Which Fixed Deposit option is right for you?

Fixed deposits (FDs) are one of the most preferred investment options in India today. They are known for their safety, reliability and predictable returns. Fixed deposits offer a simple, hassle-free and low-risk investment option for those who are looking to grow their savings. They are also a great investment option for those who prefer a steady stream of income. There are various types of fixed deposits available in the market today. In this article, we will discuss the different types of fixed deposits, and which one is right for you.

1. Regular Fixed Deposits

The first and most common type of fixed deposit is a regular fixed deposit. It offers a fixed rate of interest for a predetermined period, ranging from 7 days to 10 years. Once you invest in a fixed deposit, the interest rate remains the same throughout the tenure of the deposit. Typically, the longer the tenure of the deposit, the higher the interest rate. Regular FDs are an excellent option for those who want to lock in their savings for a specific period and earn a fixed rate of interest.

2. Flexi Fixed Deposits

Flexi FDs are another type of fixed deposit that offers a higher rate of interest compared to regular fixed deposits. They come with an added benefit of liquidity. You can withdraw a part of your deposit without breaking the FD. Unlike regular FDs, flexi FDs offer the option of adding or withdrawing funds as per your convenience. This feature is especially useful in case of an urgent need for funds. Flexi FDs are a good option if you are looking for higher returns but also need the flexibility to withdraw funds whenever required.

3. Cumulative Fixed Deposits

Cumulative FDs are a type of fixed deposit where the interest is compounded annually and paid out at maturity. This means that your investment amount and the interest earned remain locked in until maturity, making it an excellent option if you are looking for a large payout at the end of the tenure. Cumulative FDs are ideal for those who do not require regular payments and are looking for a lump sum payout at the end of the term.

4. Non-Cumulative Fixed Deposits

Unlike cumulative FDs, non-cumulative FDs offer regular interest payments either monthly, quarterly, or half-yearly. They are a good investment option if you are looking for a regular stream of income. Non-cumulative FDs are ideal for retirees who require a fixed income from their savings. For investors looking to invest in non-cumulative FDs, the interest rate will depend on the deposit tenure and the deposit amount. The interest rates for non-cumulative FDs are fixed at the time of deposit, ensuring that investors receive a fixed and stable return on their investment over the deposit tenure.

5. Tax-Saving Fixed Deposits

Tax-saving fixed deposits are a type of fixed deposit that allows you to save on taxes under Section 80C of the Income Tax Act, 1961. The tenure of these fixed deposits is usually five years, and the interest rate offered is slightly lower than regular fixed deposits. Tax-saving fixed deposits are a good option if you want to save on taxes and earn a fixed rate of return at the same time. Tax-saving FDs can be opened with any bank or financial institution and have a fixed tenure of 5 years. Investors can invest a minimum amount of INR 1000 and thereafter in multiples of INR 100. The maximum amount that can be invested in tax-saving FDs depends on the bank or financial institution’s policies and may vary from INR 1.5 lakh to INR 10 lakh.

6. Senior Citizen Fixed Deposits

Senior citizens are offered higher interest rates on fixed deposits. These fixed deposits are specifically designed for people above the age of 60. Senior citizen fixed deposits offer higher returns, making it an excellent option for people who are looking to earn higher returns on their savings. hese FD schemes are specially curated to cater to the financial requirements of senior citizens, who may be retired or require a regular source of income. Senior citizen FDs offer many benefits over regular FDs, including higher interest rates, flexible investment options and easier documentation.

7. NRE or NRO Fixed Deposits

Non-Resident External (NRE) and Non-Resident Ordinary (NRO) fixed deposits are specifically designed for NRIs who want to invest in India. NRE FDs offer tax-free returns for money earned outside India, whereas NRO FDs offer taxable returns for money earned in India. NRE/NRO FDs are an excellent option for NRIs who want to earn higher returns on their savings and diversify their investment portfolio.

Which Fixed Deposit is Right for You?

Choosing the right fixed deposit depends on your investment goals and financial requirements. If you want to earn a fixed rate of return on your savings, a regular fixed deposit is a good option. However, if you are looking for higher returns and liquidity, a flexi-fixed deposit is a better option. If you are looking for a fixed stream of income, a non-cumulative fixed deposit is an ideal option. If you want to save on taxes and earn a fixed rate of return, a tax-saving fixed deposit is a good option. Senior citizen fixed deposits are a good option for retirees who require a regular income from their savings. Lastly, NRE/NRO fixed deposits are an excellent option for NRIs who want to invest in India.

Conclusion

Fixed deposits are an excellent investment option for those who want to grow their savings and earn a fixed rate of interest. Choosing the right fixed deposit depends entirely on your investment goals and financial requirements. Understanding the different types of fixed deposits available in the market will help you make an informed decision. If you want to invest in fixed deposits, consider downloading the Bajaj Finserv app. It offers a hassle-free and paperless way to invest in fixed deposits and earn high returns on your savings. With Bajaj Finserv App, you can invest in fixed deposits with ease and convenience.