Which are the different types of fixed deposit accounts?
A fixed deposit allows you to invest your savings with a bank or a financial institution for a specified period and earn interest, either at maturity or via frequent interest payouts. FD is an ideal solution for those seeking a low-risk environment and, with high interest rates to help you battle inflation. Apart from offering assured returns, FDs also come with tax benefits, incentives for senior citizens and can be used as a collateral for loan during times of cash crunch.
Starting a fixed deposit investment is easy, but before you begin, here are some of the different types of fixed deposit accounts you should know about.
These fixed deposits are offered by private and public-sector banks and can be applied for online or at the nearest branch. The risk involved is negligent, but interest earned on your deposit is average. Here, FD tenors range from days and months to years. For a regular investor, bank FDs offer tax exemptions on interest earnings up to Rs. 10,000 in a financial year.
Company FDs, on the other hand, are offered to you by corporates and finance companies like Bajaj Finance. They generally offer you higher interest rates, but also involve more risk. To make sure that your investment will be safe, invest in company FDs with high stability ratings by ICRA or CRISIL.
Bajaj Finance Fixed Deposit (FD) for instance, is very stable as it comes with the highest credit ratings from ICRA (MAAA) and CRISIL (FAAA). Here too, the tenors range from months to years. For a regular investor, company FDs offer tax exemptions on interest earnings up to Rs. 5,000 in a financial year.
Both company FDs and bank FDs enable investors to choose how they’d like their interest payouts. Here’s a look at the different benefits of choosing different payout options
Payouts at maturity
This is a type of FD offered by banks or companies, where your interest is paid to you along with the principal amount at maturity. You can benefit from the highest earnings, but you may not be able to access any interest earnings during the length of the tenor. You can opt for this payout option, when you foresee the need for funds only after a specific time. For example, if you know that you will require funds for your daughter’s wedding in 2 years, you can safely lock them up in an FD, and benefit from earnings at the end of your tenor.
When you choose to get your interest earnings periodically, you can choose the period, and frequency for receiving your interest earnings. The more frequent the payouts, the less you earn on interest throughout the tenor. Choose between monthly, quarterly, bi-annual, and annual interest payouts to best match your financial needs.
For example, if you bought a new car and now need to pay EMIs, choose to invest in an FD with monthly payouts and fund your regular expenses easily. This FD is also apt for senior citizens looking for regular income for daily expenses post retirement.
When investing in FDs, you can also benefit from a higher interest rate for senior citizens. For example, when you invest in Bajaj Finance Fixed Deposit, you can benefit from interest rates of up to 9.10%. When this FD is opened at a bank or post office, senior citizens can benefit from tax exemptions up to Rs. 50,000 according to Section 80TTB.
You can also predict your earnings with the Bajaj Finance FD calculator and profit from perks like a 0.25% higher FD interest rate when you renew your deposit. Choose between a tenor ranging from 12 to 60 months and manage your investments easily via the online portal. Opening an FD with Bajaj Finance is simple as well, as you require just Rs. 25,000 to get started and can sign up by either walking to the nearest branch or filling up the application form online.
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