what is Fixed Deposit?

Fixed deposits are the foremost standard investment instruments in our country. For years, investing money has been similar to FDs since this product is taken into account safe, provides secured returns over an amount of your time, and is additionally versatile in its length. 

What is a Fixed Deposit? 

A fixed deposit or FD is an investment instrument that banks and non-banking financial companies (NBFC) provide their customers. Through an FD, folks invest an exact total of cash for a fixed time at a preset rate of interest in an FD. The rate of interest varies from one institution to a different, though it's typically over the interest offered on savings accounts.

Fixed deposits are on the market for various periods, starting from very short-run tenures of 7-14 days to long tenures of ten years. A set deposit is often referred to as a term deposit

How will FD work? 

  •  The interest depends on the tenure or maturity period of the FD. A 7-day fixed deposit can carry a lower annual rate of interest compared to an annual FD.
  • This can be to complete the time-risk of cash. Simply put, a rupee nowadays is a lot of valuable than a similar rupee a year from currently. 
  • This can be a result of inflation pushing up costs over time. A rupee can obtain you with a lot of products nowadays than it'll a year from currently. An investor has to pay back or prefer to reinvest the interest or receive an interest amount occasionally in your checking account. 
  • Cumulative FDs pay the interest and also the principal at maturity. The interest is reinvested once a year. This suggests that you won't be eligible to receive regular interest payouts, rather than receiving payment at the end of the FD tenure.
  • The cumulative FD choice is also appropriate for you if you do not want a daily stream of financial gain. Beneath this selection, you'll additionally have the benefit of the ability to combine the following year’s interests going to be calculated on the principal and interest of the previous year. 
  • Non-cumulative FDs pay interest at fixed intervals. You may prefer to receive interest payments monthly, quarterly, half-yearly, or annually, relying upon your wants. This may provide you with a daily stream of financial gain. However, the drawback of non-cumulative FDs is that you just can lose out on earning interest on interest.

There are many types of fixed deposits, some are as follows

Standard Fixed Deposits 

Standard fixed deposits are investment schemes whereby you invest an amount for a set of periods. And a preset rate of interest. The amount of investment or tenure will vary from seven days up to ten years. The interest offered depends on the length of investment and also on the financial institution giving this instrument. 

Recurring Deposit 

A recurring deposit could be a sort of fixed deposit whereby you'll invest a set add monthly or quarterly for a specific time. The rate of interest is prearranged. At the end of the maturity amount, you may receive your principal together with interest calculated proportionately. For example, you can, you'll be able 5,0000 monthly for 5 years. Interest on the primary deposit is going to be acquired for 5 years whereas that on the last deposit is going to be acquired for one month. 

Tax-Saving Fixed Deposit 

The specific tax-saving FDs that are eligible for tax deductions. A tax-saving FD features a maturity amount of five years and the principal quantity, up to ₹1,50,000 each year, which is tax-deductible beneath section 80C of the Indian Tax Act.

Flexi Fixed Deposit 

A flexible fixed deposit is coupled to your bank account. It instructs financial instruments, and you can instruct your bank to automatically transfer the amount to your preset balance to a set deposit via an automobile sweep-in feature. 

For example, if you wish to take care of a balance of ₹20,000 monthly, any excess is going to be transferred to an FD. Conversely, if your balance falls below ₹20,000, the bank can liquidate a little of your FD to take care of your balance. It provides you with the advantage of liquidity and investment. The interest on the Flexi-deposits is over bank account interest rates however under commonplace fixed deposit rates. 

Senior Citizen Fixed Deposits 

Banks and NBFCs provide a better charge per unit on FDs for individuals over sixty years more mature than different investors, typically providing 25-50 basis points (0.25-0.50%) more. They additionally offer a further tax deduction. Interest from seniors FDs doesn't carry a tax subtracted at supply if it doesn't exceed fifty thousand a year. Different investment choices don't offer this profit for seniors. 
For individuals who aren't senior voters, the TDS deduction limit is ₹40,000 a year. Investment in FDs as an old person can cut back your overall tax burden and thus, increase returns. 

Fixed Deposit for Non-Resident Indians 

Non-resident Indian voters will invest in non-resident Indians (NRI) deposits. FDs are appropriate for people earning in a very foreign currency. Though there are currency fluctuations, the foremost vital advantage of NRI's  FDs is that the complete amount, principal and interest, are tax-exempt. NRI FDs may be deposited in Indian or foreign currency and are ratable at a half-hour each year. 

Corporate Fixed Deposits 

Some corporate companies entities additionally provide fixed deposits. Whereas they provide a better rate of interest than banks and NBFCs, the chance related to company FDs is higher. Corporate fixed deposits don't offer this insurance. If a corporation goes bankrupt, there's no guarantee that your cash in company deposits may be recovered. 

Interest calculation formula 

  • Interest on FD = amount invested x rate of interest x (Duration/ twelve months) 
  •  Calculating the interest earned on FDs could be a performance of the number invested, the speed of interest being offered, and the investment length. The essential formula to calculate interest on your FD. 

Benefits of FDs 

There are several benefits of Fixed deposits offered by different financial institutions, they are 

  • Assured come back 
  • Benefits of compounding 
  • Low Minimum Investment 
  • Liquidity 
  • Easy method 
  • Higher Rates for Senior people.


Balancing is the option in an overall portfolio. Even for those with a medium-to-high risk craving, financing a little of your overall funds in fixed deposits balances out the chance from market-linked instruments like equity or mutual funds.

You can also read the concept of What is Liquidity


How to Invest in a very fixed Deposit?

Fill in FD details 

 Fill in your FD details, together with the amount, tenure, & interest payout methodology 

  •   Setup investment account 

 Set up your investment account by responsive to many queries 

  •  Payment 

 Make the payment on your FD.