How Many Fixed Deposits Are There?

Each one of us must have grown up hearing about the power of investment. It can do wonders for you and your loved ones during financial emergencies. One of the most popular and traditional ways of investing is through bank fixed deposits. Read on to find a detailed guide to fixed deposits. 

What Are Fixed Deposits? 

A fixed deposit is a type of investment plan offered by banks and other financial institutions. In comparison to a regular savings account, FDs offer greater returns on investment. You can either invest in short-term or long-term FDs, depending on your investment portfolio. The interest rate on fixed deposits varies from one bank to another. As the name suggests, investors cannot withdraw their money before the maturity date. However, in case of any financial emergency, an early withdrawal can be made after paying certain fees. 

Benefits of Fixed Deposits 

Fixed investment offers many benefits to investors. Some of these benefits are highlighted in the section below: 

• Assured Returns: It is considered to be one of the safest investment options as it provides assured returns on the deposited sum to investors. When you open a fixed deposit account, the financial institution determines the interest rate. 
• Flexible Investment Option: Fixed deposits are flexible investment products. They provide options to invest in both long-term and short-term periods. Depending on your preference, you can choose a tenure from 7 days to 10 years, whichever suits your financial goals. 
• Financial Goals: Another major benefit of investing in fixed deposits is that you can accomplish all your financial goals. For instance, if you plan to buy a home in 5 years, you can start investing your money in FD. After 5 years, you can buy your dream home using the return on your investment. 

Types of Fixed Deposits in India

It is necessary to understand the types of fixed deposits offered in India to make safe and profound investment decisions. Here’s a list of some common types of fixed deposits from which you can choose: 

• Standard Fixed Deposits: It is a basic type of fixed deposit offered by all banks and financial institutions. In this type of deposit, money is invested for a specific period of time. The interest rate is calculated by the bank depending on tenure at the beginning of the investment. You can choose fixed deposit tenure depending on your financial goals.
• Tax-Saving Fixed Deposits: Anyone who is looking for a tax-saving investment option can invest in this type of fixed deposit. Generally, there is a lock-in period of 5 years under this type of FD investment. This means you cannot withdraw your funds until the completion of the tenure. 
• Special Fixed Deposits: These are similar yet different from standard fixed deposits. This means that, like standard FDs, you can invest in these types of funds for a specific time period but can’t withdraw. The interest rate for special fixed deposits is higher in comparison to standard fixed deposits. 
• Regular Income Fixed Deposits: This is an ideal choice for FD investment for someone who is looking for a source of regular income. In this type, banks or financial institutions provide monthly interest to investors. You can either choose a monthly or quarterly interest payout option.
• Senior Citizen Fixed Deposits: This scheme allows people over the age of 60 to invest their life savings in fixed deposits. In this scheme, the investors get an additional 0.50% rate of interest over the normal rate. 
• Flexi Fixed Deposits: These FD accounts are linked to your savings account. You can start your FD with a minimal deposit amount of your choice. This type of fixed deposit allows you to set a limit on your savings account. If there are funds available in your savings account beyond the limit, they will be transferred to your FD account automatically. 

Factors to Consider Before Investing in Fixed Deposits

Right investments can yield better returns. So, when opening an FD account, it is important to consider the below-mentioned factors: 

• Interest Rate: FD interest rates vary from one bank to another. So, before investing in FDs, make sure that you compare FDs offered by different banks and financial institutions. 
• Loan Facility: Fixed deposits not only serve investment purposes but also are useful when you are in urgent need of funds. So, when you open an FD account with a particular bank or financial institution, always check if it is provided by them. 
• Bank’s Credibility: Checking the credibility of the bank and financial institution is important when opening an FD account since you are investing your hard-earned money in it. 
• Type of Fixed Deposit: It is always better to understand each type of fixed deposit in detail and choose the best one that best suits your needs. For instance, if you want to have a regular passive source of income, regular fixed deposits would be an ideal choice. However, if you want to save tax, tax-saving fixed deposits would be the best option. 

Conclusion

In conclusion, fixed deposits are one of the best investment options in India. You can choose among 6 types of fixed deposits to invest and satisfy your individual financial needs. To calculate the FD interest rate on your deposit amount, visit InsuranceDekho now.

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What Is Section 80DDB and Who Is Eligible For Tax Exemption