Home / Money / Personal Finance /  Bank fixed deposits (FDs): What are your investment options?
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More than half of our country's household savings are in bank deposits. According to the RBI Bulletin, 53% of a household savings are kept in a bank deposits. A fixed deposit has historically been the most attractive investment option in our country. During times of economic crisis, people use bank FDs as a flight to safety. They move from riskier asset classes to safer ones to protect their capital. According to financial planners, the ongoing Covid19 has also forced many HNIs and other retail investors to switch to fixed deposits, in order to preserve their capital.

Here's a brief on kind or types of fixed deposits offered by banks:

Regular fixed deposit: A standard fixed deposit requires an investor to invest his money for a fixed period of time, at a predetermined interest rate. Standard fixed deposit tenures vary from 7 days to 10 years. This is the most popular FD option chosen by investors. Almost every bank offers the standard fixed deposit to its customers. This deposit allows premature withdrawal.

Tax saving Fixed Deposit: Tax saving fixed deposits have a lock-in period of five years. They do not permit premature withdrawal. They allow you to claim tax deduction of maximum up to 1.50 lakh under Section 80C for the amount deposited. But the interest generated from the FD is liable to be taxed.

Special Fixed Deposit/ Non withdrawal FDs: Special Fixed Deposits are usually offered for a special time period. A special time period can be anything, like 290 days or 390 days, etc. Special FDs do not allow withdrawals before maturity and they offer a higher interest rate.

Senior Citizen Fixed Deposit: The senior citizens’ fixed deposit scheme allows individuals over 60 years of age to open an FD account. These deposits offer higher interest rates of around 0.50% over the regular interest rates. These FDs offer to choose interest payout at regular intervals like monthly or quarterly, or at maturity.

Regular Income Fixed Deposit: These deposit are suitable for those who are dependent on the FD for as a source of income. These FDs allow you to opt for regular payouts at monthly or quarterly basis.

How are bank FDs taxed?

Interest earned on a bank fixed deposit is fully taxable as per the slabrate you fall in.

Senior citizens can enjoy a tax exemption of upto 50,000 every year under Section 80TTB. This limit includes interest income from FDs, savings account and recurring deposits.

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