Fixed deposit

When it comes to investments, fixed deposits or FD accounts are the best investment option. It helps you to maximise your savings and ensures higher interest returns. In addition, a fixed deposit account offers a rate of interest that is suitable to most mutual funds or equity investments.

An individual belonging to any age group can open a fixed deposit account. However, when it comes to senior citizens, the interest rate is comparatively higher than the others. This is because a fixed deposit scheme offers dual benefits for the fund’s safety and acts as an additional source of income for investors.

What is a fixed deposit?

Fixed deposit is the best manner to grow your savings with security. It enables you to deposit a sum of money with your providers. You can choose a tenure at your convenience. Moreover, once you invest, the amount deposited at a specific interest rate stays unaffected even if there are any changes or fluctuations in the market.

Generally, Fixed deposits are of two types: cumulative and non-cumulative fixed deposits. A cumulative fixed deposit account is an investment where you will receive the investment amount and interest once it reaches maturity. Therefore, it will accumulate your wealth and provide you with a higher corpus on maturity when it comes to cumulative fixed deposit.

Whereas with a non-cumulative fixed deposit, you tend to get an interest payout option. You can select the interest payout option depending on your financial requirements and needs. The interest payout option you select should be monthly, quarterly, half-yearly, or annually.

When you are investing in a fixed deposit, you tend to get guaranteed returns. However, you will not be able to withdraw the amount deposited before maturity. In case you still do, you will have to pay a sum of money as a penalty.

Types of fixed deposit accounts:

You can choose from various fixed deposit account options depending upon your financial needs and personal goals. The different type of fixed deposit are as follows:

Standard fixed deposits: These kinds of deposits are the most fundamental forms of investment. In these accounts, investors deposit a sum of the amount for a specific period and get higher returns. The features for a standard fixed deposit account include:

  • Fixed tenure
  • Investments are unaffected during any market fluctuations
  • Standard interest rates

Tax saver fixed deposit accounts: It usually has a longer investment tenure that ranges from 3 to 5 years. In addition, these fixed deposit schemes have a lock-in period where any investors cannot make any premature withdrawals until their maturity.

Cumulative fixed deposits: It is a different kind of scheme, unlike the standard fixed deposit. The interests are earned that is not available at regular intervals. The interest will be paid with the principal amount once the investment tenure reaches maturity. Interest can take place on a monthly, half-yearly, quarterly.

Advantages of fixed deposit:

Ease of investments: You can open a fixed deposit account online within a few minutes. You can compare different fixed deposit schemes using an FD calculator and choose the scheme that offers the best interest rate with minimal documentation.

Assured returns: When it comes to fixed deposits, they provide guaranteed returns based on your investments. Investing in fixed deposits is risk-free compared to other forms of investments like debt funds or mutual funds. In addition, you receive a fixed rate of interest on the amount you invest.

Higher interest rates: Fixed deposits generally offer a higher interest rate than traditional investments like recurring and savings accounts.

Tax Benefit: You can opt for a tax saver fixed deposit to avail of tax benefits upto Rs. 1.5 lakhs. However, most fixed deposits providing tax benefits tend to have a lock-in period from 5 years.

Guaranteed returns: The returns do not depend on market fluctuations. You are assured of getting back higher returns on your fixed deposit investment. When you plan for an investment that does not require risks, a fixed deposit investment is the best choice. You can also utilise online FD calculators to calculate the maturity amount you will receive before investing.

Flexible tenure: In fixed deposit investment, the tenure depends on your financial requirements and needs.  You can choose your fixed deposit investment depending upon either short, intermediate or long-term maturity. The fixed deposit tenure ranges from 7 days to 10 years.

Senior Citizens: As a senior citizen, you get an additional 0.25% to 0.75% increase in your fixed deposit interest rate. You also get additional benefits based on the financial provider from who you get your investments.

Deposit insurance: With the help of DICGC approved financial providers. Your investments will get cover with Rs.5 lakh of compensations for all your fixed deposits when the financial provider goes bankrupt. So splitting and invest your fixed deposits will help you getting better deposit insurance coverage.

Easy liquidation: It is simple to liquidate a fixed deposit. The FD that is booked online can also be liquidated online through net banking. Liquidation is the process of bringing a business to an end. It is not essential to file a bankruptcy to liquidate inventory.

Loans against fixed deposit: A fixed deposit is dependable in times of emergencies. Applying for a loan in fixed deposit is very simple. You can easily take a loan upto 95% of the fixed deposit account. However, a fixed deposit acts as collateral for the loan.


Investing in a Fixed deposit is risk-free and has guaranteed returns. As a result, you can quickly get higher interest rates and attractive returns on your investments along with the highest security. In addition, fixed deposits provide complete flexibility with tenure to investment. While investing in a fixed deposit, you get to select the term.

When the interest is then credited to your account, you can choose to depend upon your preference for monthly, annually or even at maturity pay-outs. With the help of an FD calculator, you can calculate how much interest you can earn in a fixed deposit. Before investing in any investments, make sure you are well aware of it and then alone invest in a fixed deposit.

By Andy