7 Fixed Deposit Variants Every Indian Should Know

Fixed deposits (FDs) are a popular way to safely grow savings. By locking in a lump sum for a set period, investors can earn guaranteed returns without market risks. However, the variety of FD options can be overwhelming. Here's a breakdown of seven types of FDs you can consider for your financial goals.

1. Regular Fixed Deposits
A regular FD is a basic investment option for those looking for a safe and steady return on their savings. With a fixed interest rate, investors can choose a deposit tenure ranging from a few months to several years. Depending on the terms, interest may be paid monthly, quarterly, or annually, offering flexibility for individuals. The key advantage is the certainty of returns, making it ideal for risk-averse individuals seeking consistent growth in their savings.

2. Tax Saver Fixed Deposits
Tax saver FDs come with dual benefits: earning interest and saving on taxes. Under Section 80C of the Income Tax Act, you can invest up to ₹1.5 lakh annually to reduce taxable income. However, these FDs have a lock-in period of five years, which means no premature withdrawal is allowed. Though the interest is taxable, the fixed returns and tax benefit make it attractive for long-term savings.

3. Digital Fixed Deposits
Digital FDs bring convenience to your fingertips. Without the need to visit a branch, these FDs allow customers to open and manage their accounts online. From submitting KYC documents to tracking returns, everything can be done digitally. This type of FD suits tech-savvy individuals who want a hassle-free, paperless experience for their investments.

4. Reinvestment Fixed Deposits
Also known as cumulative FDs, reinvestment FDs offer higher returns by reinvesting the interest earned back into the principal amount. Instead of receiving periodic interest payouts, the accumulated interest compounds, yielding a higher maturity amount. This option is perfect for long-term investors who prefer to maximise savings and are not looking for immediate returns.

5. Senior Citizen Fixed Deposits
Senior citizen FDs are specifically designed for individuals over 60 years of age. These deposits offer a higher interest rate compared to standard FDs, typically ranging from 3% to 8.75% per annum, depending on the bank. Seniors can choose from a range of tenures, from short-term to long-term, and enjoy regular interest payouts, providing a reliable income stream during retirement.

6. Fixed Deposit Plus
For those looking to earn even more, the fixed deposit plus option offers a higher rate of interest compared to regular FDs. However, these come with a higher minimum deposit requirement. Additionally, investors have the option to choose between simple and compound interest. The more you invest, the more you earn, making it a suitable choice for high-net-worth individuals.

7. Auto Fixed Deposits
An auto FD blends the features of a savings account and an FD. It allows you to set a threshold limit in your savings account, and any amount exceeding that limit automatically moves into an FD to earn higher interest. While there may be penalties for early withdrawals, this option offers convenience for those who want to make the most out of their idle savings.

Each type of fixed deposit serves different financial needs, whether it's saving on taxes, earning higher interest, or providing reliable income during retirement. Choosing the right FD can help you align your investments with your long-term financial goals, ensuring growth with security.