What are the Different Types of Fixed Deposits (FDs) in India?

Fixed Deposits are one of the most popular investment options to save and grow money gradually. It is the safest option available, which offers guaranteed returns and can be opened very easily.

In this piece, you will understand the different types of fixed deposit schemes available in India, along with those available for NRIs.

Fixed Deposits are broadly classified into the following different categories:

• Regular Income FD: Regular Income fixed deposits suit best for people who have limited income, and their regular expenses depend on interest from the deposited money. The depositor can either withdraw monthly or quarterly.
• Tax Saving FD: This fixed deposit account allows a customer to avoid taxes while earning interest up to ₹1,50,000 per year. However, it has a 5-year lock-in period during which one cannot withdraw the deposited money. Although no tax is deducted from the deposited money, the interest that is compounded is taxable.
• Flexi Fixed FD: By the name, it is understandable that this fixed deposit is flexible and convenient for the use of customers. Flexi Fixed Deposit offers high-interest rates like a fixed deposit and liquidity like that of a savings account. So, we can call it a mixture of a savings account and a fixed deposit.
• Cumulative FD: In this type of fixed deposit, the interest is compounded quarterly on the principal amount of money at the rate that the financial institution decides. The main advantage of this scheme is that the depositor earns interest on the main amount along with the interest component.
• Non-Cumulative FD: In non-cumulative fixed deposits, the earned interest is withdrawn at regular intervals rather than being accumulated. This works as a steady source of income.
• Standard Fixed FD: This is the most common type of fixed deposit where the money is kept for a fixed tenure at a rate that is decided by the bank. The tenure can range from a week to several years. The interest rates are generally much higher than a normal savings account.
• Senior Citizen FD: In these types of fixed deposits, the rate of interest is quite high. Also, the customer can decide the frequency of payouts, like quarterly, annual, or monthly.

The banks also have specific schemes for the NRIs. There are two types of accounts that can be held by the NRIs, and they are:

• NRE FD: NRE fixed deposits allow the NRI to deposit money into his or her account from a foreign country, which is consequently converted into Indian currency. In simple words, it is just a term deposit account that is kept to transfer foreign income.
• NRO FD: NRO fixed deposits are held by those NRIs that have a steady income coming from India, such as rent, fees, or any other kind of business. The amount in this account is completely taxable, and the interest rates vary depending on the bank.

The simple answer is you should choose an FD that aligns with your plans and financial goals. Being an investor or depositor, it is very obvious for you to look for better interest rates. The interest rates depend on the amount of money and the time period for which the money is kept in a fixed deposit.

Nowadays, there are various investment options, but the scheme of fixed deposit remains the safest option. Fixed deposits guarantee returns on whatever you invest. There are different types of FD available for both resident and non-resident Indians.