Overview on Short Term Fixed Deposit
Planning on saving that Rakhi gift money from your overly generous brother? Or wondering what to do with a lump sum settlement amount? Make your money earn for you by putting it into a fixed deposit.
A fixed deposit is a financial tool where an individual can deposit a sum of money for a fixed period of time. Upon maturity of that period, the deposited sum along with interest will be returned to the individual.
Sounds suspiciously like a savings account? The difference between a fixed deposit and a savings account is that a fixed deposit locks your money in for the tenure of the deposit. In other words, you are unable to withdraw or use that money without incurring a hefty penalty.
This ensures that you do not use the money for any purpose until the deposit matures and you receive the lump sum along with interest.
Benefits of a Short Term Fixed Deposit
A short term fixed deposit has a number of benefits and advantages, as listed below:
- Shorter period of lock in, giving you access to your money sooner.
- Stable means of building wealth.
- Interest rates in amount deposited are close to double those of a savings account.
Planning Your Short Term Goals Using Short Term FD
A short term fixed deposit enables you to save towards a short term goal by helping you set aside a certain amount of money for it.
As the amount in a fixed deposit cannot be withdrawn or utilised in any way without the paying of a hefty fine, it can be saved towards the realisation of a goal.
For example, if a short term goal is the acquisition of a new two wheeler, you could plan your fixed deposit in a way that the amount received at the time of maturity meets the goal. Accordingly, picking a fixed deposit that offers a certain rate of interest depending on the tenure would be important.
However, it should be noted that the income form fixed deposits is taxable under provisions of the Income tax Act. In case of exemptions, the applicant is required to submit the relevant exemption form at the time of income declaration. Additionally, interest received on fixed deposits is taxable if the amount is above Rs.10,000 in a year.
Short Term Fixed Deposit Tenure
A short term fixed deposit can have a tenure ranging from 7 days to 10 years. Thus, there is a fixed deposit plan to suit every budget and requirement. Different banks offer fixed deposits at different tenures, so it would be advisable to check the tenures offered by different banks before applying for one.
If you are looking for a short term fixed deposit, you could pick between a very short duration of 7 days and one up to 2 years.
Short Term Fixed Deposit Minimum Requirements
The short term fixed deposit plans offered by banks are subject to certain minimum requirements and eligibility criteria. Some banks offers fixed deposits with a premature withdrawal option, but the interest rate offered in such cases is lower than those where a premature withdrawal is not permitted.
The minimum deposit amount for a fixed deposit varies from bank to bank. Some banks have a minimum amount of Rs.10,000 for general customers.
Banks also offer fixed deposits for minors. The amount for such accounts is lower, with some banks offering a minor fixed deposit account with a minimum amount of Rs.2,000.
Eligibility Criteria for Short Term Fixed Deposit
Each bank has a list of eligibility criteria that applicants have to meet before they can open a fixed deposit account. Most banks will ask the depositor to open a saving account with them so the interest can be credited to the account, avoiding the hassle of the depositor having to collect it in person.
Apart from this, all depositors have to be resident Indians, unless the fixed deposit is also offered to Non-Resident Indians (as specified in the terms and conditions).
Documentation Required for Short Term Fixed Deposit
The list of documents to be submitted when opening a fixed deposit account are given below:
- Proof of identity
- Proof of address
- Recent passport sized photographs
Short Term Fixed Deposit Interest Rates in India
Short term fixed deposits are offered by a large number of banks in India. The rates of interest on the fixed deposits varies from bank to bank. A list of the fixed deposit tenures along with the corresponding rates of interest is given below:
|
Short Term Fixed Deposit Interest Rates (calculated at % P.A.)
|
| |
ICICI Bank
|
SBI
|
HDFC
|
Axis Bank
|
| Tenure |
Reg |
Sr Cit |
Reg
|
Sr Cit |
Reg |
Sr Cit |
Reg
|
Sr Cit |
| 7 – 14 days |
4 |
4.50 |
5.50
|
5.75 |
3.50 |
4 |
3.50
|
3.50 |
| 15 – 29 days |
4.25 |
4.75 |
5.50
|
5.75 |
5 |
5.50 |
3.50
|
3.50 |
| 30 – 45 days |
5.50 |
6 |
5.50
|
5.75 |
5.50 |
6 |
5.50
|
5.50 |
| 46 - 60 days |
6.50 |
7 |
6.50
|
6.75 |
6.25 |
6.75 |
6
|
6 |
| 61 – 90 days |
6.75 |
7.25 |
6.50
|
6.75 |
6.25 |
6.75 |
6.25
|
6.25 |
| 91 – 184 days |
7 |
7.50 |
6.50
|
6.75 |
6.50 |
7 |
6.75
|
6.75 |
| 185 – 289 days |
7.25 |
7.75 |
6.75
|
7 |
6.75 |
7.25 |
6.75
|
7 |
| 290 – 364 days |
7.40 |
7.90 |
7
|
7.25 |
6.75 |
7.25 |
7.30
|
7.55 |
| 365 – 389 days |
7.40 |
7.90 |
7.25
|
7.50 |
7.50 |
8 |
7.50
|
8 |
Please note- the above rates are as on 4th September, 2016. The rates are subject to change at the discretion of the banks. Please check the current applicable rate at the time of application.
A short term fixed deposit is an ideal way to plan for and begin your savings portfolio while also earning from your savings.
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