Nowadays, there is a wide range of options when it comes to wealth creation. One method to exponentially grow your money is by using the power of compounding. In this method, the longer you hold your deposit amount, the better the returns will be. Investing in fixed deposit schemes is the best way to utilise the power of compounding. However, the fixed deposit double scheme is a better version of fixed deposit. Let’s explore more about FD double scheme, its benefits and who can avail this scheme.
What is a Fixed Deposit Double Scheme?
The Fixed Deposit Double Scheme is an investment option offered by several financial institutions in India that helps investors grow their money by 2X. The interest that investors will earn on their deposit eventually becomes double the principal amount. This will then be handed over to the investor when the scheme matures.
If you plan to double your money by investing in this scheme, it is important to note that you will not have the flexibility to choose the investment tenure or interest rate. It is the financial institution you choose who will decide the tenure as well as the interest rate.
The interest rate is usually compounded quarterly, which will enhance your overall yield. You cannot opt for a separate interest payout, as the principal and interest will remain locked till the scheme matures.
However, some banks might also offer the option of premature withdrawal for this scheme. The interest you earn on your deposit is reinvested in the scheme so that the investor receives double the investment amount in the form of a lump sum.
Here is a tabular representation of how the fixed deposit double scheme works in real life. The investment amount taken for this example below is ₹50,000. While the rate of interest applicable in this case is 8%.
| Year | Starting Principal | Interest Earned | Total Interest Earned | Ending Principal |
|---|---|---|---|---|
| 1 | ₹50,000 | ₹4,000 | ₹4,000 | ₹54,000 |
| 2 | ₹54,000 | ₹4,320 | ₹8,320 | ₹58,320 |
| 3 | ₹58,320 | ₹4,665.6 | ₹12,985.6 | ₹62,985.6 |
| 4 | ₹62,985.6 | ₹5,038.85 | ₹18,024.45 | ₹68,024.45 |
| 5 | ₹68,024.45 | ₹5,441.96 | ₹23,466.41 | ₹73,466.41 |
| 6 | ₹73,466.41 | ₹5,877.31 | ₹29,343.72 | ₹79,343.72 |
| 7 | ₹79,343.72 | ₹6,347.50 | ₹35,691.22 | ₹85,691.22 |
| 8 | ₹85,691.22 | ₹6,855.29 | ₹42,546.52 | ₹92,546.51 |
| 9 | ₹92,546.51 | ₹7,403.72 | ₹49,950.24 | ₹99,950.23 |
You can see that the initial amount you invested almost doubled within 9 years.
Features of the FD Double Scheme
A Fixed deposit double scheme comes with some salient features and benefits. Let us take a look at some of them:
1. Interest Rate
FD double scheme comes with attractive interest rates. Some banks also offer higher rates for senior citizens who invest in this scheme. This helps in doubling up their deposits till the scheme matures. The interest rate, fixed at the time when the deposit is made, remains constant throughout the tenure so that there is no fluctuation which might impact your investment.
2. Safe Returns
Offered by most banks in India under the watch of RBI, an FD double scheme is considered a safe investment option. By investing in this scheme, investors can enjoy some peace of mind as it is not subject to any market-related risk or volatility.
This type of fixed deposit scheme is apt for risk-averse individuals as whatever is decided upon when the investment is made is offered in the end. Furthermore, depositors get an insurance cover of up to ₹5 lakh on their FD investment from DICGC (Deposit Insurance and Credit Guarantee Corporation).
3. Premature Withdrawal
As the FD double scheme aims to offer double what you have invested, therefore the tenure is fixed, keeping that in mind. This is the reason why some banks do not offer the option of premature withdrawal of investment from the scheme. Therefore, checking the rules and regulations regarding premature withdrawal before investing is best.
4. Loan Against FD
By investing in a double scheme FD, you do not have to worry about any financial emergency that might occur. A situation might arise when you have a financial crunch, but your money is fixed, and the scheme has not matured yet. In such circumstances, the bank provides a loan/overdraft against FD instead of a premature withdrawal facility. This ensures that depositors do not have to break their FD to meet their liquidity requirements.
5. Nomination Facility
When you invest in a fixed deposit double scheme, the bank allows account holders to nominate individuals who can access their deposit amount on their behalf. This might be helpful in case of certain unforeseen circumstances, such as the death of an account holder.
6. Taxation
The interest income you earn from the FD double scheme is income from other sources. In this regard, the bank deducts a TDS (tax deducted at source) of 10% if the interest income is above ₹40,000. For senior citizens, the limit is ₹50,000. If you cannot furnish your PAN card to the financial institution, then the applicable TDS rate becomes 20%.
7. Multiple Deposits
Banks do not restrict the number of deposits you can own. Therefore, you can invest in as many schemes as you have the funds for.
List of Banks Offering FD Double Scheme
Here is a list of all the banks offering depositors to double their investment over a particular period. Let us take a look at it:
- State Bank of India
- Tamil Mercantile Bank
- Central Bank of India
- Bank of Baroda
- Punjab National Bank
- Oriental Bank of Commerce
List of Double Deposit Schemes in India
Here is the list of the FD double schemes that the banks mentioned above provide for the depositors to double their funds. Check it out:
- SBI Fixed Deposit Double Scheme
- Tamilnad Mercantile Bank Double Deposit Scheme
- Bank of Baroda Double Dhamaka Fixed Deposit Scheme
- PNB Dugna Fixed Deposit Scheme
- Oriental Double Deposit Scheme
Eligibility Criteria for Fixed Deposit Double Scheme
Following are the general eligibility criteria that a person needs to follow to start investing in a fixed deposit double scheme:
- Applicant type: Individual, Non-Resident Individual (NRI), Hindu Undivided Families (HUFs), Public and Private Companies, Partnership Firms, Associations Clubs, Societies and Trusts.
- Age (in case of individual applicants): 18 and above (minors can open an FD under the supervision of their guardians)
Difference Between Fixed Deposit Double Scheme and Regular Fixed Deposit
Here are some of the key differences between the fixed deposit double scheme and regular fixed deposit.
| Parameters | Fixed Deposit Double Scheme | Regular Fixed Deposit |
|---|---|---|
| Tenure | In the case of a deposit double scheme, the tenure is fixed by the financial institution for the money to double. | In the case of regular fixed deposits, investors have the freedom to select the tenure for the deposit. |
| Interest Rate | FD double scheme offers a higher rate of interest than normal fixed deposit | A regular fixed deposit comes with a lower interest rate in comparison to a fixed deposit double scheme. |
| Interest Payout Option | In this case, interest income is compounded quarterly and paid along with the principal amount at the time of maturity. | In the case of regular fixed deposits, there are multiple interest payout options to choose from. |
| Premature Withdrawal | Only a few banks permit premature withdrawal in case of a fixed deposit double scheme. | Almost all banks offer premature withdrawal facilities under a regular fixed deposit scheme. |
| Maturity Amount | By investing in a fixed deposit double scheme, you can get up to double the amount you deposit. | If you invest in this scheme, you will receive the amount which is fixed as per the interest rate. |
Conclusion
An FD double scheme is a lucrative long-term investment option for risk-averse investors. By investing in this scheme, you can double your funds without having to deal with any volatility. People who plan on saving money for fulfilling goals like marriage and children’s education can opt for this scheme and get assured returns.
