Understanding the Basics of Fixed Deposits

Posted on Wednesday, February 21st, 2024 | By IndusInd Bank

When you think about investing money, wouldn’t it be great to know exactly how much you will get back at maturity or redemption? That’s the power of Fixed Deposits (FDs). The moment you book an FD, your returns are clear from day one. Your hard-earned money stays safe, untouched by market fluctuations or economic certainty.  

Fixed deposits aren’t just secure, they are flexible too. You can choose a tenure to align your investments with your personal goals. From short-term savings to long-term planning, you can customise FDs for various needs and expectations. 

Curious to learn more? Let’s understand the basics, types, features, and benefits of fixed deposits in more detail. 

What is an FD? 

Also known as term deposit, a fixed deposit is an investment instrument offered by various banks in India. It allows you to deposit a lump sum amount for a fixed tenure at a predetermined interest rate. Upon maturity, you get the total amount you have invested plus the compounded interest.  

Now that the fixed deposit meaning is clear, let’s understand the way it works. 

How a Fixed Deposit Works 

To open a fixed deposit account at any bank, you must first deposit a certain amount of money. This amount is your principal. The duration for which you commit this money is the tenure. The duration could be from 7 days to 10 years, whatever you find the most convenient.  

In exchange for the locked-in funds, you get a fixed interest from your bank. This interest rate differs depending on factors like the deposit amount, tenure, and the type of FD. Upon maturity, you get back the original principal along with the accumulated interest earned during the period.  

To get a clear estimate of your FD maturity amount, it is advisable to use an FD interest calculator. There are plenty of these available online. Just input your deposit amount, the tenure, and the interest rate you are being offered. Once you click on calculate, the tool displays what you will earn at maturity with compound interest factored in. You can use the FD interest calculator to experiment with different amounts, tenures, and interest rates. This helps you find the one that yields the highest returns for your chosen duration. 

Different Types of FDs Offered by Banks  

• Tax-saving fixed deposits: Put your money into this FD and get tax exemptions up to ₹1.5 lakhs under section 80C of the Indian Income Tax, 1961. The tax-saver FD locks in your funds for five years. 

• Senior citizen fixed deposits: Individuals aged 60 and above can choose this option to earn better FD interest rates than what regular FDs offer. 

• Cumulative fixed deposits: The bank compounds the interest and reinvests it in your principal amount. When the deposit matures, you will receive both the principal sum and the total accrued interest.   

• Non-cumulative fixed deposits: You can pick how often you want to receive interest. Options include monthly, quarterly, half-yearly, or yearly. It’s ideal if you need regular payouts to manage your usual expenses. 

• Flexi fixed deposits: By linking your FD to your savings account, you get to earn higher interest rates on FDs while maintaining the liquidity of savings accounts. Whenever your savings account balance runs low, you can use the funds directly from your FD to make payments. Put simply, you get the features and benefits of both investment options. 

• NRI fixed deposits: Banks usually have three FD options for non-resident Indians: NRO, NRE, and FCNR. Each plan has unique rules for currencies, deposit amounts, and tax considerations. 

Easy Investing, Endless Convenience: IndusInd Bank Instant Fixed Deposit 

With features like simplicity, a risk-free approach, predictability of returns, and tax-saving benefits, fixed deposits help you grow your money in multiple ways.  

IndusInd Bank makes adding them to your financial toolkit easier. Whether you are an existing or new customer, booking an instant FD is hassle-free. Moreover, you get to enjoy premium features like: 

• 100% paperless process 
• Low minimum deposit requirement of ₹10,000 
• Choose from flexible tenures (7 days to 10 years) 
• Competitive FD interest rates and special rates for seniors 
• Auto-renewal at maturity for additional convenience 
• Flexible interest payout options  
• Tax-saver FD that helps you save more  

So, why wait? Book an FD online with IndusInd Bank today!  

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.