Fixed Deposit Schemes are the most popular investment vehicles because they don’t just offer you capital security but also give you a fixed interest rate which is paid to you monthly, quarterly, half-yearly or annually as agreed upon.
Fixed Deposit Schemes offer stable returns on your investment. These returns are not affected by the volatility in the market. They also don’t require regular monitoring from your end and are a rather hassle-free stable investment scheme.
Besides, investing in HDFC Fixed Deposit Schemes is fairly easy and can also be done online.
Types of Fixed Deposit Schemes
There are 3 popular variations of Fixed Deposit Schemes available in the market that is great stable investment plans:
- Regular Fixed Deposit Schemes
- 5-year Tax-Saving Fixed Deposit Schemes.
- NRE/NRO Fixed Deposit Schemes.
Regular Fixed Deposit Schemes
These are your regular single-payment Fixed Deposit Schemes.
The minimum Fixed Deposit amount is INR 1000 and there is no upper limit for investing in Fixed Deposit Schemes.
TDS (Tax Deduction at Source) is deducted on Fixed Deposit Schemes only if the payable interest exceeds a limit of INR 50,000 annually.
In case of a financial emergency, you can also take an overdraft facility. For example, in HDFC Fixed Deposit Schemes you can take an overdraft facility for up to 90% of the deposit amount.
Early withdrawals might invite some penalty charges. These vary from bank to bank. Do understand the conditions for early withdrawals.
If you choose to reinvest the interest you earn on your Fixed Deposit Scheme, you can earn compound interest on your HDFC Fixed Deposit investment. This gets you a higher cash value at maturity. This is known as the cumulative option whereas the option in which interest is credited to your account periodically is known as the non-cumulative option.
It is compulsory to provide your PAN Card copy if you are investing an amount greater than INR 50,000.
5-Year Tax Saving Fixed Deposit Schemes
Tax-Saving Fixed Deposit Schemes are available to Indian residents for saving tax under section 80C of the Income Tax Act of India. As Tax-Saving Fixed Deposit Schemes have a lock-in period of 5 years, you have to remain invested in them for a period of 5 years.
The maximum amount you can invest per year in Tax-Saving Fixed Deposit Schemes is INR 1.5 lacs.
The interest rate applicable for this 5-Year Tax Saving Fixed Deposit Scheme is the same as that of a 5-Year Regular Deposit Scheme.
NRE/ NRO Fixed Deposit Schemes
Banks also offer Fixed Deposit Schemes to non-resident Indians.
As a non-resident Indian, you can have both NRE and NRO Fixed Deposit Schemes.
In NRE Fixed Deposits, your principal amount and your interest rates are completely exempted from tax and your principal plus interest are fully repatriable. The minimum tenure for NRE Fixed Deposits is 12 months and the maximum is 10 years.
NRO Fixed Deposit Schemes are taxable. The tax on the interest earned in NRO Fixed Deposit Schemes is 30.90% and is very high compared to the tax applicable on Domestic Fixed Deposit Schemes. The term of NRO Deposit Schemes also ranges from 7 days to 10 years and is similar to regular Fixed Deposit Schemes.
Fixed Deposit Interest Rates
Fixed Deposit interest rates are based on the economics of demand and supply. If there are more borrowers present in the market, banks need to keep funds at hand for which they are usually ready to pay a higher rate of interest. In a growing economy, there is a demand for debt because businesses wish to expand. Other factors that influence fixed deposit interest rates are –monetary policy, fiscal policy and the prevailing rate of inflation.
The fixed deposit interest rate you get on your Fixed Deposit Scheme is decided by the Fixed Deposit term and the amount you invest. Your Fixed Deposit interest rate once agreed upon will remain constant throughout your investment tenure. As you keep increasing your investment tenure, you get higher interest rates.
Depending on your portfolio requirements you can choose from the different types of Fixed Deposit Schemes available. Because Fixed Deposit Schemes are stable investment vehicles, they make a great choice for parking your contingency funds by choosing a favourable term.