Fixed Deposit

A fixed deposit (FD) is a financial instrument offered by banks and other financial institutions where an investor deposits a lump sum of money for a fixed period of time, usually ranging from one month to several years, at a predetermined interest rate. The interest rate offered on an FD is usually higher than that offered on a regular savings account, making it a popular investment option for those seeking a low-risk, steady return on their investment. Once the FD matures, the investor can either withdraw the principal and interest earned or choose to reinvest it for another term. The interest earned on an FD is usually taxable, but senior citizens are often offered a higher interest rate and tax benefits.

Advantages of Investing in a Fixed Deposit

Stability and safety of investment
Guaranteed returns
Higher interest rates compared to savings accounts
Flexibility in choosing tenure and frequency of interest payouts
No market fluctuations or volatility
No impact of inflation on returns
Easy to open and operate
Can be used as collateral for loans
Tax benefits under certain conditions

Types of Fixed Deposit Schemes

Traditional Fixed Deposit: This is the standard type of fixed deposit scheme, where the investor deposits a lump sum of money for a fixed period of time and earns a fixed interest rate on the principal amount.
Tax-Saving Fixed Deposit: This is a type of fixed deposit scheme that allows investors to save on taxes under Section 80C of the Income Tax Act. The investment made in this scheme is eligible for tax deduction up to a certain limit.
Senior Citizen Fixed Deposit: This scheme is designed for senior citizens who are above the age of 60 years. They can earn a higher interest rate on their fixed deposit as compared to the standard fixed deposit scheme.
Monthly Income Fixed Deposit: This scheme is suitable for investors who require a regular monthly income. The interest earned on the fixed deposit is paid out as a monthly income to the investor.
Flexi Fixed Deposit: This scheme allows investors to withdraw or add to their fixed deposit amount as per their convenience without any penalty.
Corporate Fixed Deposit: This scheme is offered by companies to investors and usually offers a higher interest rate as compared to traditional fixed deposits. However, it also carries a higher risk as there is no guarantee of the company's financial stability.