In the current sphere of financial instruments, Fixed Deposits (FDs) have long been a preferred choice for investors who look upon stability and guaranteed returns. One should be well aware that FDs aren’t limited to conventional offerings.
In recent years, especially since the pandemic, specialized FDs have gained a lot of popularity, especially those customized for tax-saving purposes and other unique schemes. Therefore, understanding how interest is calculated on these specialized FDs is crucial for investors to make informed and wise decisions and maximize their returns.
In the current sphere of financial instruments, including innovative features such as QR codes, Fixed Deposits (FDs) have long been a preferred choice for investors who look upon stability and guaranteed returns. One should be well aware that FDs aren’t limited to conventional offerings.
Understanding Specialized FDs
As the term implies, it refers to fixed deposit schemes offered by financial institutions that come with specific features. These include tax-saving benefits, higher Fixed Deposit Interest Rate for senior citizens, or some unique terms and conditions. These FDs are designed to cater to the diverse needs of investors and provide them with options beyond traditional FDs.
Calculating Interest for Tax-Saving FDs
Also known as Tax-Saver FDs, these kinds of investment instruments are a popular choice among investors looking to save on taxes while earning returns on their investments. These FDs come with a lock-in period of typically five years and tend to offer tax benefits under Section 80C of the Income Tax Act of 1961.
The amount of interest earned on tax-saving FDs is calculated in the same manner as traditional FDs i.e., using the compound interest formula. However, the interest accrued on these FDs is subject to taxation as per the potential investor’s income tax slab rate.
Other Unique FD Schemes
- Senior Citizen FDs
These offer higher fd interest rate to senior citizens, usually aged 60 years and above. It is pertinent to mention here that the rates are higher than regular FD rates, offering these individuals an additional source of income during their retirement years.
- Flexi FDs
It allows investors out there to withdraw funds from their FD account without breaking the entire deposit. This kind of flexibility makes it easier for investors to manage their liquidity needs while earning a higher rate of interest on the remaining balance.
- Cumulative FDs
It is ideal for those investors looking to reinvest their interest earnings to earn compounded returns. In these FDs, the interest earned is reinvested along with the initial investment amount (principal), ultimately leading to higher overall returns at maturity.
- Special Term Deposit Schemes
Banks often introduce special term deposit schemes with attractive Fixed Deposit Interest Rate for a limited period.
How to invest in FDs in 2024?
If you are planning to invest in any kind of FD this year, then firstly, you need not go anywhere and just go digital. You just need to download the ‘Bajaj Finserv’ application, which is quite trending these days and I’ve been using it for quite a long time now. It is highly recommended and reliable at all times.
Conclusion
Specialized and customized FDs offer potential investors a diverse range of options to suit their objectives. Whether saving on those annual taxes, securing higher returns for senior citizens, or participating in unique banking initiatives, these schemes cater to specific needs within the investment landscape.
(Tip: Calculate fd interest by using a simple calculator tool.)
