The Essentials of Fixed Deposits


Every investment avenue provides a certain rate of return, which can be either fixed or variable. Some investments, like equities, do not have fixed returns and investments in fixed deposits (FD) have a pre-determined interest rate.


The interest on these deposits varies from one institution to another and depends on the duration of the deposit. Senior investors get higher interest rates to provide more financial security to them.


Few Basics of FDs

  • Safe investments as they are regulated by the Reserve Bank of India (RBI)
  • Provide higher interest rates when compared to savings accounts
  • Amount invested can neither be enhanced nor withdrawn before maturity date
  • In case of early redemption of the FD, penalty is levied
  • Investors can increase their returns by reinvesting the interest amount in these deposits
  • It is important to check the implications of Tax Deducted at Source (TDS) and Income Tax on the interest and maturity amounts received through FD investing


Before you decide to invest in these deposits, you can check the returns on fixed deposit calculators that can easily be found on the Internet. These calculators will provide you with detailed information on the total amount that you will receive on maturity. This can help you plan your finances more accurately.


As you get closer to your retirement age, youwould naturally want to reduce the risks on investments. A fixed deposit is beneficial in this scenario because the rate of returns on the capital investment is guaranteed, irrespective of market fluctuations or changes in interest rates.


Different types of FDs

  • Regular FD – Offers a fixed interest rate with duration ranging between 7 days to 10 years
  • Special FD –The amount is invested for a specified period, such as 333 days or 555 days and earns little more than regular FD interest; you can check the returns using an online FD interest calculator
  • Tax saving FD – Used to save tax liabilities but have a lock-in period of 5 years
  • Floating FD – Flexible interest is paid on the invested amount and is linked to changes in market rates


Benefits of Fixed Deposits

  • Investors are able to plan their finances in a better way, because they are aware of the precise returns that they can expect on the invested amount
  • Financial security because there is almost no possibility of losing the amount invested in FDs
  • Regular source of income from the interest that is earned at periodic intervals through such investments


Using an Online Calculator

An online FD calculator is a very beneficial tool that helps investors calculate the compounded return that will be earned on maturity. Using this calculator can also help you determine the returns offered by various institutions to make the right choice, not just in terms of highest interest rates, but also in the context of safety. All you need to do is input the amount that you want to invest and the deposit tenure to calculate the returns you can make on maturity. The calculators are also beneficial to determine and estimate fees and other charges that you may have to pay in case you avail a loan on your fixed deposits.


If you are interested in opening a fixed deposit, but do not understand how these financial instruments work, online calculators will help give you a more practical insight. If you need further assistance, you can also contact a financial adviser. 


Click here to know more about fixed deposit and their interest rates.


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