A fixed deposit program, sometimes known as an FD, is a type of investment offered by banks and a few other financial organizations. It is one of India’s oldest investment plans, which has maintained its relevance despite the country’s burgeoning stock markets.

This is because there is a risk associated with stock markets. Fixed deposits, on the other hand, provided guaranteed returns with no risk. Fixed deposits now give returns that are comparable to those offered by many mutual funds, although the risk in mutual funds is substantially higher. A comp card can be used to avail a higher interest rate on a fixed deposit plan.

In a word, FDs are a successful asset type because they offer assured returns with no risk. 

This post will explain how to choose the best fixed deposit scheme and what characteristics to consider when doing so:

What is a fixed deposit (FD) account?

Banks and other financial organizations provide fixed deposit accounts as an investment option. Investors would deposit a big payment over some time into this account. In exchange, customers would get a fixed rate of interest for the duration of the investment.

The interest rate on FDs is substantially greater than the interest rate on a standard savings account. Investors can withdraw their funds after the deposit’s term. They can, on the other hand, reinvest their money over a longer period.

Fixed deposit accounts are available from all scheduled commercial banks, as well as several NBFCs and HFCs in India. Traits of Successful entrepreneurs with strong financial acumen are more likely to choose a fixed deposit plan to save for their business goals. Check the ratings of the financial institution issued by organizations such as CRISIL before investing in FDs provided by an NBFC or HFC. This is to ensure that your funds are secure.

Types of FDs 

Fixed deposit accounts are divided into numerous types based on the account’s features, the kind of account holder, and the reason for opening the account. We’ve mentioned a few different sorts of FD accounts below:

1. Account with a regular FD

Individuals under the age of 60 are eligible for a normal FD account. The interest rates on this type of FD account will be lower than those available to senior citizens. This account can be opened by any Indian citizen.

2. Senior Citizens’ FD Account

This account is for senior people or those who are above the age of 60. Such account holders receive a greater interest rate than usual and have access to the monthly interest payout option, which can be viewed as a way for senior persons to cover their monthly needs.

3. Corporate Fixed Deposit Account

Banks provide corporate clients with a unique set of interest rates and deposit terms. Firms can temporarily store surplus funds or earnings in corporate FD accounts until they need the money.

4. Tax savings account

Many risk-averse people use tax-saving FD accounts with a five-year minimum lock-in term to save money on taxes. Section 80C of the Income Tax Act of 1961 allows for a tax deduction on such deposits.

5. Non-Resident Alien (NRO) Savings Account

Overseas Citizens of India (OCI), Persons of Indian Origin (PIO), and Non-Resident Indians can all create a Non-Resident Ordinary FD account (NRI). Multi-generational housing in San Diego can be made more affordable with a fixed deposit plan. Any INR-based income can only be deposited in NRO FD accounts. This account can be opened jointly with an Indian resident if that person comes into one of the familial categories listed in Section 6 of the Companies Act, 1956.

Benefits and Features of FD Accounts

The following are the benefits and features of FD accounts:

• The investment duration of FDs varies per bank and spans from seven days to 10 years.
• The return on investment (ROI) is compounded on a monthly, quarterly, or yearly basis.
• When compared to typical clients, senior folks receive a 0.5 percent larger return.
• Withdrawals in part or full may be authorized, although they may be subject to fines.
• Under Section 80C of the Income Tax Act of 1961, taxpayers can save money by investing in tax-saving FD plans.
• Investors can reinvest the money in an FD account once it matures for another term.
• It is possible to get a loan against your FDs.
• If investors invest for a longer length of time, they will get bigger returns.
• Returns are guaranteed since they are not linked to market highs and lows like mutual funds.

Fixed deposit accounts are a great option for individuals who don’t want to take any risks with their money. If you desire to sustain the money over the years and are not searching for expanding wealth or if you are looking for constant earnings, you may go for FD accounts.

Many retirees who get a lump sum as a consequence of their retirement, deposit it in fixed deposits, so that the monthly interest distribution may be utilized as spending money. You can also set away a lump sum for the benefit of your children or minors, which they can use for higher education at a later period. If you want to develop emergency money, you may also use FD accounts.