A fixed deposit is a type of term deposit where individuals deposit money to earn high returns compared to a savings account or recurring deposit. Interest is earned on the principal amount for a fixed time known as the tenor. After the money is invested, it is locked away for the time specified and cannot be withdrawn before maturity. If anyone still wishes to withdraw within the maturity period, they will have to pay a penalty. It is the best investment option for anyone who wishes to avoid the risks associated with market-linked investments.
The monthly interest on different types of FDs
There are two types of fixed deposits- cumulative fixed deposit and non-cumulative fixed deposit –
- In cumulative fixed deposits, interest is calculated on a quarterly or yearly basis and the interest paid along with the principal sum at the time of maturity. Cumulative FD is suitable for those individuals who are looking to expand their savings.
- In case of non-cumulative fixed deposits, interest is calculated on a monthly, quarterly or yearly basis as per the investor’s choice and disbursed accordingly too. Non-cumulative fixed deposits charge a comparatively lower rate of interest rate therefore suited to those who are interested in a regular income from their savings.
A Fixed deposit interest calculator is an online tool that can be used to calculate the monthly interest returns from a fixed deposit so that the investor can plan his/her finances in advance.
How to use a fixed deposit interest rates calculator?
These steps below can be followed in order to use a fixed deposit interest rates calculator –
- Choose customer type, e.g. new customer/existing or senior citizen.
- Opt for either fixed deposit-cumulative or non-cumulative.
- Fixed deposit amount and the tenor period for fixed deposit.
- Maturity or disbursal amount/s will be computed and shown according to the mentioned inputs.
For example, if someone invests Rs. 25,000 for 24 months, his/her monthly interest will be Rs. 162 at an interest of 7.77%. If he or she chooses to opt for quarterly payments, their interest will be Rs. 489 at a rate of 7.82%. Similarly their half-yearly and yearly payment will be Rs. 986 and Rs. 2013 at a rate of 7.89% and 8.05% respectively. All this can be easily calculated with the help of an online fixed deposit calculator.
What are the advantages of investing in a fixed deposit?
Advantages of investing in a fixed deposit are –
- It is a stable investment option and has assured returns compared to other high-risk investment options in the market.
- Offers a higher rate of interest than a savings account
- Some financers offer online applications for fixed deposits.
- Consumers can apply for loans against fixed deposits as collateral in case of emergencies.
- Investors can opt for a tenor period as per their convenience. Know how the tenor period of the FD affects its interest rates.
- The minimum deposit for a fixed deposit is as low as Rs. 25,000 so it is a good investment option for younger people.
- Some financial institutions also offer auto-renewal at the end of the maturity period.
- It is a good investment option for senior citizens as it offers higher returns for them.
- As per the income tax act of 1961, income from the fixed deposit is exempted from TDS up to Rs. 10,000. In a tax saving FD, the principal amount that is invested is exempted from TDS.
Who are eligible for fixed deposits?
Apart from individuals residing in India and non-resident Indians, the following are also eligible to avail of an FD account with most NBFCs and financial institutions.
- Hindu undivided family (HUF.)
- Public/private ltd. Companies, partnership firms, a sole proprietorship.
- Local authorities and registered societies.
Individuals opting for an FD account need to provide their latest photograph, and certified KYC documents. Societies and companies need to provide other documentation along with the above ones.
An investor has to invest a substantial amount as the principal sum to get assured high returns monthly. Hence he/she needs to choose a financial institution that has a high stability and credit rating so as to ensure that their principal amount is secured at all times. For instance, Bajaj Finance has CRISIL’s FAAA rating and ICRA’S MAAA rating.
A fixed deposit is the best option for investors who want a high return on their investments minus the market risks. Make sure you have comprehensive know-how on how to choose the best FD plan in 2019 to plan your future finances effectively.
With the help of an FD interest calculator, they can now easily calculate their interest amount and the total amount at the end of maturity period beforehand and plan their investments accordingly.