Investors who don’t like taking chances should choose fixed deposit accounts. Over a predetermined length of time, interest is accumulated on the amount deposited. Interest rates for deposits under Rs. 5 Crores range from 6.5% per year (for shorter-term savings) to 7.30% per year (for deposits of up to 10 years). Additionally, this depends on the kind of financial organization (public sector, private sector, or small finance banks). The tenure may be between seven and ten years. Higher interest rates are given to senior citizens. This typically represents an increase over current rates of 0.25 to 0.50%.

Types of Fixed Deposits

Normal Fixed Deposits

  • Deposit money for a fixed tenure.
  • Tenure can range from 7 days to 10 years.
  • Interest rates are higher than a normal savings account.

Tax-Saving Fixed Deposits.

  • Tax exemption on the principal deposit amount of up to Rs.1.5 lakh in a calendar year.
  • Lock-in period of 5 years within which you cannot withdraw the amount.
  • Allows only one-time lumpsum deposit.

Senior Citizen Fixed Deposits

  • Applicable for individuals above 60 years of age.
  • Senior citizens are eligible for special rates.
  • Flexible tenures.

Cumulative Fixed Deposits.

  • Interest is compounded every quarter or year and paid at the time of maturity.
  • Helps substantially grow your savings.

Non-Cumulative Fixed Deposits

  • Interest is paid out monthly, quarterly, half-yearly, or annually, as per your choice.
  • A better bet for pensioners looking for a regular source of income.

Flexi Fixed Deposits

  • Fixed deposit linked to your bank account.
  • Money shuttles between your FD and savings account.

Fixed Deposit Tax Benefits

The advantages of Tax Saving on Fixed Deposits are numerous. These are listed as follows:

  • Investors might be individuals, Hindu Undivided Families (HUFs), and children investing alongside adults.
  • Under Section 80C of the Income Tax Act, the investment is eligible for a tax deduction.
  • Depending on the income tax bracket, Tax Deducted at Source (TDS) is applicable on interest earned, although this can be avoided by submitting Form 15G. (for senior citizens it is Form 15H).
  • On interest generated under Section 80TTB, senior citizens may deduct up to Rs. 50,000.
  • Except for when it is held by or on behalf of minors, the nomination facility is available.
  • Senior citizens receive higher interest rates.
  • Fixed deposits in post offices can be transferred from one post office to another.
  • Postal fixed deposits may be moved from one post office to another.