Types of Fixed Deposits – Latest Schemes in India 2023
Investing money rightly and timely is very important if you wish to grow your wealth exponentially in the long run. In India, when the word investment comes into mind, fixed deposit is something that first strikes every potential investor.
This is because it is considered one of the safest investments as it assures guaranteed returns and offers a lucrative return. They are also a good option for those who want to avoid taking risks with their money and want to earn a predictable and steady return.
(Tip: Use a fixed deposit calculator before investing your hard-earned money)
What is a fixed deposit?
A fixed deposit, also known as a term deposit, is a type of financial investment in which a potential investor deposits a sum of money for a predetermined period ranging from a few months to several years.
When it comes to the FD interest rate, it is usually higher than that of a regular savings account and is fixed for the term duration. Therefore, the longer the term, the higher the rate of interest tends to be. When the term ends, the investor can easily choose to withdraw the principal amount along with the accumulated interest amount or reinvest the amount for another term.
What are its advantages?
● Assured returns
One of the primary advantages of FD is that they offer guaranteed returns on your investment. This is because the FD interest rate is fixed for the entire tenure, which means you know exactly how much you’ll earn when the maturity term comes.
● Low Risk
FDs are considered to be a low-risk investment option because they are not dependent on what happens in the market. Moreover, the investment is insured by the government up to a specific limit, which offers an added layer of security.
FDs come with a range of tenure options, ranging from a few months to several years. This means one can choose a tenure that suits the investment goals and financial needs.
● Regular income
If you opt for a periodic payment option in this investment scheme, you can easily earn a regular income from your investment. The period can be monthly or quarterly.
What are the different types of fixed deposits?
1. Regular Fixed Deposit
One of the most common types of fixed deposits, a regular fixed deposit enables a potential investor to deposit a lump sum of money for a fixed period of time. This period ranges from as short as 7 days to as long as 10 years, and one can easily earn interest on it.
2. Tax-saving fixed deposit
These are special fixed deposits that have a lock-in period of 5 years. As the term suggests, it offers tax benefits under Section 80C of the Income Tax Act. However, remember that the interest earned on these deposits is taxable.
3. Senior Citizen Fixed Deposit
This type of fixed deposit is only available to senior citizens (usually 60 years and above). However, compared to a regular FD, it offers quite a lucrative interest rate.
4. Flexi Fixed Deposit
A Flexi FD allows you to withdraw money from the account without breaking the entire deposit. It basically comes with a sweep-in and sweep-out facility.