Fixed deposits (FDs) are widely used savings instruments among investors who prefer interest rates that are determined at the time of booking for a defined tenure. Fixed deposits are commonly considered by individuals who prefer investment options that are not directly linked to market movements.
Banks, post offices and non-banking finance companies (NBFCs) like Shriram Finance offer a variety of fixed deposit schemes. You can compare and learn about fixed deposit accounts that offer reliable interest rates. For instance, Shriram Fixed Deposit offer attractive interest rate of up to 8.15%* p.a., inclusive of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors.
However, before you invest, you should know about fixed deposit accounts and how FD works. We're going to talk about fixed deposit accounts, how fixed deposit works, and what is the FD process.
What is Fixed Deposit?
You may wonder what exactly happens when you invest your money in a fixed deposit account. A fixed deposit account is a savings scheme where you deposit a lump sum amount for a fixed time period. You earn interest on your deposit over the selected tenure. When the tenure comes to an end, you get a lump sum amount on maturity.
Features of Fixed Deposits
Here are some of the salient features of a fixed deposit account:
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Banks, post offices and Non-Banking Finance Companies (NBFCs) offer fixed deposit accounts.
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The interest on the deposit is fixed throughout the term that you choose. It remains the same even if the market is volatile or if the issuer changes the rates during the term.
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Additional interest rates are offered by some institutions for senior citizens.
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You can choose the term of the deposit. At Shriram Finance, you can choose the Fixed Deposit tenure from 12 months to 60 months.
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The minimum deposit amount depends on the financial institution whose scheme you have selected. For instance, Shriram Finance allows deposits starting from ₹5000.
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Premature withdrawals are discouraged from the fixed deposit account. However, if you withdraw before the term, you might have to pay a penalty for the same.
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There are two main types of fixed deposits:
- Cumulative fixed deposits - In this scheme, the interest earned is reinvested. On maturity, you receive the lump sum interest with the deposit amount.
- Non-cumulative fixed deposits - The interest earned is paid out during the term in this scheme. You get a regular income during the fixed deposit tenure. On maturity, the financial institution refunds the deposited amount.
How Fixed Deposit Works
In a fixed deposit scheme, you choose:
- The deposit amount
- The type of scheme
- The deposit term
Based on these choices, the interest rate is fixed. After that, your deposit starts earning interest.
If you have chosen the non-cumulative fixed deposit account, you will receive the interest when it is calculated.
On the other hand, if you have chosen the cumulative scheme, the interest will keep accumulating. You will get the interest and the principal amount on maturity. When the fixed deposit matures, you can get the entire amount with interest. Alternatively, you can reinvest the maturity amount back into the scheme if you want to invest further.
How to Invest in Fixed Deposits
The FD process of investing is quite simple. You can invest in a fixed deposit in two ways:
- Offline: In the offline FD process, you will have to visit the financial institution's branch office. You can locate a branch nearest to your home or office, visit the branch and fill out the application form. Submit the form with the relevant documents and the deposit amount. The financial institution will verify your documents and open your fixed deposit account.
- Online: In the online FD process, you have to do is visit the financial institution's official website to open a fixed deposit account. On the website, select the FD scheme that you want to invest in, fill out an online application form and upload your documents. Pay the deposit amount online, and the fixed deposit account will be opened.
The Bottom Line
Fixed deposits are fixed-income instruments that give fixed returns on your investments, even when the markets are fluctuating. You can invest in fixed deposit plans to create a corpus for your financial goals over time. However, before you invest, you should understand what the scheme is all about and how it works.
Though it's a simple process, the knowledge about fixed deposit accounts will help you plan your investment strategy based on your needs. So, understand what is fixed deposit account and then invest accordingly.
If you are looking for a plan that offers attractive interest rates, consider Shriram Fixed Deposit. With interest rates up to 8.15%* p.a. (including 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors), you can invest with ease as the minimum investment starts from ₹5,000. Choose from a wide range of tenure options and build a strong investment portfolio.
Invest now and set aside a corpus for your goals.
Key highlights
- Fixed deposits are savings plans that offer a reliable interest rate on deposits throughout the deposit tenure.
- You can choose the deposit amount, term and type of FD scheme.
- Interest, once fixed, remains the same.
- You can invest in fixed deposits online or offline.
FAQs
What factors affect FD interest rates?
Some of the factors that affect the interest rates of fixed deposit schemes include:
- Deposit tenure
- Age and gender of the depositor
- Type of deposit - cumulative or non-cumulative
Is TDS deducted from FD interest?
TDS may be deducted on interest income from fixed deposits if the applicable threshold limits prescribed under tax regulations are exceeded. The applicable threshold and tax rates depend on prevailing tax rules and the depositor’s category.
Is online FD investment safe?
Online fixed deposits can be opened through the official websites or authorised platforms of banks and NBFCs. Investors should ensure they are using verified platforms and review the institution’s policies before investing.