also come with flexible payout options where you can choose to receive the entire amount at maturity or at regular intervals. In case of the latter, you could opt for a monthly interest payout plan.
Here are the various types of fixed deposit options that Non-resident Indians (NRIs) can invest in:
In these deposits, you have the flexibility to transfer foreign currency into your account, which automatically converts to Indian currency. The tenor for these types of fixed deposits can range from 1 year to 10 years, and the interest you earn is tax-free.
However, you need to remember that fluctuations in currency rates may affect the money that you invest in these FDs.
These types of fixed deposits are an ideal investment option for NRIs with stable income in India. The interest that you earn on these FDs is taxable at 30%. However, both interest as well as principal amounts can be repatriated up to a certain limit.
In addition, unlike NRE FDs, these carry no exchange rate risks.
Similar to NRE deposits, you can deposit in a foreign currency and earn tax-exempt interest. However, the issuer may accept only select currencies, such as USD, Pounds, Sterling, Yen, or Euros. Additionally, unlike NRE deposits, the amount is repatriable in the same currency.
Here are some factors to consider while choosing the right option from the various types of fixed deposits:
To ensure that you earn maximum returns on your investment, remember to compare interest rates offered on different types of fixed deposits by issuers.
If you wish to enjoy liquidity benefits from your FD account, remember to check the premature withdrawal policy before investing.
FDs are not just tools for building financial security for the future but can also come in handy when you need lump sum cash as credit. Check whether the issuer offers this before you invest.
Weighing in the lender’s credibility is equally important when picking an FD to invest in. You can assess the credit ratings of the FD issuer as per established credit bureaus like CRISIL and ICRA.
These credit ratings signify the safety of the deposit and the consistency of the issuer’s payment history.
Fixed deposit plans offer various payout options. For instance, a cumulative FD will entitle you to a lump sum payout at maturity, while a non-cumulative one will allow for monthly payouts. So, you must evaluate and choose as per your needs.
The interest you earn from your FD is taxable. However, certain types of fixed deposit plans, such as tax-saving FDs, provide you with an annual tax exemption. This is offered as per the provisions under Section 80C of the Income Tax Act, 1961.
While such tax rebates may seem attractive, you must know that such plans come with a mandatory 5-year lock-in period. Thus, you should only opt for such plans if you do not need the money in the next 5 years.
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Tenor refers to the length of time during which your invested amount earns interest in an FD account.
No. The tenor is the investment duration of an FD, which you decide on at the time of booking an FD account. On the other hand, maturity refers to the date on which the tenor expires.
If you have short-term goals and need high liquidity, a Flexi FD may be the best. With these types of fixed deposits, you can earn high returns and make withdrawals without attracting penalties.
If you have long-term goals and no immediate liquidity concerns, a tax-saving or corporate FD with a long tenor may be a better fit.
You have to visit the issuer’s branch and fill in an FD investing form. Then, complete the details and transfer the amount via cheque, cash deposit or account transfer. In a matter of hours, your FD account will be created.
Cumulative FDs, in which interest is paid out at maturity, generate higher returns than FDs with periodical payout options. Additionally, senior citizen FDs generally have the highest interest rates, which result in some of the highest returns.
According to the fixed deposit meaning, financial instruments offering higher returns than a savings account are known as an FD. You park your funds for a chosen tenor at a predetermined interest rate to generate maximum earnings.
An alternate name for fixed deposit is term deposit.
A fixed deposit (FD) and term deposit (TD) refer to the same product. In terms of liquidity, a Flexi FD may be the best investment option for you. However, if you wish to earn higher returns, you may choose a cumulative FD.
Yes, senior citizens enjoy special rates as they are generally higher than the rates for regular investors.
No. As per the Income Tax Act, the interest that you earn on FDs is considered as 'income from other sources' and, therefore, is taxable. However, you can invest in tax-saving fixed deposits and claim a tax deduction on the investment amount u/s 80C.