Fixed Deposit – Features, Types, Eligibility & Schemes

You can choose from a Fixed Deposit period ranging from a minimum of 7 to 14 days up to ten years. FDs are sometimes referred to as term deposits. You can plan on opening a fixed deposit account at a specific interest rate, and you are guaranteed to keep the same interest rate regardless of changes that are occurring due to changes in the market. You can choose whether or not you wish to receive interest every month or at maturity, depending on your preference. However, you cannot withdraw the money before the account’s maturity. 

Fixed deposits are investment instruments banks and non-banking financial companies offer to save money for their customers. If you want to know what is a fixed deposit account, then you should keep in mind that a fixed deposit account allows you to invest a substantial amount of money at a predetermined interest rate over a specified term, similar to National Pension Scheme. As a result, you will receive a lump sum of money at the end of the tenure, together with interest, which is a good way of saving money. Banks offer fixed deposit accounts at different rates of interest. 

FD Investment Eligibility Criteria

The following entities may open an FD investment account in India:

• Resident of India
• Companies
• NRI
• Firms with partnerships
• Senior citizens
• Societies or clubs
• Sole proprietorship

Features of a Fixed Deposit

Guaranteed Refunds 

It guarantees you will receive a return on your fixed deposit. It is important to know that you will receive the same rate of return as agreed upon when you opened an FD. On the other hand, market-led investments offer returns based on market fluctuations. Therefore, despite the decline in interest rates, you will still be able to receive the same amount of interest that was agreed upon. As a result, a fixed deposit is more secure than any other type of investment.

Interest rate

To choose the best interest rate, you must decide the principal amount and the tenure you want. There is a tendency for interest rates to be higher for long-term fixed deposits and lower for short-term fixed deposits.

Provides flexible tenures and renewal options

There are a variety of tenures for FDs, ranging from one week to ten years. When you open the FD, you can choose the term that is most convenient for you. When the FD matures, you can renew it, but remember to check the interest rates.

Return on investment

To know what is fixed deposit account and what is its ROI. Then, it is very important to know that it depends on the maturity period or tenure of the fixed deposit and how much interest you earn. You earn more interest with a longer tenure. A cumulative FD allows you to reinvest interest at regular intervals, or you can receive it periodically. By choosing this FD, you can take advantage of compound interest.

Loans against FDs

If you urgently need funds and have a fixed deposit, you can take out a loan against it. Your fixed deposit will not be closed prematurely if you apply for a loan against FD.

Types of Fixed Deposits 

Before investing in Fixed Deposit schemes, you should know detailed information about what is fixed deposit account and what its types are.

Standard FDs

Investors deposit money in FD accounts for a fixed term of seven days to ten years. An interest rate that is fixed and pre-defined is higher than that of a regular savings account. It is possible to use fixed deposits to obtain loans and overdrafts in exchange for mortgages. You must pay the penalty if you want to withdraw your money before the account matures.

Tax-saving FDs

There is a mandatory lock-in period of five years with these FDs, so you cannot withdraw your funds prematurely. It is important to note that the repayment facilities for tax-saving FDs are not available. Under section 80C of the Income Tax Act, you can take out tax exemptions of up to Rs 1.5 lakh. 

Cumulative FDs

There is no limit to how much interest you can earn on these FDs. Interest is compounded at the interval of your choice. You will be paid interest on the maturity of your FD which will be added to your investment amount.

Non-cumulative FDs

With these FD investments, you can select the frequency at which you will receive interest payments. Therefore, if you need to make a regular income from investments, you can consider it a good investment. 

Senior citizen FD

Senior citizen FD schemes are for people over the age of 60. The interest rates they offer are higher than those offered by Standard FDs. In addition, various tenure options are available here, ranging from 10 days up to 10 years.