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

Types of Fixed Deposits in India

Since banks and NBFCs offer various types of fixed deposit plans, it is essential to assess your options to ensure they align with your investment goals. 

 

Here are the different types of fixed deposits and their meanings:

  • Standard Bank Fixed Deposits

All banks offer these types of fixed deposit accounts to both new and existing customers. 

 

When you open a standard fixed deposit account, you agree to invest a certain sum of money against a predetermined interest rate. Usually, the tenor of this type of FD varies from 7 days to 10 years.

  • Corporate Fixed Deposits

Corporate FDs are guaranteed saving avenues offered by private financial institutions and Non-banking Financial Companies (NBFCs). These FDs also allow you to invest a lump sum amount at a given interest rate for an investment tenor of your choice.

 

Corporate FDs are rated by credit agencies like ICRA and CRISIL. They often offer higher interest rates than FDs issued by banks.

  • Tax-saving Fixed Deposits

With this type of FD, you can claim tax exemptions of up to ₹1.5 Lakhs under Section 80C of the Income Tax Act, 1961. However, investing in this FD is only prudent if you have no liquidity concerns, as they have a minimum lock-in period of 5 years. 

 

Additionally, no overdraft or loan facility is available against such FDs.

  • Senior Citizen Fixed Deposits 

A senior citizen FD is available to only those above 60 years of age. It offers a hiked interest rate over and above the base rate applicable for regular citizens. Senior Citizen FD rates for most banks and NBFCs tend to be 0.25% p.a. - 0.65% p.a. higher than the base interest rate.

  • Cumulative Fixed Deposits

With a cumulative FD type, you are only entitled to the interest payout at maturity. In other words, while you earn interest on your principal investment, it is only payable once the investment tenor ends. 

 

The interest earnings are compounded and added to your principal sum. These types of fixed deposits are suitable for those looking for long-term investments. Cumulative FD interest rates are generally higher than those that apply to non-cumulative FDs.

  • Non-cumulative Fixed Deposits 

A non-cumulative FD is one where you can select an interest payout frequency of your choice. You can pick a monthly, quarterly, half-yearly, or yearly payout option to meet your expenses, like utility bills or EMIs. 

 

Such types of fixed deposit plans are well-suited for people who require regular interest payouts to meet daily or recurring expenses.

  • Flexi Fixed Deposits 

Flexi FDs merge the liquidity benefits of a savings bank account with the higher interest rate advantage of fixed deposit plans. Since a Flexi FD is linked to a savings account, you get to enjoy higher liquidity while still earning high rates of return.

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Types of Fixed Deposits for NRIs

Here are the various types of fixed deposit options that Non-resident Indians (NRIs) can invest in:

  • NRE Fixed Deposits

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. 

  • NRO Fixed Deposits

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. 

  • FCNR Fixed Deposits

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.

How to Select the Right FD

Here are some factors to consider while choosing the right option from the various types of fixed deposits:

  • Interest Rates

To ensure that you earn maximum returns on your investment, remember to compare interest rates offered on different types of fixed deposits by issuers. 

  • Premature Withdrawal Clause

If you wish to enjoy liquidity benefits from your FD account, remember to check the premature withdrawal policy before investing. 

  • Loan Facility

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. 

  • Credibility of the Issuer

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. 

  • Payout Frequency

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.

  • Tax Exemptions and Tenors

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.

Disclaimer

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

FAQs on Types of Fixed Deposits

What is a tenor in FD?

Tenor refers to the length of time during which your invested amount earns interest in an FD account.

Are tenor and maturity the same?

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.

Which type of FD is the best in India?

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.

How to open a fixed deposit account offline?

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.

Which FD has the highest return?

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.

Which type of account is a fixed deposit?

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.

What is the alternate name for the fixed deposit?

An alternate name for fixed deposit is term deposit.

Which is best FD or TD?

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.

Are there any special interest rates for senior citizens on fixed deposits?

Yes, senior citizens enjoy special rates as they are generally higher than the rates for regular investors.

Is an FD tax-free?

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. 

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