• Fixed Deposit (FD)

    Know about fixed deposit

    Designed for risk-averse investors, fixed deposit accounts let you earn interest on the deposited amount over a fixed period of time. The interest rate usually varies from 4.50% p.a. to 8% p.a. depending on the tenure, which is usually up to 10 years. Some lenders also offer up to 0.5% additional interest rate for senior citizens.

    How Does a Fixed Deposit Account Work?

    When you put your money to work in fixed deposits, you basically lock the amount for a fixed period of time. You can earn interest on the principal sum throughout the tenure, on a cumulative basis. The interest earned gets added to the principal amount after every specific interval.

    Since the tenures are flexible, you have the option to manage multiple FD accounts spread across different tenures. That way, you will be able to earn more on your investments. Senior citizens are eligible for additional rates, usually 0.50% more than the existing rate.

    Other than this, even NRIs (Non-resident Indians) can open FD accounts in India in the form of NRE (Non-resident External) and NRO (Non-resident Ordinary) FDs.

    You can open a term deposit account with a bank where you already have a savings account. There are banks that let you open an FD account even if you don’t have a savings account with that bank. However, with such banks, you have to go through a KYC process where you have to present relevant documents, including ID proof, address proof, passport size photographs, among others.

    Features of a Fixed Deposit Account

    • Safer than other investment vehicles.
    • Lets you earn interest over a fixed period of time.
    • Flexible tenures of up to 10 years.
    • No cap on the maximum deposit.
    • Additional rates for senior citizens.

    Types of Fixed Deposits

    • Normal Fixed Deposits

      • Deposit money for a fixed tenure.
      • Tenure can range from 7 days to 10 years.
      • Interest rates higher than a normal savings account.
    • Tax-Saving Fixed Deposits

      • Tax exemption on the principal deposit amount of up to Rs.1.5 lakh in a calendar year.
      • Lock-in period of 5 years within which you cannot withdraw the amount.
      • Allows only one-time lumpsum deposit.
    • Senior Citizens’ Fixed Deposits

      • Applicable for individuals above 60 years of age.
      • Senior citizens are eligible for special rates.
      • Flexible tenures.
    • Cumulative Fixed Deposits

      • Interest is compounded every quarter or year and paid at the time of maturity.
      • Helps substantially grow your savings.
    • Non-Cumulative Fixed Deposits

      • Interest is paid out monthly, quarterly, half-yearly, or annually, as per your choice.
      • Better bet for pensioners looking for a regular source of income.
    • Flexi Fixed Deposits

      • Fixed deposit linked to your bank account.
      • Money shuttles between your FD and savings account.

    Benefits of Fixed Deposits

    • Safer bet for risk-averse investors.
    • Earn interest on your deposits and see your wealth grow.
    • Flexible tenures.
    • Tax-saving options available.
    • Better rates for senior citizens.

    Fixed deposits for NRIs

    For Non-resident Indians, there are two types of accounts they can open with Indian banks—Non-resident External account (NRE) and Non-resident Ordinary account (NRO).

    NRE fixed deposits

    NRE FDs are beneficial for those earning in foreign currency and who would like to get the amount converted to the value of Indian currency. Some of the major highlights an NRE FD account is that the interest earned is tax-free and both the principal and the interest amount are completely repatriable. The only pitfall is that the money deposited can get affected due to currency rate fluctuations.

    NRO fixed deposits

    Unlike NRE FDs, the interest earned through NRO FDs is taxable at 30%, based on the Income Tax Act, 1961. Also, only the interest earned can be completely repatriated, but the principal amount can be repatriated within a certain bracket or set limit. However, the plus point is that in case of NRO fixed deposits, there are no exchange rate fluctuation risks. You can deposit money in foreign or Indian currency in case of NRO accounts. So, if you are staying abroad and your total income also includes earnings from India, NRO FDs can be an effective gateway to manage your funds within India.

    FAQs about Fixed Deposit

    Kisan Credit Card Loan Scheme FAQs:

    What’s the maximum amount that can be deposited?

    There’s no upper cap for fixed deposits. However, you can check with your lender to see if there are any set limits.

    Can I get monthly interest on FD?

    Your FD interest can be compounded monthly, quarterly, half-yearly or annually as per your choice. However, frequent compounding can reduce the rates.

    What is the minimum period for a fixed deposit?

    Your FD tenure can range from 7 days to 10 years depending on the term you choose.

    What happens to FD after maturity?

    While opening an FD, you can mention that after maturity the amount can be transferred to your savings account. Or you can mention in the form that the amount to be renewed after maturity. If you choose the second option, after maturity, the amount will be reinvested as fixed deposit with the same tenure and rates as the previous one. If nothing is notified in the form, the concerned lender will notify you. In case you don’t respond within 14 days after FD maturity, your account will be renewed automatically.

    Is FD tax free?

    No, it’s not tax free. However, you can get tax exemptions if you opt for tax-saving fixed deposits. Under such FDs, you can claim a deduction of up to Rs.1.5 lakh under section 80C of the Indian Income Tax Act, 1961.

    Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

    This Page is BLOCKED as it is using Iframes.