Flexi Fixed Deposit

Updated on: 20 Dec 2023 | 10 min read

Fixed deposits (FDs) help you save up for a financial goal and get guaranteed returns on your investments. However, traditional fixed deposits are somewhat rigid in nature. Once you open an FD account, your investment gets fixed for the chosen tenure. What if you need funds in an emergency?

While premature withdrawals are allowed, they incur penalties, reducing your effective interest income. Flexi fixed deposits, as the name suggests are flexible in nature and attempt to overcome this limitation of traditional fixed deposits. A flexi FD combines the benefits of a fixed deposit and a savings account. You get the higher FD returns along with flexibility of easy withdrawals that one gets with a savings account.

What is a Flexi Fixed Deposit?

A flexi fixed deposit scheme combines the features of a fixed deposit account and a savings/current/recurring account. You can deposit any amount in this scheme and then get the flexibility of partial withdrawals. Moreover, under flexi fixed deposits, you can choose to make investments during the deposit tenure. The amount of the investment is also not fixed. You can choose to invest any amount at your discretion.

Features of Flexi Fixed Deposit

Some of the salient features of the flexi FD account are as follows –

Affordable deposit amounts: The deposit amount required to open a flexi fixed deposit account is affordable. Some banks allow you to open an account with as little as Rs.1,000, while some banks might require higher amounts.
Flexible tenure: You can choose a flexible tenure based on your investment needs. Flexi deposit accounts allow different tenure options, usually starting from 6 months or 12 months and going up to 5 or 10 years.
Attractive interest rates: Compared to savings accounts, flexi fixed deposit interest rates are higher. Thus, with a flexi FD account, you get higher returns while enjoying the liquidity benefits of a savings account.
Auto-renewal on maturity: The flexi fixed deposit is automatically renewed on maturity. If you don’t want to withdraw your deposits entirely, you can continue to stay invested in the flexi deposit scheme for as long as you want to and earn attractive returns.
Partial withdrawal facility: One of the most beneficial features of the flexi fixed deposit account is its partial withdrawal facility. Unlike regular fixed deposits, you can make partial withdrawals from the account to avail of the funds needed for your financial obligations. No penalty is charged for such withdrawals, enabling easy liquidity.
Availability of loans: Financial institutions offer you a loan facility against flexi fixed deposits. You can take loans up to 80-90% of the balance in your deposit account.

Banks Providing Flexi Fixed Deposit Schemes

Several public and private sector banks offer flexi fixed deposit accounts for interested customers. Some leading names include SBI, ICICI Bank, HDFC Bank, Punjab National Bank, Bank of Baroda.

You can compare the eligibility parameters, minimum deposit amount, available deposit tenures and interest rates before investing.

Flexi vs Regular FDs

Flexi fixed deposits are different from regular fixed deposit accounts. The differences are as follows –

Flexi Fixed Deposits	Regular Fixed Deposits
After opening the account with a fixed amount, you can make further deposits during the deposit tenure. The amount of each deposit is not fixed.	You deposit a lump sum amount when you open the fixed deposit account. After that, you cannot make further investments during the deposit tenure. You will need to open a new fixed deposit account.
The deposit term is not fixed. You can change it at your will.	Once you choose the deposit term, it remains fixed.
You can make partial withdrawals freely without incurring any charges.	You cannot withdraw partial amounts. Even if allowed, they incur additional charges, reducing your interest income.
No tax benefit is allowed on the investment.	You can claim a tax benefit under Section 80C if you invest in tax-saving fixed deposit schemes.
The flexi deposit account is usually tied-up with a savings, current or recurring account.	The account is not tied-up with any other account. It is an independent account.
The minimum deposit tenure is usually higher compared to regular fixed deposits. The tenure might be in months.	The minimum deposit tenure starts from 7 days.

Conclusion

The flexi fixed deposit scheme is beneficial if you are looking for liquidity and attractive returns higher than what your savings account offers. One of the disadvantages of flexi fixed deposits might be the lower interest rates than regular FDs.

However, the benefits of the scheme outweigh the disadvantages. So, it is important to understand what a flexi deposit is and how it works. Invest in the scheme and enjoy flexible investments with the facility of partial withdrawals.

FAQs

How to invest in a flexi deposit?

You can invest in a flexi deposit scheme by filling out the application form through the online facility provided by some banks, uploading requisite documents and depositing the amount. For the offline process, you must visit the bank branch and complete the formalities.

How to withdraw money from the flexi fixed deposit account?

To withdraw money from your flexi fixed deposit, you can make a written request to the bank. The bank would then issue a cheque or draft of the amount you seek to withdraw. Alternatively, you can use the net banking facility or the debit card issued by the bank to make the withdrawal.

Is TDS applicable on flexi fixed deposits?

Yes, TDS would apply if your interest income exceeds Rs. 40,000 from all your fixed deposit accounts. In the case of senior citizens, the limit is Rs. 50,000.
However, if your total taxable income falls within Rs. 2.5 lakhs, you can submit Form 15G/H to the bank to avoid a TDS deduction from the interest income.
The rate of TDS is 10% if you have submitted your PAN Card details; else, it would be 20%.

Who is eligible for flexi FDs?

Resident Indian citizens, senior citizens, minors (with adults), Hindu Undivided Families and corporates can open a flexi fixed deposit account.

What is the minimum period of deposit in a flexi fixed deposit account?

The minimum deposit period varies between 6 to 12 months. You may want to choose a scheme with a deposit tenure matching your financial needs and investment strategy.