Fixed deposits are a type of investment that pays predetermined interest over a decided period. Sometimes, they are also known as term deposits. They are very popular in India because of their guaranteed returns and low-risk profile. Moreover, they give higher returns than savings accounts.
FD gives you the flexibility to lock in your funds for different terms ranging from 7 days to 10 years and requires a minimum of Rs. 1,000 for investment.
They are one of the safest investment options available to investors. The interest rate rises with the length of the tenure. There are many types of schemes available based on one’s requirements and needs.
 Types of Fixed Deposits
- Bank deposit: These are the most common category of deposits. One has to maintain a specific amount for a decided period.
- Company deposit: These are the second most common category of the scheme that offers higher interest rates.
- Tax saving deposit: This type of investment allows you to save tax on interest earned on investments up to Rs 1.5 lakh per year.
- Senior citizen deposit: This account requires the investor to be at least 60 years old. The individual gets a higher interest rate than a regular FD.
- NRI deposit: It is the safest way to store savings in India, which works well for non-resident Indians (NRIs).Â
Benefits of Fixed Deposits Â
- When you maintain a minimum amount at all times, you have the opportunity to receive benefits such as special deposit rates, cash credit, and access to promotional features such as increased interest rates on savings accounts.
- The investment earns interest at regular intervals, calculated daily, and credited to your account every month.
- They are safe since the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) protects against any loss of all the funds deposited.
- The scheme offers higher rates when the term is completed, making it an attractive option for conservative investors who want to invest their money with no risk.
Who should invest in fixed deposits? Â
One should invest in an FD if they do not need to access money for emergencies and want high returns. That way, a person gets maximum interest along with the principal amount.
They’re a great investment for anyone who doesn’t have the time, expertise, or experience to invest their extra cash. It’s one of the safest ways to earn a profit on your savings.
What are the eligibility criteria? Â
If you want to make investments, it is essential to understand the eligibility criteria for the same.
If you meet the following criteria, you are qualified to invest:
- The person should be above 18 years to make this investment.
- The person should not have any outstanding loans or credit facilities with the bank or company they want to invest with.
- They also need to provide documents like a passport and PAN card and evidence of residence like an electricity bill or phone bill.
 Is the investment taxable? Â
The answer is yes. Interest earned on an FD is fully taxable as ‘income from other sources,’ as per the Income Tax Act, 1961.
How much TDS is deducted?
For an Indian resident, the TDS deduction would be 10% after submitting a PAN number and filling the form with all required details. If a person does not have a PAN number, TDS will be deducted at a rate of 20%. Thus, it is wise to submit a PAN number.
However, for an NRI, 30% would be deducted as TDS whether or not you submit a PAN number.
Summary
Fixed Deposits are ideal for those who want to save money for the future and have a long-term investment aim. They also provide a better safety net in case of emergencies. You can apply for an early withdrawal before the maturity period if any such situation arises.
