In India, we have various types of fixed deposit schemes. An investor can choose based on their personal and financial needs. Let’s discuss the types of deposit schemes here.
Standard Fixed Deposits
A fixed sum of money is deposited for a certain period of time and a certain interest rate is provided for the deposited amount. This kind of deposits is one of the common and basic deposits with less complication.
Special Fixed Deposits
In this kind of deposits, the investors get some special benefits or perks when compared to the standard fixed deposits. These plans usually offer higher rates of interest. An investor can generally take a loan on these types of fixed deposits as well.
Tax Saver Fixed Deposits
A fixed deposit attracts tax, like any other investments. If you plan to reclaim some tax then you can opt for this plan. The tenure is usually long-term that ranges between 3 to 5 years, or more. Therefore, they come with a lock-in period and one cannot break these deposits or withdraw them prematurely, unless in the event of the death of the account holder. The deposit also comes up with a maximum limit of investment. The tax exemption can be claimed under Section 80C of the Income Tax Act.
Cumulative Fixed Deposits
In this plan, the interest earned on will not be paid to the policyholder at regular intervals (Monthly or quarterly or half yearly or yearly). Instead, Interest is compounded on a weekly, bi-weekly, monthly, quarterly, half-yearly or yearly basis and will be paid only upon completion of the tenure. This gives higher gains, making it a more profitable form of investment. This plan is not ideal for those who opt for a regular income.
Non-Cumulative Fixed Deposits
This plan is just opposite to the cumulative fixed deposits; here the bank pays the account holder the interest earned on the principal amount at regular frequencies. Unlike cumulative deposits, this is suitable for a person who is in need of regular income. The depositor can choose at what interval interest should be paid. The downside is it earn lesser on the whole when compared to cumulative fixed deposit schemes.
Flexi Fixed Deposits
As the name suggests, Flexi fixed deposit offers flexibility and convenience to customers. It is a combination of a fixed deposit and a recurring/current or savings account, ensuring customers get the benefit of high-interest rates offered by Fixed Deposits plus liquidity offered by saving accounts. Withdrawing amount before maturity is generally not permitted in FD. FFD overcome this problem by allowing account holders to withdraw certain sums of money, which could be from their linked account. As like other deposits TDS is applicable for FFD as well.
Fixed Deposits for NRI
Fixed deposits are offered to NRI through NRO and NRE accounts. However, the interest earned from NRO accounts is taxable as per the Indian income tax regulations. The amount in NRO account cannot be converted and repatriated into foreign currency. Whereas, the interest earned from NRE accounts is tax-free and the funds can be moved around to other accounts without any restrictions. Interest rate range from 4% to 8% on both NRO and NRE fixed deposits.
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