What is Fixed Deposit Account? Things You Should Be Aware Of

Taking care of our financial whereabouts is an essential aspect that everybody should be responsible about. Fixed deposit accounts can be the best solution for anyone looking for a method to invest in a risk-free manner irrespective of age. If you are looking for the answer to what a fixed deposit is and whether or not you should invest in it, here is all you need to know regarding the entire procedure.

What is Fixed Deposit?

Fixed deposit accounts can be made by investors interested in investing their money and being risk-free about the entire interest procedure until the end of the journey. If you are wondering what is fixed deposit account is and why you should invest in it, the first and foremost step would be to understand the types, benefits, and other details regarding the entire procedure.

Over the past years, fixed deposit accounts have become the best investment method in India due to the increasing interest rate that the banks and non-banking financial companies offer across the country.

The FD meaning is important to understand while analyzing interest rates and their relations to tenure periods. Certain tenure periods are predetermined by the banks or the organization you decide to invest in. Upon completing the period, you will receive the amount you deposited along with the interest rate the bank offers. The interest rate varies from one bank to the other. The rate generally ranges from 3% to 8%, depending on the bank you invest in. 

Senior citizens tend to receive more interest rates from banks and organizations across the entire country. If you are wondering why you should invest in it, it is important to understand the benefits of the process.

Benefits of Fixed Deposit Account

Once you understand the fixed deposit meaning and its nature, understanding the benefits is extremely important. 

Some of the major benefits that you can get by investing in fixed deposit accounts are mentioned below:

• The entire procedure is completely risk-free. There is no possibility of your money being lost. The promised amount will be paid to your bank account after the completion of the tenure period.
• This can be considered to be a golden opportunity for senior citizens. More than 95% of banks and non-banking financial companies tend to offer a higher interest rate to all senior citizens.
• In the event of demise, one has the option to choose someone else to withdraw the amount from the bank even when it is not matured.
• It is a completely trustworthy and safe investment method.
• The interest rate cannot decrease over time, for it remains unaffected despite all market fluctuations from time to time.
• Some banks like HDFC bank offer as low as 100 rupees investment when investing for the first time. If you are looking for an investment method that would allow you to put a low amount initially, this is it.
• FD processes are the easiest in the market when it comes to investments. There is not much that you have to do during the entire process. You can directly apply for investing, and the entire procedure will be carried forward smoothly without any action from your side.

Features of Fixed Deposit in India

If you have come to realize what is FD, and its benefits that you can enjoy, take a look at some of the features of the procedure for an even better idea.

1. Fixed deposit accounts can be considered the safest option for those looking for a risk-free method of investing in today’s world.
2. Flexible tenures up to 10 years are offered by the banks and NBFCs across the country. Therefore, no matter how many years you want your program to be for, it will be available in one bank. Go for the one that suits your demands.
3. There is no maximum depositing limit. You can invest as much as you want.
4. The amount you decide to invest can be easily renewed whenever you want. Therefore, the interest rate also goes up accordingly as per your investment amount.

Types of Fixed Deposits in India

There are various FD types available in India. Here are some of the major ones that offer safe FD plans:

1. Banks can be considered the most effective agencies across the country that offer various interest programs to the citizens. The most popular banks for FD are India or the State Bank of India, HDFC Bank, Axis Bank, ICICI Bank, Kotak Mahindra Bank, and other banks like Bajaj finance, PNB bank, RBL bank, Jana small finance bank, to name a few. 

The options are countless if you decide to invest in a bank. The interest rate varies from one bank to the other. The average rate that most banks offer ranges from 5% to 7.25%. Senior citizens always get a higher interest rate than general citizens.

2. If you are looking for other agencies and organizations to invest in, there are several NBFCs (Non-banking financial companies) such as Utkarsh small finance bank, SBM bank, RBL bank, Jana bank, IndusInd Bank, Bajaj Finserv bank, to name a few, who offer good interest rates to the citizens.

3. There is another option for you if you don't want to invest in either of the above. The post office fixed deposit Services are offered by Indian postal services. There is a guaranteed return that the post offices across the country offer. The average rate of interest remains around 5% to 7% in India. For senior citizens, a higher interest rate is offered by the post offices as well. 

Best Fixed Deposit Interest Rates in India

If you are someone who is wondering what is FD in bank and which bank or NBFC can be the best option for you to invest in 2024 in India, which pays the highest fixed deposit interest rates, the first and foremost step for you would be to analyze and compare several banks and NBFCs interest rates and go for the best rate that you can find. 

The interest keeps growing over time. First, you should consider the possible rate of interest offered for the amount you are investing in any bank or NBFC and go for the best possible option.

As far as the banks are concerned, State Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra bank, to name a few, or some of the top banks that provide the citizens with a high rate of interest in 2024. The average rate of interest ranges from 5% to 8% when it comes to banks. 

As far as the NBC apps are concerned, banks like Muthoot finance bank, RBL Bank, Yes Bank are some organizations that offer around 7% to 8% interest rates to the citizens. Compare the rates for your convenience, and go for the best plan that you can find.

Taxability on Fixed Deposit Account

The amount you receive as the interest rate on the money you deposit is taxable. The tax deducted from the money you receive can range from 0% to 30%, depending on the bank or organization you decide to invest in. The amount of tax that is deducted also depends on how much money you invest. 

If your pan card details are available with the bank officials, tax deduction tends to remain at 10%. If your PAN card details are not provided, the tax deduction rate can go up to 20% to 25%, depending on the bank. You can skip the text deduction procedure year if you are a senior citizen. If you tend to come in the higher tax bracket (20% - 30%), you will be asked to pay extra taxes.

How does Fixed Deposit work?

The entire procedure depends upon the type of fixed deposit plan you go for. If you are a general citizen who decides to go for a normal fixed deposit, you will be asked to deposit your money for a fixed tenure, ranging from seven days up to 10 years. Interest rates will be higher than a normal savings account in this case. 

If you go for a tax-saving fixed deposit account, the tax exemption on the principal deposit amount has to be 1.5 lakh in a year. The lock-in period remains five years irrespective of your profession, background, and other external factors. You cannot withdraw the amount before the maturation of the amount. If you are above 60 years, you will fall under the senior citizen category. In this case, you will have a flexible tenure period, and higher interest rates will be offered to you.

If you choose to go for cumulative fixed deposit plans, the interest will be compounded every quarter or year to you. You can also decide to go for a non-cumulative fixed deposit account, in which case, your interest amount will be paid out monthly, quarterly, half-yearly, or annually, as per your convenience.

Eligibility Criteria

Suppose you intend to invest in an FD account. In that case, it is of utmost importance for you to understand the eligibility criteria properly so that the investment procedure can take place successfully. These are some of the major points that you should keep in mind if you are planning to invest shortly.

• You have to be an Indian resident.
• You are also eligible if you are an NRI or belong to the minority quota.
• Partnership firms can also go for FD plans across the country.
• Regardless of their size, location, and other factors, companies can invest in FD accounts as per their convenience.
• Whether you are an individual or have a partner to jointly invest in an account, you can go for an FD account in India.

Why invest in Fixed Deposit Account?

In India, fixed deposits are some of the safest and traditional investment procedures available since the beginning. You should consider several factors while deciding if you want to invest in a fixed deposit account or not.

1. The interest rate remains the same no matter how much the market rates fluctuate between your tenure.

2. This is a safe process that you can track at any time by communicating with the bank officials. You can track the progress of your money and plan accordingly.

3. The return of your deposited account amount along with the interest rate is confirmed. No chance of any fraud activity seems to be there.

4. If you are aiming to save money for your business or any other major events in your life, depositing in a fixed deposit account can be the best decision of your life.

5. There are various options available in the country. You can go for your preferred investment method that offers the best interest rate and suits your demands.

How is Interest on FDs calculated?

The interest rate that you can expect from a certain bank is given before your investment. You can check the amount of money that you will receive by the end of the entire procedure. The bank officials are the ones to carry forward the plan.

The interest rates on FDs are calculated after considering the 10 years you are willing to invest for. You can calculate FD Interest using FD Calculator. The interest rate remains around 3525% when you're investing for 3 to 5 years. It can go up when you are willing to invest up to 10 years.

How to apply for Fixed Deposit in India?

Compare and analyze the Best interest rates of your contemporary time and go for the best deal that you come across. Visit your nearest bank with all the necessary documents like your address proof, financial documents, ID cards, partnership proof, and other necessary details and apply for an FD account. The bank officials will guide you further for further queries and assistance.

FAQs

✅Is it safe to invest in an FD in India?

Ans: The process is completely safe as far as your financial security is concerned. Banks offer full transparency throughout the process, and you can track your development whenever you want.

✅Are banks safer when it comes to investing?

Ans: Although the other options are equally compatible, banks in India tend to offer the most reliability and safety when it comes to the citizens' financial security.

✅In how many years will my interest rate double up?

Ans: It depends on the interest rate that the bank is offering.

✅What is the minimum period for a fixed deposit?

Ans: The tenure period can range from seven days to 8 and 10 years, depending on the bank you decide to invest in.