Fixed Deposits: start FD now
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A fixed deposit (FD) is a financial product offered by banks and financial institutions where you deposit or invest a lump sum of money for a specific period at a predetermined interest rate. In India, still a fixed deposit investment is considered to be the safest amount of all investments, as most of the banks are public sector banks that are owned by the government of India. Fixed deposit maturity and interest rates vary from bank to bank. At the end of the term, you receive your principal amount along with the interest earned.
Benefits of Fixed Deposits (FD):
- Guaranteed Returns: Fixed Deposits in India provide a fixed interest rate, ensuring that you know exactly how much you’ll earn over the term.
- Safety first: They are considered to be low-risk investments, especially if the bank is insured by a government agency.
- Liquidity Options: While FDs are meant for the long term, many banks allow you to withdraw funds early, although this may incur a penalty.
- Easy and flexible Tenure: You can choose the duration of your deposit, ranging from a few months to several years.
- Interest Payment Options: You can opt for interest to be paid monthly, quarterly, or at maturity, depending on your financial needs.
- Loan Against FD: Some banks allow you to take a loan against your fixed deposit, providing liquidity without breaking the FD.
- Tax Benefits: In some cases, specific types of FDs (like tax-saving FDs) can offer tax deductions under certain laws.
- Predictable Investment: FDs are ideal for conservative investors looking for stable, predictable returns without market volatility.
Overall, fixed deposits can be a good option for those seeking a safe and stable way to grow their savings. The rate of interest may be paid monthly, quarterly, half year, yearly or at the end of the term.
Types of Fixed Deposits:
Fixed deposits come in various types, catering to different financial needs and goals. Here are some common types of fixed deposits:
- Regular Fixed Deposit: A standard FD where you deposit a lump sum for a fixed tenure at a predetermined interest rate.
- Tax-Saving Fixed Deposit: These FDs are designed to help you save on taxes, usually with a lock-in period of five years. Tax savings fixed deposits Interest earned is taxable, but the principal can be claimed as a tax deduction under certain conditions.
- Cumulative Fixed Deposit: In this type, the interest earned is added to the principal amount, and you receive the total amount at maturity. This option typically yields higher returns.
- Non-Cumulative Fixed Deposit: Interest is paid out at regular intervals (monthly, quarterly, or annually) instead of at maturity. This is suitable for those who need regular income.
- Senior Citizen Fixed Deposit: Special FD schemes with higher interest rates for senior citizens (usually 60 years and above) to provide better returns.
- Recurring Deposit: While not a traditional fixed deposit, a recurring deposit allows you to deposit a fixed amount monthly for a specific tenure, earning interest like a regular FD.
- Flexi Fixed Deposit: Offers the flexibility to withdraw funds without breaking the FD, with a minimum balance requirement. Interest rates may vary based on withdrawal.
- Joint Fixed Deposit: An FD that can be held jointly by two or more individuals, normally with a family member, allowing shared ownership and benefits.
- NRE/NRO Fixed Deposit: Accounts specifically for Non-Resident Indians (NRI), allowing them to earn interest on funds held in India, with favorable tax treatment.
These different types of fixed deposits help individuals tailor their investments according to their financial goals and needs.
