Fixed Deposits

Fixed deposits are debt instruments that offer a fixed amount of interest on the amount invested at maturity or monthly, quarterly, semi-yearly, annually. Fixed deposits are one of the safest ways of investing your hard-earned money as the returns are fixed as per the interest rate and they don't depend on market factors.

The rate of interest changes from time to time, but once the deposit is issued the rate of interest mentioned on it is fixed. You get better interest rates if you opt for longer duration fixed deposits. Senior citizens normally get 0.50% more in terms of interest rates.

Types of Interest Payouts

• Cumulative Fixed Deposit: Interest is compounded every year and paid at the time of maturity. This helps you build a corpus by saving a large amount and offers a higher return.
• Non-Cumulative Fixed Deposit: Interest is paid monthly, quarterly, half-yearly, or yearly. This helps you meet your daily expenses by giving regular interest payouts, suitable for pensioners.

Taxation

Interest income from fixed deposits is taxable. You will get taxed at slab rates applicable to your total income.