Fixed deposits not just offer capital security on your investments but also provide fixed and regular FD Interest rates on the funds deposited in FD accounts. In India, it remains one of the most popular savings schemes for investors who prefer stable investment plans for a long tenure. Fixed Deposit Schemes Types as Stable Investment Plans.
Fixed Deposit Schemes Types as Stable Investment Plans
Here are three common fixed deposit schemes as offered by banks and non-banking financial institutions:
Regular Fixed Deposit Scheme:
Regular fixed deposit schemes offered by banks is the most preferred FD scheme opted by the investors.
- Investors need to deposit a minimum of Rs. 100 in the FD accounts. There is no cap on the maximum amount that can be invested in FD accounts. However, in the case of larger values, you must inform the financial institution in advance before depositing the money. Also, lenders prefer to deposit through modes such as net banking or cheque facility.
- A regular fixed deposit scheme offers a flexible tenure. Investors can thus invest in an FD scheme ranging from 7 days to 10 years, depending on the requirement of funds and goal of financial investment.
- There are no tax benefits on both the principal amount and interest earned on FD investments. However, if the interest earned from FD investments does not exceed Rs. 10,000 banks do not deduct TDS.
- Investors can also avail an overdraft facility against fixed deposit accounts. This credit facility, also known as a loan against fixed deposit is available up to 90% of the funds deposited in FD accounts. The rate of interest on loans against FD is 1%-2% higher than FD rates, which is lower than loan products such as personal loans. Further, the investor does not need to break his/her FD to avail of this facility.
- Banks charge a penalty on premature withdrawal of funds from regular Fd accounts.
Tax-Saver Fixed Deposits:
Investors who wish to avail tax more benefits on their investments must choose tax saving FD< as it offers the following features and benefits:
- A tax-saver FD is available for a fixed lock-in period of 5 years.
- Under Sec 80 C of the Income Tax Act, investors can get tax deductions up to Rs. 1.5 Lakhs on their investments.
- There is no overdraft facility provided against tax-saver FD.
- Corporate and business entities cannot avail a tax-saver FD.
- Investors can get the same benefits, such as nomination facilities. Also, the minimum amount of investment and other rules for premature withdrawal of funds remains the same in a tax-saver fixed deposit.
NRE/NRO Fixed Deposit Scheme:
Fixed Deposit Schemes offered to Non-Resident Indians come under this category. Investors can save their foreign earnings by opening an NRE/NRO FD account in India. These are some of the best features and benefits of NRE/NRO Fixed Deposit Scheme.
- In the case of the NRE FD scheme, the NRI can get a flexible tenure that can range anywhere from 1 year to 10 years.
- Also, no tax is deducted on both the principal amount and interest earned.
- NRE FD rates usually range from 3.50% to 7.25%
- NRO fixed deposit schemes are, however, taxable. Also, the rate of interest on these schemes is higher than regular fixed deposit schemes with other features remaining the same.
Conclusion | Fixed Deposit Schemes Types as Stable Investment Plans
FD rates offered by banks and non-banking financial institutions are dependent on investment tenure and the amount of investments. In most of the cases, the lenders provide a higher rate of interest if funds are invested for a longer period. However, the rate remains fixed throughout the investment tenure.