Types of Fixed Deposits in India & How to Choose the Best One?

When it comes to investing for a fixed return in India, one of the most sought-after investments is a fixed deposit. Many people are being pulled towards it due to its fixed returns in a fixed period of time without being affected by the fluctuations in the bigger market. Moreover, the Fixed Deposit Interest Rate is quite lucrative in our country. 

In our country, this investment is considered relatively safe as it is backed by the government and insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). 

What is a fixed deposit?

Also known as a term deposit, it is a financial instrument offered by banks as well as non-banking financial companies (NBFCs) in India that allows individuals to deposit their savings for a fixed tenure. In this investment scheme, the potential investor earns a fixed interest rate on their deposit. 

The amount is locked in for a specific period of time, and the rate of interest offered depends on the tenure. The longer the tenure, the higher the interest rate offered. As a result, the interest rate on an FD is usually higher and much better than that offered on a savings or current account. 

Furthermore, there are certain tools available such as a FD calculator that help you get a brief idea about your investment. 

What are the types of fixed deposits?

  • Regular Fixed Deposit

This is one of the most common types of fixed deposits. Here, the depositor deposits a lump sum amount for a particular tenure and earns a fixed interest rate on it. 

  • Senior Citizen Fixed Deposit

Senior Citizens, who are 60 years or above, can avail of a higher interest rate on their fixed deposits. 

  • Tax Saver Fixed Deposit

This type of FD has a fixed lock-in period of 5 years. It basically offers tax benefits under Section 80C of the Income Tax Act. 

  • Flexi Fixed Deposit

This type of fixed deposit allows the depositor to withdraw a portion of the deposit amount without breaking the flow of the entire investment. 

  • Cumulative Fixed Deposit

Here, the interest is compounded annually and paid along with the principal amount when the investment matures. 

How to choose the best one?

While opting for a fd, several factors must be considered to ensure that you get the best returns on your investment. These factors are the rate of interest, tenure, credibility, deposit insurance, the penalty for premature withdrawal, etc. Keep in mind to calculate FD interest so that you’ll be clear about what you’ll be reaping out of your investment. 

Basically, by knowing all these factors beforehand, you’ll be able to make an informed decision and choose the right fixed deposit which will suit your investment needs.

How to invest in an FD?

In the current times, investing in fixed deposits is as easy as ordering groceries/food from your smartphone while sitting in your comfort zone. Around two months ago, when I was planning to invest in the same, one of my colleagues told me about the Bajaj Finserv 

application. Believe me, it is convenient to use. 

  1. Download the app from Play Store/App Store
  2. Sign up by entering your mobile number
  3. On the home page, you’ll see the Investment Bazaar section
  4. Tap on Fixed Deposit
  5. Proceed further as per your suitability/requirements

(Tip: Use a fixed deposit calculator before investing.)

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