Everything You Need to Know About Fixed Deposits in India

A Fixed Deposit is definitely the safest and most popular mode of saving money in India. It simply implies that you deposit money with the bank (or other financial institution) for a fixed duration of time, and during this time the bank gives interest to you on the amount of money deposited. The best thing is that your return on investment can be guaranteed, and hence it is risk-free.

How does a Fixed Deposit work?

Fixed Deposit involves investing a specific amount in a bank for a specific time, depending on the tenure that you choose. You will have Fixed Deposit rates, which might vary with the time of selection.At the end of the tenure, you will be paid your entire principal amount with all the accrued interest. You can reinvest the money back into Fixed Deposits or withdraw it as well.

Why should you invest in a Fixed Deposit?

1. Guaranteed Returns: Fixed Deposits do not have a market risk like shares or mutual funds. 
2. Flexible Tenure: You can open an FD for a few days to several years. 
3. Higher Rates for Senior Citizens: Many banks offer a higher senior citizen FD rate that is over and above their normal FD rate. 
4. Loan Against FD: Whenever you need money urgently, instead of breaking your FD, you can avail of a loan against it. 
5. Tax Saving Option: A five-year tax-saving Fixed Deposit can be used to get tax deductions under Section 80C of the Income Tax Act. 
6. Safe and Secure Investment: FDs are insured up to a certain limit by the Deposit Insurance and Credit Guarantee Corporation (DICGC); therefore, the money you invest in them remains relatively safe.

Fixed Deposit rates in India

Based on tenure and type of Fixed Deposit, banks in India offer different Fixed Deposit rates. Generally, the longer the tenure, the higher the rate. Senior citizens have additional benefits, as the senior citizen FD rates are generally 0.50% higher than the regular rates.

Types of Fixed Deposits

Regular Fixed Deposit: 

It is a common type of FD that allows investments for a fixed tenor with interest paid at maturity. 

Tax-saving FD

It is a five-year FD that gives tax benefits with a lock-in period. 

Senior citizen FD

Senior citizens qualify for this FD and can enjoy preferential Fixed Deposit rates.

Flexi FD 

Where Savings Accounts and FDs intermingle and funds being automatically moved to FD once the balance exceeds a particular limit. 

Recurring FD

A fixed sum is deposited every month, helping in a disciplined savings plan. 

NRI Fixed Deposit 

These special FDs are devised for Non-Resident Indians (NRIs) with the options of NRE and NRO accounts.

How to open a Fixed Deposit?

You can open an FD both online and offline.

Online process:

1. Log onto your bank's net banking or mobile app.
2. Open Fixed Deposit.
3. Deposited amount and duration of tenure are entered.
4. Choose among the different types of FD and how you'd like to be paid interest.
5. Confirm and complete the transaction.

Offline process:

1. Visit the nearest bank branch.
2. Fill out the form for the FD application.
3. Required documents to be attached ID, proof of address, and PAN card.
4. The amount is deposited and the FD receipt is collected.

Final thoughts

Apart from creating risk-free wealth from your earnings, you can use Fixed Deposits to prepare for future costs and retirement and secure the investment of your assets. However, before you invest, compare Fixed Deposit rates to see which one offers you the best rates.

Open your FD today and make sure you are financially secure!