Looking at a fix deposit? Know about the different types of Fix Deposit schemes to secure your investments.
Make The Most of Your Investments With Different Types of Fixed Deposit Schemes
You’ve probably heard about fixed deposits from someone. You may even have invested in one or two. In most cases, you’re likely to receive the FD interest rate and the principal amount at the time of maturity. You can also choose to receive the interest on a periodical basis. This is known as non-cumulative fixed deposit. This helps you to earn from the money you have secured over a considerable span of time. This is so that you can manage day-to-day expenses.
Understanding The Difference
Choosing between non-cumulative or cumulative fixed deposit is dependent on your economic condition. It also needs to be in tune with your financial goals. There are several banks/NBFCs in the country that offer you different schemes under these two types of fixed deposit. But to make an informed decision, it is imperative to know more about each of these two types of fixed deposits.
The Cumulative Fixed Deposit Scheme: In a cumulative fixed deposit scheme, you won’t receive any percentage of interest during the course of the tenure. The total amount of interest will be compounded every quarter or every year. Then it’s added up with the principal amount which you would receive at the time of maturity. When you invest in a fixed deposit with a bank, you’ll receive all the interest and amount at the end of the period.
The Non-Cumulative Fixed Deposit Scheme:
When you invest in a fix deposit in this category, you’ll receive the interest amount after a month, three months, six months, or a year. This is dependent on what you choose. This helps manage finances and allows you to bear expenses without having to empty your pocket.
Choosing The Most Suitable Deposit Category
There are no differences in these two categories of fixed deposit other than how you receive the interest amount. The one you should go for depends on your own preferences and financial needs.
For instance, if you need a regular cash flow, then go for non-cumulative fixed deposit. But if you don’t need a regular payout, then you can go for the cumulative option. If you’re retired, and need money on a regular basis to take care of daily expenses, then non-cumulative fixed deposit can be your best bet. It will keep your principal amount intact and moreover, you can earn additional cash at fixed intervals. But it’s important to remember that with non-cumulative, the interest won’t be compounded. That’s because it’s sent to you via a cheque or your registered bank account.
If you have a fixed monthly income like a salary or business to meet your day-to-day needs, then you should go for cumulative fixed deposit. This is because it offers additional benefits when the interest is compounded at fixed intervals. This can help you earn a lot more.
Taxations Imposed on The Fixed Deposit
As far as tax impositions of non-cumulative and cumulative fixed deposits are concerned, the same rule is applicable for both. The fixed deposit taxable amount changes as per the Union Budget each financial year. So you should be ready for any changes every budget. The professionals of any bank can guide you on this matter. They can let you know whether your earnings taxable under the present circumstances.
Go ahead and invest in a fixed deposit. It can be more than a lifesaver with all the interest that you accumulate from it. If you’re looking for something that can help you start a diverse portfolio to mitigate your losses, then this is an option that can be helpful.
Nitin Arora
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