If you are looking for a safe and reliable investment option in India, the Fixed Deposit (FD) Scheme can be the most preferable option for your savings. Banks or financial institutions offer this type of investment where you deposit a lump sum amount for a fixed tenure, and in return, you earn interest. FDs are an attractive option for their low-risk nature, which makes them an ideal choice for individuals who prefer stable returns.
FDs encourage you to save money with security and financial freedom. To avail better investment options, you should know about the type of FDs offered by banks or financial institutions to make an informed decision.
Let Us Explore the Types of FDs:
Standard FD: A Steady and Popular Investment Choice
The standard FD is the most common type of FD available for investors. You can deposit a specific amount of money in this scheme with a bank for a predetermined or fixed duration. Banks fix the FD interest rate at the time of deposit, where you can opt to receive interest payments on a monthly, quarterly, or annual basis, or at maturity depending on your preference. If you plan to save money for a specific goal or look for a steady income stream, this FD Scheme is suitable because of its reliability and simplicity.
Income-Generating FD: A Reliable Source of Regular Earnings
This income-generating FD offers a reliable source of income, unlike standard FDs. Under this scheme, you opt to receive the interest earned on your deposit as a monthly payout, which provides you with a stable and predictable income source. This feature makes it an appealing choice for retirees or anyone requiring a monthly fixed amount to cover expenses. With the income-generating FD, you can enjoy the benefits of consistent earnings while still getting the benefits of the security and low-risk nature of traditional FDs. If you seek a stable income source, this FD scheme can be the most suitable option for your financial growth.
Tax-Saving FD: Manage your tax burdens
This Tax-Saving FD is for you if you want to optimise your tax savings. It offers attractive tax benefits with a mandatory lock-in period of five years under Section 80C of the Income Tax Act. You become eligible to claim a deduction of up to Rs 1.5 lakh on the invested amount by investing in this scheme. Tax-saving FDs reduce your taxable income and helps you plan your taxes prudently to minimise your tax liabilities while earning stable returns in this investment plan. You should be aware that the interest earned on this FD is subject to taxation. So, embrace the tax-saving FDs to maximise your investments while efficiently managing your tax burdens.
Senior Citizen FDs: Securing Enhanced Returns for Senior Citizens
This type of FD is designed for senior citizens and aims to provide them with preferential treatment by offering higher interest rates than regular FDs. Banks prioritise senior citizens due to their financially stable profiles. This type of FD has become an excellent opportunity for retirees to boost their income during their golden years. With the senior citizen FD, senior citizens can enjoy the benefits of increased returns while ensuring the safety and reliability that FDs are known for. This investment option empowers senior citizens to maximise their savings and enjoy a financially secure and comfortable retirement.
Types of FD for Non-Residential Indians
Are there some investment plans for Non-Residential Indians (NRIs) in India as well? Let us understand FD Investment options offered by banks or financial institutions to NRIs in India:
Non-Resident External FD:
Non-Resident External (NRE) FD is an exclusive FD scheme for NRIs. This deposit enables NRIs to deposit their foreign earnings and repatriate the principal and the interest earned to their country of residence. It is a tax-efficient investment for NRIs because the interest earned on an NRE FD is tax-free in India.
Non-Resident Ordinary FD:
Non-Resident Ordinary (NRO) FD is another FD option for NRIs, which is ideal for those NRIs who have income generated in India, such as rental income or dividends. But under this scheme, NRIs cannot repatriate the principal amount out of India. Unlike the NRE FD, the interest earned on NRO FDs is taxable in India.
HOW TO CHOOSE THE RIGHT FD
Let us select the right FD which is essential to meet your financial goals after considering the following factors:
Interest Rate: You should compare the interest rates offered by different banks or financial institutions to choose an FD with a competitive interest rate to maximise your returns.Tenure: You should determine the tenure of the FD based on your financial goals and liquidity needs. Keep in mind that longer tenures often offer higher interest rates.
Interest Payment Frequency: You should decide whether you want the interest to be paid out regularly or reinvested until maturity.Credibility of the Institution: You should ensure that you invest in an FD with a reputable bank or financial institution to safeguard your money.
Penalties and Premature Withdrawal: You should understand the penalties and consequences of premature withdrawal if you need the funds before maturity.
FD Schemes are a secure and straightforward investment option for individuals in India. When choosing an FD, choose wisely the type of FD you want to invest in and consider the interest rate, tenure, and credibility of the bank or financial institution. You can make the most of your FD and achieve your financial aspirations by making a well-informed decision. Consult a financial advisor to align your investments with your overall financial plan.