Standard fixed deposits are investment schemes wherein you invest an amount for a fixed period and a predetermined interest rate. The period of investment or tenure can range from 7 days up to 10 years. The interest offered depends on the duration of investment as well as the financial institution offering this instrument.

For individuals over 60 years of age, banks and NBFCs offer a higher interest rate on FDs than other investors, usually providing about 25-50 basis points (0.25-0.50%) more. They also provide an additional tax benefit. Interest from senior citizen FDs does not carry a tax deducted at source if it does not exceed ₹50,000 a year. Other investment options do not provide this benefit for seniors.

For individuals who are not senior citizens, the TDS deduction limit is at ₹40,000 a year. Investing in FDs as a senior citizen will reduce your overall tax burden and hence, increase returns.

There are specific tax-saving FDs that are eligible for tax deductions. A tax-saving FD has a maturity period of 5 years and the principal amount, up to ₹1,50,000 per annum is tax-deductible under section 80C of the Indian Income Tax Act.

A recurring deposit is a type of fixed deposit wherein you can invest a fixed sum monthly or quarterly for a specified time. The interest rate is predetermined. At the end of the maturity period, you will receive your principal along with interest calculated proportionately. For instance, you can deposit ₹1,000 every month for five years. Interest on the first deposit will be paid for five years while that on the last deposit will be paid for one month.

Non-resident Indian citizens can invest in non-resident external (NRE) or non-resident ordinary (NRO) fixed deposits. NRE FDs are suitable for citizens earning in a foreign currency. Although there are currency fluctuations, the most significant advantage of NRE FDs is that the whole amount, principal and interest, are tax-free. NRO FDs can be deposited in Indian or foreign currency and are taxable at 30% per annum.

Some companies or corporate entities also offer fixed deposits. While they offer a higher rate of interest than banks and NBFCs, the risk associated with corporate FDs is higher. While bank and NBFC deposits enjoy backing and insurance coverage from the DICGC, corporate fixed deposits do not provide this insurance. If a company goes bankrupt, there is no guarantee that your money in corporate deposits can be recovered.