A FD is a type of financial instrument offered by banks and it allows individuals to deposit sums of money for fixed periods of time, like 1 month, 6 months, 1 year, 5 years etc. In general, fixed deposit accounts offer a higher interest rates than savings accounts. Fixed deposits are regarded as safe investments and help people to grow their financial assets without exposing them to volatility and other risks associated with the financial market. Most of the banks offer fixed deposit accounts in India and the interest rates offered with these accounts depend on the tenure of deposit and other factors. The tenure offered with fixed deposits can range from 7 days to 10 years, whereas the interest rate offered can be as high as 9% per annum. Some of banks even offer tax saving fixed deposits that offer tax benefits to customers.
There are various types of fixed deposit accounts that are available in India and investors can choose from the wide range of investment options based on personal and financial needs.
This is one of the most common fixed deposit accounts. It is also one of the most basic and uncomplicated forms of investment. A fixed sum of money is deposited for a certain pre-determined period of time and a certain interest rate is provided on the same.
These types of fixed deposits come with certain special benefits or perks when compared to the ordinary fixed investment plan. They usually offer higher rates of interest. One can also generally take a loan on these types of fixed deposits.
These type of fixed deposit accounts are usually for a longer tenure that ranges between 3 to 5 years, or more. Therefore, they come with a lock-in period and one cannot break these deposits or withdraw them prematurely, unless in the event of death of the account holder. The main advantage of these deposits is that one can claim tax exemption under Section 80C of the Income Tax Act.
When it comes to cumulative fixed deposits, the interest earned on this will not be available or paid to the policyholder at regular intervals. Instead, interest will be paid only upon completion of the fixed deposit tenure along with the principal amount.
In the case of non-cumulative fixed deposit, the bank pays the account holder the interest earned on the principal amount at regular frequencies.
A flexi fixed deposit is a type of fixed deposit account where the savings account is linked with the term deposit.
A fixed deposit allows an individual to keep a certain amount of money with a lender/bank for a certain duration of time for which he/she can earn a certain interest amount. The interest earned on an FD account is calculated based on the deposited amount and the term of the account. An FD account with a higher deposit amount will attract higher fd interest rates and likewise. The individual can choose to deposit a certain amount of money for a minimum of one month and a maximum of five years. As the name sounds, a fixed deposit account doesn’t provide the facility to withdraw the fund before the maturity, however, should the need arise, the account holder can liquidate the funds for a much lesser interest rate. The customers need to keep in mind that the interest earned on an FD account is subject to income tax.
Yes, a fixed deposit account can be liquidated before maturity, however, the interest payable will be lesser than what is given at maturity of the account. The account holder will need to get in touch with the bank or use the net-banking service (subject to availability) to liquidate the fixed deposit account at any time during the term.
A fixed deposit account is provided under either a cumulative or non-cumulative deposit scheme. Under a cumulative fixed deposit account, the account holder is entitled to the interest that is payable at the account maturity along with the principal amount. In cumulative deposits, the interest is accumulated with the deposit amount, which is eligible to earn compounding principle interest on monthly/quarterly/annually basis. Whether the account reaches the maturity or subject to premature withdrawal, the principal, as well as the accumulated interest amount, is paid to the customer at the end of the term.
A FD is an investment plan where a lump sum is put aside for a fixed period of time to earn interest.
A recurring deposit (RD) account is a type of investment plan where a certain sum of money is deposited every month or at set intervals of time for a fixed tenure. Interest is earned on the same.
The interest earned on an FD will be much higher than that earned, for the same amount and interest rate, on an RD. Therefore, it always wise to choose an FD over an RD.
Those investing in a tax saver fixed deposit can claim exemption under Section 80C of the Income Tax Act. The sum invested towards this will be deducted and will not be a part of the taxable income.
However, one must note that the interest earned on such term deposits will be taxable based on the tax bracket of the individual.
Only in case of tax saver fixed deposits, exemption can be claimed under Section 80C of the Income Tax Act. For other types of fixed deposits, interest earned will be taxed and exemption cannot be claimed under this section.
A non-cumulative fixed deposit scheme is an investment plan where the interest is payable at regular intervals, which may be payable on a monthly, quarterly or half yearly basis, depending on the type of bank. This ensures that the investor is earning interest at regular frequencies on the fixed deposit. On the other hand, in a cumulative fixed deposit account, interest is payable only upon maturity along with the principal amount.
Fixed Deposit Nomination Rules India
Premature withdrawal or Breaking a fixed deposit means withdrawing the money before the maturity expires. This may be necessary if you urgently require the funds or if there are better investment opportunities elsewhere. Many people want to close their old Fixed Deposit account before maturity and open a new account when they see the current interest rates on fixed deposits in the market much higher than rate of interest at which they have opened FD sometime back.
Most of the banks charge premature withdrawal penalty in the form of a 0. 5-1% lower interest on customers looking to close their Fixed Deposit
In the event of the FD being closed before completing the original term of the deposit, interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank, with premature closure penalty.
The Bank on request from the depositor, will allow withdrawal of term deposit before completion of the period of the deposit as per terms agreed upon at the time of placing the deposit. For such premature withdrawals and partial withdrawals, the Bank will levy a penalty of 1%, on the applicable rate. Partial withdrawal is permitted in units of Rs 1,000. The balance amount earns the original rate of interest.
Non-Resident Ordinary (NRO) Rupee Accounts are maintained by non-resident Indians (NRI) in Indian Rupees, to keep funds that belonged to them before they turned NRI. These accounts can also be used to account for fresh earnings in Indian Rupees even after the individual has turned an NRI, from such sources as house rent, dividend and interests, salary etc. The interest earned from such accounts is taxable as per the Indian income tax regulations. Currently, Indian banks offer an interest rate from 8-10% on fixed accounts that fulfil the NRO parameters.
Alternatively, a Non-Resident External (NRE) Rupee Accounts are maintained by non-resident Indians (NRI) in Indian Rupees and are meant for foreign exchange that is earned in their country of residence and then transferred to India. The interest earned from such accounts is tax free and the funds can be moved around to other accounts without any restrictions. Currently, Indian banks offer an interest rate from 7-10% on fixed accounts that fulfil the NRE parameters.
Many first-time investors make the mistake of investing in products that they do not know much about. We can help you there. Here are a few rules of investing. Waiting to get started?
Don’t put your hard-earned money into unknown avenues. Learn all you can about an investment product before you invest. Identify your financial needs and choose investments that suit your goals.
Do Not Time the Markets
Follow only one mantra while investing. Buy low and sell high. Avoid trying to time the markets. Invest for the long term to beat market volatility.
Be Realistic In Your Expectations
Just because some funds promise high returns, don’t expect them to make you rich overnight. Review your investments for profits over a long term.
Track Your InvestmentsRegularly
Remember to keep a watch on the performance of your investments. Rebalance your portfolio at regular intervals based on market trends.
Successful investing is all about making the right decisions at the right time. Are you ready to make your money work for you?
Fixed deposit accounts provide a stable platform for investors to earn a guaranteed return on investment on their deposits with low or no market risks. A fixed deposit or term deposit account comes with a tenure which can easily be opened and liquidated if needed (subject to charges and terms of the account). There are various types of FD accounts that provide tax benefits to the investors. An FD account has its own advantages and disadvantages which are outlined below to help you make an effective investment decision.
FDs are popular for offering a safe avenue for investment which can provide tax deduction under Section 80C of the Income Tax Act, 1961. Over the years, people have been investing in FD accounts to avoid any kind of market risk while being certain about a earning a decent interest. Moreover, the other avenues of investment may provide a higher return provided the investor is willing to accept the risk factors. The following factors are few of the distinct advantages of investing in an FD accounts:
Though an FD account offers safety and decent income through interest, it has its own drawbacks. Nowadays, most investors are finding different avenues to increase the earning potential. Additionally, other avenues of investment disclose the level of risk anticipation based on the investor's financial goals and other needs. There are certain types of investment options that allow the investors to switch their investment fund during the term of the scheme for a nominal or no charges at all. Moreover, certain accounts set a threshold for market risk exposure which helps in securing a certain amount of fund before the risk factors impact the accounts severely. In order to decide whether to invest in an FD account or not, an investor must consider the following disadvantages of an FD account:
While making an investment decision for an FD account, the investor must assess his/her financial situation in order to determine his/her financial goals. An FD account has been the popular choice of investment for most conservative investors since it eliminates the market risk and ensures a guaranteed return irrespective of market condition, however, there are various other investment options that offer a higher return based on the risk appetite of the investors. Before making an investment decision, investors are advised to compare various types of FDs and other investment option in order to make a better decision. The tax benefits are based on the current tax rules which are subject to change.
Planning to invest some money in a Fixed Deposit? Here’s all you need to know. A Fixed Deposit is a savings scheme in which you deposit a principal amount for a fixed tenure. On maturity, you get the principal amount including the interest earned. Simple! What’s more? Fixed Deposits give you guaranteed returns on maturity and offer higher interest rates in comparison to a regular savings account. You can also apply for a loan against your Fixed Deposit and get up to 90% of the amount. You can deposit any amount of money in a Fixed Deposit and also choose the tenure. This could range from 7 days to 10 years. Senior citizens can get higher interest rates on Fixed Deposits which vary from bank to bank. You’ve just learnt everything that is important about Fixed Deposits. Ready to start investing?
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22nd August, 2016
The risk element is one of the most important factors to consider while making an investment. For example, the risk factor in holding a fixed deposit is less when compared to stocks or mutual funds. Fixed Deposits fall under the safe category because there is a certain element of guarantee of returns after a fixed tenure in this type of investment option when compared to other type of investments.
There are various categories of risks:
Market risk: Market risk is defined as the probability of loss due to the poor performance in the financial market. This is also referred to as systematic risk. The results of market risks are fluctuations in interest rates, recession, political changes.
Specific risk: This is a type of risk that arises depending on how a certain security or stock performs. There can be a certain element of protection obtained by diversifying the investment portfolio.
25th October 2017
According a Sebi Survey, over 95% families in India prefer fixed deposits over equities and mutual funds. The survey revealed that only 10% households invest in risk instruments. Life insurance ranks second and precious metals rank third in the list of most preferred investment instruments in the country. The fourth and fifth place are taken by post-office savings and real estate followed by Mutual Funds (MF) and stocks. As per the survey, only 1.4% people in rural areas are aware of equities and MFs.
12th April 2017
The BMC has said that all fixed deposits amounting to a high amount to the tune of Rs.61,510 crore kept in numerous banks will be used only for city development projects. Corporators from various parties had said that the money should not be used for any purpose other than for Mumbaikars instead of burdening them with hikes. Sanjay Mukherjee, the Additional Municipal Commissioner said that these funds would be used purely for development purposes.
According to civic officials, BMC makes provision of large scale for capital works in the budget and takes a year or more for these works to be completed. Delay in procuring no-objection certificates, permissions from departments such as railway, forest and environment occurs frequently.
6th April 2017
After the brilliant performance of Indian female athletes in the Rio Olympics, Oxxy, one of India’s largest healthcare networks, has announced that it will make a fixed deposit of Rs.11,000 for each girl child born in the country. The company said that there will be no contribution taken from the parents and the allocation of the funds will be handled by Oxxy. The fixed deposit can be withdrawn by the girl when she attains the age of 18 years. Everyday approximately 50,000 children are born in India and Oxxy is expecting approximately 5,000 registrations per day. Oxxy’s Girl Development Program is available to every expecting mother and has helped reduce the infant mortality rate by educating expectant mothers on the various tests they need to undergo in accordance with global standards.
9th March 2017
A net withdrawal of Rs.5,582.83 crore has been observed in Jan Dhan accounts ever since 7th of December which was the day deposits in all these accounts increased to an all-time high after Prime Minister Narendra Modi’s decision to ban cash notes worth Rs.500 and Rs.1,000 in order to curb corruption, a move which came to be known as demonetization.
Total deposits had increased to a high of Rs.74,610 crore on the 7th of December and after that started reducing gradually to close at Rs.69,027.17 crore on the 11th of January, according to the latest data from the Finance Ministry. During the period between 7 December to 11 January, the total deposit had reduced by rs.5,582.83 crore. As of now, there are around 26.68 crore Jan Dhan accounts. The upper withdrawal limit per month for a Jan Dhan account has been fixed at Rs.10,000 from the 30th of November to check for misuse of these accounts. The upper limit for all deposits in a Jan Dhan account is Rs.50,000. On November 9th, the day after demonetization was announced, there were 25.5 crore accounts which had a deposit of 45,636.61 crore. Total deposits in these accounts increased by around Rs.28,973 crore in around a month.Mr.Singh also said that this was just a soft launch and that the firm is planning a mega launch to announce its arrival sometime in April.
9th February 2017
Utkarsh Micro Finance, backed by Commonwealth Development Corporation (CDC) has begun a new chapter by foraying into the banking sector.
The company which began operations on the 23rd is looking to take the market over by storm by providing higher deposit rates compared to major banks.
At present, the bank is looking to reduce the 1% processing fee levied on new loan borrowers and is also considering reducing the lending rates in the near future. Currently, the lending rates range between 15% - 25% annually.
Managing Director of the bank, Govind Singh, spoke to the media and said that the company has successfully completed all formalities and has launched five full-fledged branches in key areas.
He also said that the company is the first banking-related entity to be launched since demonetisation and that all this was possible because CDC pumped in Rs.150 crores in Tier-II capital about two weeks ago.
Mr.Singh also said that this was just a soft launch and that the firm is planning a mega launch to announce its arrival sometime in April.
7th February 2017
Last fortnight, the non-food credit in banking system was 9.3%. However, on September 30 when the fortnight ended, the non-food credit in banking system went up to 10.6%. When the fortnight ended, as per the Reserve Bank of India, the review for non-food credit stood at Rs.74.35 lakh crore. There was also some growth with bank deposits which was 11.3% year on year. The previous fortnight, the year on year rate stood at 9.9% which amounted to a total sum of Rs.101.43 lakh crore. This was for the first time that the banking deposits surpassed Rs.100 lakh crore milestone.
There has been very less growth in the section of loan sanctions. So the 10.6% credit growth is basically a result of the demands from retail segment. The management of different banks have agreed on the same and stated that this would remain their focus area now. The borrowing have been moved by different companies to corporate bond market. This has happened due to the low rates of interest. The lowest MCLR for one year is 9.05% at present. For corporate bonds that come with AAA rating, the benchmark rate set by FIMMDA is 7.6%.
18th October 2016
According to SEBI, banks are not allowed to use their own fixed deposits receipts as collateral as clearing or trading stock exchange members, whether they function directly or through associates. This move was made as step towards strengthening SEBI’s risk management mechanism. Clearing corporations received a circular directing them to stop accepting FDRs from banks. For those members who already deposited their FDRs or their FDRS from associate banks, they would be required to replace the collateral with other eligible security within the next 6 months. IOSCO, the international securities regulator body, has its own global benchmarks set for collaterals. The need for Indian markets to align the risk management practices along the lines of global benchmarks has emerged. In light of this, SEBI has taken the step to bar FDRs being used as collateral.
21st July 2016
Before Raghuram Rajan took over as the Governor of the Reserve Bank of India, depositors were facing negative real rates when it came to their savings. People turned to more lucrative investments such as gold, land and other non-financial assets. An important objective for Rajan was to raise the interest for savers with a decent positive real rate. Since January 2014, the rates have been rising as inflation started to fall. In the past few months, the real term deposit rates have been declining. However, the rates have stayed positive making deposits more appealing. For those interested in depositing their money in fixed deposit schemes, the returns will be higher than what they were a few years back.
21st June 2016
Money invested in stocks increase in value much faster than money invested in KVP or FD. It is important to not invest everything in just one investment option but to diversify. Diversification reduces risks that are specific to stocks and provides better returns as well.
Companies that provide visible growth in earnings are generally chased by companies resulting in an increase in their valuation. However, there are times when investors get trapped while chasing such companies. Although stocks look expensive upfront, they must be evaluated based on their growth, sustainability and visibility of earnings.
20th June 2016