Fixed Deposit
Fixed Deposit is a financial tool used by many people. People with Fixed Deposit (FD) get more interests rate than what saving account offers. It is also known as Bonds and is very safe investments. The interest rate of FD usually varies between 4-7.25%. The tenure of a FD can vary a lot it can be 15, 30 days or can be as high as 10 years. It may or may not require any a separate account depending on the bank or NBFCs offering the service. They are safer because they are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGS is a subsidiary of Reserve Bank Of India and is solely responsible for insurance for all the bank deposits. A maximum of Rs 1,00,000 is insured for each user for both principal and interest amount.
Benefits of FD
- High-interest rate than savings account
- The customer can get loans up to 90 % of the amount deposit at 1-2% over the rate offered.
- Some FD schemes offer Tax Benefit too.
- No risk investment
- Very easy to open a FD account online.
Types of Fixed Deposits
Normal/Standard Fixed Deposits
Features
- Fixed tenure
- Standard interest rates
Special Fixed Deposits
Features
- The higher rate of interest
- Can take loan
- Additional benefits
Tax Saver Fixed Deposits
Features
- Cannot be broken until completion of tenure
- The interest gained on these deposits are taxable
- tax exemption can be claimed
Cumulative Fixed Deposits
Features
- Interest paid with the principal at the time of maturity
- Not ideal for those without a regular income like pensioners etc.
- Interest is compounded on a weekly, bi-weekly, monthly, quarterly, half-yearly or yearly basis
- This leads to higher gains, making it a more profitable form of investment
Non-Cumulative Fixed Deposits
Features
- Good option for pensioners
- Extra income
- The account holder can choose at what interval dividend should be paid
- Usually one tends to earn lesser on the whole in this scheme when compared to cumulative fixed deposit scheme
Flexi Fixed Deposits
Features
- Provides flexibility
- Convenient
- A savings account is linked to the term deposit
Recurring Deposit
A Recurring Deposit is a special kind of term deposit that offers a monthly deposit till a decided amount of time. This time can be 6 months to 10 years. The depositor enjoys the interest rate of up to 7.29%. This is also a very safest and easiest investment. This kind of investment gives the opportunity to the do savings with regular monthly savings.
Benefits of RD
- Safe investment
- Earn while you save
- Lump sum payout
- Online access
- Loan offers
Types of Recurring Deposit
Regular savings scheme
- Age- 18 and above
- Time period-6 months to 10 years
- At the end of the tenure, lump sum amount can be withdrawn
- As little as Rs.10/month
- Intrest rates-7-8% per annum
Junior RD Schemes
- Recurring Deposit schemes for kids, Parents or guardians can open these deposits for their children
- Interest can be equal to or higher than regular RD.
- Time period-6 months to 10 years
Senior Citizens RD Schemes
- Interest rates-5% to 9.25% per annum
- Designed to help senior citizens during their retirement and old age
- Time period-6 months to 10 years.
NRE/NRO RD schemes
- lower interest rate
- 50% interest per annum
- Best for NRIs
- Time period-6 months to 10 years
Special RD Schemes
- The higher rate of interest
- Goal oriented
- Other people can also contribute to help you reach your goals
- Certain schemes allowed to withdraw the money in part without breaking the full deposit
- The bigger lump sum amount
- Some RD offers free life insurance.
- Time period-6 months to 10 years
Key point when comparing-
Recurring Deposit and Fixed Deposit
Features / Scheme |
Recurring Deposit |
Fixed Deposit |
Tenure |
7 days to 10 years | 1 year to 10 years |
Limit |
Minimum-Rs. 100
Maximum- Rs. 1.5 lakh. |
Minimum-Rs. 1000
Maximum- Rs. 15 lakh |
Interest |
6.96% to 8.00%. | 5.25% to 7.90% |
Tax Benefit |
Tax Exemption is provided | No tax if interest earned is up to Rs.10,000. |
