10 types of fixed deposit accounts you can invest in

As an earning individual, the last thing you want to do is keep your money idle in your bank  account and not have it work for you. The rising inflation may take a toll on your finances unless you invest them strategically to make the most out of your hard earned money. Though stock markets and mutual funds are excellent options to invest in,  the risk associated is more than with fixed deposits. . 

If you wish to opt for an investment option with low or limited risk associated with it, you can consider opening a fixed deposit account. But which type would be suitable for you? Let’s find out!

What is a Fixed Deposit Account?

Fixed deposit (FD) is a popular instrument of investment that involves you depositing a certain amount of money for a fixed period of time. In return, you get a fixed rate of interest on the deposited amount  throughout the tenure of investment. The rate of interest offered varies from one bank  to another.  

What are the different types of FDs?

1. Standard Fixed Deposit 

A standard or normal FD account requires you to deposit your money for a specific period of time, ranging between seven days to ten years. Due to the specified investment tenure commitment, banks generally offer higher interest on fixed deposits.

2. Corporate Fixed Deposit 

Corporate FDs are offered by some NBFCs and companies that have been permitted by RBI.  Although they offer a higher rate of interest than standard FDs, such FDs are issued by many companies with different credit ratings. Consult your financial advisor to evaluate your acceptable risk taking ability.  

3. Cumulative Fixed Deposit 

Unlike regular fixed deposits, these FDs allow you to choose the interval at which interest would get compounded. The interest is added to the amount you invested and is paid when the FD matures.

4. Non-cumulative Fixed Deposit 

You can select the frequency of interest payments with these FDs. This way you can receive the payouts on the interest based on your choice of frequency.

5. Tax-Saving Fixed Deposit 

Tax-saving FDs have a 5-year lock-in term and you won't be allowed to withdraw the money prematurely. You can avail income tax deduction of up to Rs. 1.5 lakh on your total income each year if you park your savings in tax-saving FDs .

6. Special Fixed Deposit 

These kind of  FD accounts require investments for set durations of time, just like normal FDs. The main distinction is that you will receive higher interest than normal FDs if you don't withdraw the money before maturity. Some banks and NBFCs offer special FDs for an irregular period of time only for senior citizens where the interest rate is much higher, while others offer this scheme for everyone, keeping the rate of interest higher for the senior citizens.

7. Flexi Fixed Deposit 

You can get dual benefits from these deposit accounts as they act both as a savings account and an FD. You can avail a higher interest on the deposited amount plus enjoy the liquidity associated with a savings account. The deposits must be connected to your savings account and you can transfer any additional funds to the linked FD account. You can also open an FD account and link it with a savings account as per your convenience. 

8. Senior Citizen Fixed Deposit 

Senior Citizen FD account is primarily for those aged above 60. It offers interest rates higher than regular FDs as well as flexible tenure. 

9. NRE Fixed Deposit 

For NRIs earning in foreign currency who wish to deposit the amount in Indian currency, this can be an ideal option as interest earned on the deposit is tax-free. Additionally, you can get both the principal and interest amount in Indian currency as they are completely repatriable. 

10. NRO Fixed Deposit 

The advantage of opening an NRO fixed deposit is that there are no exchange rate fluctuation risks. You can deposit the money in both Indian and foreign currency. So, if you stay abroad but earn from the Indian market, NRO FDs can help you manage your funds effectively. However, you need to pay a 30% tax on the interest earned through these FDs.