Bank Fixed Deposits (FD’s) is an investment option that everyone is familiar with. Invested in a Public Sector Undertaking (PSU) Bank, it is safe and reliable. The Liquidity is good but the returns are low compared to the other investment options. Regular returns can be made from Bank Fixed Deposits, and the Interest income is fully taxable. Interest earned on a Bank Fixed Deposit is fully taxable as per the slab rate you fall in. According to RBI Reports, 53% of the household savings are kept in bank deposits. People prefer to switch to FD’s as a flight to safety during the economic crisis.
It has historically been the most attractive investment option in our country. People protect their capital by moving from the more riskier asset classes to the safer ones. The ongoing covid-19 pandemic has forced many retail and business investors to switch to fixed deposits in order to preserve their capital.
There are different types of Fixed Deposits in private banks and nationalized banks depending upon the term invested, and the maturity plans.
Regular Fixed Deposit: It is a Standard Scheme Available in All the Banks. This scheme requires investors to invest their money for a fixed period of time at a predetermined interest rate. The tenure can range from 7 to 10 years. This is the most popular FD option chosen by the investors. This deposit allows premature withdrawal.
Tax Saving Fixed Deposit: These Deposits are instrumental in saving the tax and are available in almost all the banks. They have a lock-in period of five years, and they do not permit premature withdrawal. One can get a tax exemption of Rs.1.5 lakh in a year under section 80c for the amount deposited.
Special Fixed deposit/Non-Withdrawal FD’s: Like Standard FD’s these funds are also invested for specific time periods. The specific time period can be anything like 290 days or 390 days, etc. They do not allow withdrawals before maturity, and they offer a high interest rate.
Senior Citizen Fixed Deposit: The senior Citizen’s Fixed Deposit Scheme allows Individuals over 60 years of Age to open an FD account. These Deposits offer higher interest rate of over 0.50% over the regular interest rates. These FD’s offer to choose interest payouts at regular intervals like monthly or quarterly or at maturity. Senior citizens can enjoy a tax exemption up to 50,000 every year under section 80TTB.
Regular Income Fixed Deposit: These Deposits are suitable for those who are dependent on FD’s for as a source of income These FD’s allow you to opt for regular payouts at monthly or quarterly basis.
