How does an FD work?
Fixed Deposits (FDs) provide a secure avenue for growing your savings. With an FD, you invest a lump sum amount for a specific period, ranging from a short 7 days to a longer 10 years. The interest rate you earn on your FD is predetermined and remains fixed throughout the tenure, ensuring guaranteed returns regardless of market fluctuations. The longer the tenure you choose, the higher the interest rate you'll typically receive.
Interest earned on your FD is usually paid out at maturity. You can choose to have it directly credited to your linked savings account for immediate access or opt for it to be reinvested into your FD to accumulate over time.
Features and benefits of fixed deposits
Fixed deposits offer several advantages that make them a popular investment choice:
- Guaranteed returns: Unlike market-linked investments, FDs provide assured returns, reducing investment risk.
- Flexible tenures: FDs cater to diverse investment horizons, with options ranging from short-term to long-term goals.
- Higher interest rates: FD interest rates are generally higher than regular savings accounts, allowing for better returns on your savings.
- Loan against FD: Many financial instituion offer loans against FDs, providing liquidity in case of emergencies.
- Additional features: Some FDs offer features like auto-renewal, nomination facility, and higher interest rates for senior citizens.
Types of fixed deposits
Different categories of fixed deposits include:
1. Standard term deposits
This is the most common type of FD available at all banks. You deposit a fixed amount of money for a specific tenure, and the bank pays you interest on it at regular intervals or at maturity. The interest rate is pre-determined by the bank and varies based on the tenure and amount invested.
2. Senior citizen fixed deposits
These are FDs designed specifically for senior citizens. They offer higher interest rates than standard FDs and are available to individuals aged 60 years and above.
3. Flexi fixed deposit
This is a type of FD that allows you to withdraw money from your account without breaking the FD. You can withdraw up to a certain limit without incurring any penalty, and the interest rate is calculated on the remaining balance.
4. Recurring deposit
This is a type of FD where you deposit a fixed amount of money at regular intervals (usually monthly) for a specific tenure. The interest rate is pre-determined by the bank and varies based on the tenure and amount invested.
5. Tax-saving FD
Tax-Saving Fixed Deposit (FD) is a type of fixed deposit account that offers a tax deduction under Section 80C of the Income Tax Act, 1961 1. Any investor can claim a deduction of a maximum of Rs. 1.5 lakh per annum by investing in a tax-saving fixed deposit account. The lock-in period for this type of FD is 5 years, and the interest earned is taxable.
Other Types of Fixed Deposit
1. Cumulative FD
In cumulative FD, the earned interest is reinvested in the FD account. Both the principal amount and the accumulated interest are paid out at the end of the tenure. This suits investors seeking higher returns without the need for regular interest payouts.
2. Non-cumulative FD
Under this FD type, the earned interest is paid to the investor periodically such as monthly, quarterly, half-yearly, or annually, based on their preference. It is suitable choice for investors looking for a steady income stream.
How is interest on FD calculated?
Calculating interest on fixed deposits is simple, considering the investment amount, interest rate, and investment duration. The basic formula is:
Interest on FD=Amount Invested × Interest Rate × (Duration/12 months)
However, the interest amount varies based on whether you opt for a cumulative or non-cumulative FD. For example, let's consider investing Rs. 50,000 for 5 years at an annual interest rate of 8.5% p.a. In this scenario, a cumulative FD would yield a maturity value of Rs. 76,140.
Amount
|
Interest rate (p.a.)
|
Interest earned per annum
|
Rs. 1,00,000
|
6%
|
Rs. 6,000.00
|
Rs. 1,00,000
|
6.50%
|
Rs. 6,500.00
|
Rs. 1,00,000
|
7%
|
Rs. 7,000.00
|
Rs. 1,00,000
|
7.50%
|
Rs. 7,500.00
|
Rs. 1,00,000
|
8%
|
Rs. 8,000.00
|
Rs. 1,00,000
|
8.50%
|
Rs. 8,500.00
|
Rs. 1,00,000
|
9%
|
Rs. 9,000.00
|
Rs. 1,00,000
|
9.50%
|
Rs. 9,500.00
|
Rs. 1,00,000
|
10.00%
|
Rs. 10,000.00
|
Who should invest in an FD?
Fixed deposit is a popular investment option for various reasons. It offers fixed returns, minimal risk, flexible tenure, tax benefits, and easy liquidity. FDs are suitable for a wide range of investors depending on their financial objectives and investment portfolio. Here are the types of investors who should invest in fixed deposits:
- New investors: FDs are an idea investment option for new investors interested in learning about fixed income instruments. These investors can start with small investments and gradually increase their holdings.
- Retirement planning: People looking for a low-risk option to create a retirement corpus can invest in fixed deposits. This investment provides retirees with a regular and guaranteed income stream and protects their savings from market fluctuations.
- Conservative investors: FDs are an ideal choice for investors who prefer safe and low-risk investments. Conservative investors want to avoid fluctuations in returns that come with riskier investment products.
- Short-term goals: Investors with short-term goals can invest in fixed deposits to achieve their financial objectives. FDs offer flexible tenures from a few days to a few years. Investors can use the interest earned on the investment to meet their short-term financial goals.
- Emergency funds: FDs are a useful investment option to set aside emergency funds. They provide higher interest rates than savings accounts and offer easy liquidity with premature withdrawal.
Features of Bajaj Finance Fixed Deposit
Here are some key features of Bajaj Finance Fixed Deposit:
1. High FD rates
Bajaj Finance offers one of the highest FD rates in the market, ranging from 7.16% p.a. to 8.40% p.a. for regular customers and up to 8.65% p.a. for senior citizens, depending on the tenure of the deposit. This means that you can earn higher returns on your investment without taking on any additional risks.
Mentioned is an example where a customer below 60 years and a senior citizen invests Rs. 5,00,000 for different tenure. Here is how much they will receive at the end of their chosen tenure. (16 July, 2024)
Customers below 60 years
|
Senior citizens
|
Interest rate
|
Maturity value
|
Interest rate
|
Maturity value
|
7.40% p.a.
|
Rs 5,37,0002
|
8.04% p.a.
|
Rs. 5,38,250
|
7.80% p.a.
|
Rs. 5,78,350
|
8.20% p.a.
|
Rs. 5,85,271
|
8.10% p.a.
|
Rs. 6,19,843
|
8.35% p.a.
|
Rs. 6,23,816
|
8.25% p.a.
|
Rs. 6,69,115
|
8.50% p.a.
|
Rs. 6,74,826
|
Disclaimer: The above calculations are done using the FD Calculator.
2. Flexible tenures
Bajaj Finance Fixed Deposits offer flexible tenures ranging from 12 to 60 months. This means that you can choose a tenure that suits your investment needs and goals. Whether you want to invest for a short-term or a long-term period, Bajaj Finance has got you covered. You can also opt for a cumulative FD, where the interest is compounded annually and paid out at maturity. In a non-cumulative FD, the interest is paid out monthly, quarterly, half-yearly or annually.
3. Easy online application
Bajaj Finance offers an easy online application process for opening a fixed deposit account. You can visit the Bajaj Finance website, fill out the application form, and upload the necessary documents. Once your application is approved, you can transfer the funds online, and your fixed deposit account will be opened instantly. This saves you time and hassle of visiting a bank or a financial institution to open an FD account.
4. Monthly deposits
The Bajaj Finance Fixed Deposit also comes with a Systematic Deposit Plan (SDP) feature. Instead of making a lump sum investment, it allows you to make periodic investments in FDs. Each FD you start will earn returns based on the current FD rates. This allows you to ensure that you begin the journey of growing your wealth without straining your finances. With the Bajaj Finance SDP, you can begin to invest with as little as Rs. 5,000 every month.
5. Highly rated by credit rating agencies
Bajaj Finance Limited is rated CRISIL AAA/ STABLE and [ICRA]AAA(Stable). This indicates the highest degree of safety and stability regarding the timely payment of interest and principal on fixed deposits. This means that your investment is in safe hands, and you can be assured of timely payments of interest and principal.
Also read: TDS on FD interest
Why invest in a Bajaj Finance Fixed Deposit?
Bajaj Finance offers some of the highest FD rates in India, up to 8.65% p.a., and you enjoy high investment safety here because of the highest credit ratings - CRISIL AAA/STABLE and [ICRA]AAA(Stable). You can invest for a flexible tenure and start with a sum of just Rs. 15,000. By investing in a Bajaj Finance FD, senior citizens can also reap interest rate benefits up to 0.40% p.a. on their deposits.
Interest rate
|
up to 8.65% p.a.
|
Minimum tenure
|
1 Year
|
Maximum tenure
|
5 Years
|
Deposit amount
|
Min- Rs. 15,000
|
Application process
|
Easy online paperless process
|
Online payment options
|
Net Banking and UPI
|
