What's The Right Fixed Deposit for you?: A blog about different types of FDs and the different rates they offer

  • Fixed Deposit
  • 22 Days ago
What's The Right Fixed Deposit FD for you?
HIGHLIGHTS

  • Understand fixed deposits
  • Eligibility criteria to invest in FD schemes
  • What are the different types of Fixed Deposit schemes?


Fixed deposits are one of the most sought-after investment schemes in India. So, millions of Indians prefer to put their life savings in a fixed deposit scheme. It is a must for an investor to know about the types of fixed deposit schemes and the factors to keep in mind while choosing any fixed deposit scheme.

Finding the right fixed deposit scheme is essential to get the best returns on your invested money. But you can select the best fixed deposit scheme if you are aware of certain factors before applying for a term deposit. Here you can learn about every aspect of fixed deposit schemes.

Understand fixed deposits

Fixed deposits are low-risk investment options through which people can get higher returns than keeping their money in a regular savings account. The interest earned in online fixed deposit amounts keeps on accumulating at frequent intervals. The rate of interest applicable on fixed deposits varies from one financial institution to another. Most of the fixed deposits come with a lock-in period during which the investor cannot make withdrawals.

Here are the main features of fixed deposits:

  1. It is a safe investment option
  2. It helps you earn good interest over a fixed period
  3. It comes with a flexible tenure option
  4. There is no limit on the maximum amount in a fixed deposit scheme
  5. Senior citizen saving schemes have special rates

Eligibility criteria to invest in FD schemes:

Here is the list of all those who are eligible to invest in a fixed deposit scheme:

  1. Indian resident
  2. NRI
  3. Minors
  4. Senior citizens
  5. Companies
  6. Partnership firms
  7. Individuals or joint investors
  8. Societies or clubs
  9. Sole proprietorship

What are the different types of Fixed Deposit schemes?

  1. Standard fixed deposit scheme

    Almost every bank offers standard fixed deposit schemes to their customers.  When you are investing in this scheme, you have to lock the money over a fixed period ranging from 7 days to 10 years. The best part about the standard fixed deposit is that the interest rates are higher than the interest earned on money deposited in the normal savings account. The interest rate offered in a standard fixed deposit scheme varies from one financial institution to another.

    There are mainly two types of standard fixed deposit schemes:

    • Cumulative scheme

      In a cumulative fixed deposit scheme, the interest is payable on maturity. The interest is compounded yearly, quarterly, and annually.

    • Non-cumulative scheme

      Here, the interest is credited to your account quarterly, monthly, or annually. One also needs to understand that if you choose the non-cumulative option, the interest earned is taxable.

  2. Tax-saving fixed deposit scheme:

    The tax-saving fixed deposit is the best-secured FD schemefor claiming tax-exemptions under Section 80C of the Income Tax Act. The tax-saving fixed deposit comes with a fixed lock-in period of 5 years. By investing in this fixed deposit scheme, one can get an annual tax exemption of Rs 1.5 Lakh. The interest rate offered in tax-saver FDs at present varies between 5 to 6%.

    Here are the key benefits of tax-saving FDS

    • The tax exemptions under this FD scheme are listed in Section 80C of the Income Tax Act, 1961.
    • Withdrawals are allowed only after the end of the maturity period, i.e., five years.
    • Tax-saving fixed deposits come with the option of a joint account.
    • Most of the banks and financial institutions offer a 0.50% hike to the senior citizens
    • In the case of a joint account, only the primary holders are eligible to claim tax exemptions.
  3. Senior citizen fixed deposit scheme

    The senior citizen fixed deposit scheme is a term plan that comes with special interest rates. The interest rate offered in this scheme is 0.50% higher. If you are above 60 years, you can choose a senior citizen fixed deposit scheme. It comes with the feature of a regular pay-out option where you can earn a reliable and steady income to cope with your daily financial requirements easily. During financial emergencies, a senior citizen can also avail of a loan against the Senior Citizen Saving Scheme (SCSS). The interest rate offered in SCSS varies from 5.50% to 6.50% at a maximum for a tenure up to 5 years.

    Benefits of getting FDs for senior citizens

    • There are special interest rates offered in this scheme. It tends to be higher and generates profitable earnings on the investment made
    • The easiest way for senior citizens to double their money, as all the banks and financial institutions offer the best FD rates for senior citizens.
    • The SCSS scheme is a tax-saver FDS where one can claim tax exemption under Section 80C of the Income Tax Act of India.
    • Regular pay-out option offers more peace and financial security in the retirement years. There are different pay-out options where the interest is being paid out either half-yearly, yearly, monthly, etc.
    • The regular interest pay-out option can be a boon for retired people because it acts as a source of supplementary income.
  4. Fixed deposits for NRIs and NREs

    If you are a non-resident Indian and looking for the right fixed deposit scheme, there are mainly two types of deposits

    • NRE fixed deposit

      It is an ideal option for individuals earning in foreign currencies and want to convert the same in rupee. One of the major highlights of the NRE FD account is the interest earned under this scheme is tax-free. The return could be changed only in the currency fluctuation scenario.

    • NRO fixed deposit

      The interest earned on the NRO fixed deposit is taxable, but the principal amount enjoys repatriation up to a certain set limit. Under this scheme, an investor can make a deposit only either in Indian currency or foreign currency. If you are residing abroad, earnings are generated from India, choose to go with the NRO fixed deposit scheme.

  5. Corporate fixed deposits

    Company fixed deposits are a popular choice for investors. The interest rate offered in this type of fixed deposit is higher than that offered by banks and NBFCs. With the higher interest rate, the risk is also higher. Always invest after going through ICRA credit ratings fixed deposits. It helps in determining the risk percentage of investing in any of the corporate fixed deposits.

    Here are the steps to choose the best saving schemes

    • Interest rate: It is one of the most crucial factors to help you find the right fixed deposit scheme. Always compare the interest rates offered by various banks, NBFCs, and corporates.
    • Credibility: Apart from considering interest rates, it is also important to check the market positions of the FD provider. Don’t consider only interest rate as a factor to make the decision. Always choose the A-rated FD scheme of a company, bank or NBFCs
    • Tenure: After considering the above two factors, check the lock-in period and ensure that it matches your lock-in period requirement.
    • Interest pay-out option: There are wide options for getting interest pay-out options. It is a must to check the interest-pay-out procedure of each FD investment scheme.

Bottom line

If you still have any queries or concerns about how FDs work, features, eligibility criteria, or interest rates, check Shriram City Union Finance Limited. We are one of the top fixed deposit providers. Here the deposit scheme works as a contract between you and Shri Ram City. When it comes to offering the best and most secured FD schemes, we have trust in the Indian financial market spanning 45 years. Check out our FD interest rates of 2021.