Fixed Deposits: Six type of FDs you must know about

Fixed deposits (FDs) are considered to be one of the safest forms of investments and they offer assured returns. In a FD, you invest a lump sum in your bank for a fixed period at a pre-decided interest rate. In India, term deposits are one of the most popular ways of saving money. Banks across the country have been raising the interest rates on their FDs since May this year after the Reserve Bank of India started raising the repo rate to contain inflation. So, this can be considered to be the best time to invest in FDs. But before you put your money in the scheme, you should know the types of FDs that are available.

So, here are some types of fixed deposits in which you can invest your money: Cumulative FDs: The interests earned on these deposits are compounded according to the interval of investor’s choice, and added to the principal amount. You receive the returns when the FD matures. Non-cumulative FDs: In non-cumulative FDs, investors receive the interest payment on regular intervals. It is ideal for those who wish to earn a regular income through their investments. The interest can be paid to the investors in their bank accounts on a monthly, quarterly, half-yearly or yearly basis. Standard FDs: Standard FDs are the basic kind of FDs where you invest your money for a fixed term, which ranges from seven days to 10 years. In this deposit, the interest rates you earn are predefined and more than the regular savings account. One also receives loan and overdraft facilities against standard FDs. Senior Citizens FDs: These FDs are available for senior citizens (individuals of 60 years of age or above). Senior citizens are paid a higher return on term deposits in comparison to regular individuals. Flexi FDs: Flexi FDs offer the flexibility and convenience of a fixed deposit as well as a savings account. You earn higher interest rates like FDs, while getting liquidity of savings accounts. Tax-Saving FDs: These deposits have a lock-in period. This implies that you cannot withdraw your money before the tenure ends. This type of FD is ideal for individuals who want to claim tax exemptions of a maximum of Rs 1.5 lakh under Section 80C of the Income Tax Act.

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