The things you must know before investing in a Fixed Deposit

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There comes a time when you have to make an investment decision and it is important to know about them so that your savings are safe and you earn the expected returns. Fixed deposits is one the most trusted saving schemes in India as it has higher interest rates than other schemes and the returns are also known in advance as the money is invested for a predetermined duration, unlike equities. But before you make a decision to invest in the same you need to know a few things.

1. Interest Rate

Banks fix the interest rate on fixed deposits and sometimes the fixed deposit interest is paid cumulative along with principal amount on maturity. Open term deposit in a bank which gives you the best interest rate.

2. Interest Rate for Senior Citizens

If you are a senior citizen and want to invest in fixed deposits, then you will get higher interest rates of 25-75 bps than others. If you are opening FD for your self or for your parents do check the senior citizen rates.

3. FD Tenure

Most of the banks offer tenure of 7 days to 10 years on FD but there are few who also provide a tenure of up to 20 years and few international banks have fixed deposits schemes for maximum five years. It is worth mentioning that the interest rate is based on the FD tenure. 

4. Minimum Account Balance

The minimum account balance is required which varies from bank to bank. Some banks open an FD account on as little as Rs. 10,000 for major and Rs. 2,000 for the minor. It is advisable to check with the lender, what is the minimum balance required to open the savings account.

  1. Maturity Date

Always remember the maturity date of your fixed deposit, especially if you are opening it for a special occasion, like for your first luxury car or so. The maturity date is written on the receipt that you get when you open the FD account. On maturity, you have three options out of which you can select any one, credit both principal and interest in your account, credit interest in your account and reinvest the principal in FD or reinvest both Principal and interest.

6. Premature Withdrawal Penalty

If you break your FD due to any reason, every bank levy charges for it. There is a policy when you can withdraw the amount partially or completely before the maturity date, but make sure to check the penalty before opening an account. 

7. Interest Payout

You receive interest on your FD account, it is completely your decision to select the frequency of payout, most of the bank offers monthly, quarterly or annually for regular income. Select the plan according to your needs. 

8. Nomination Facility

When you open an FD account, you will be asked to choose a nominee. A nominee is chosen in case of sudden demise during the tenure, the amount of the FD will be given to the nominee. You can nominate different people in different FDs in the same bank.   

9. TDS Declaration

The bank deducts 10 per cent Tax Deducted at Source (TDS) if the total income accrued is Rs 40,000 and Rs 50,000 in case of senior citizen from interest. However, if you don’t fall under the no income tax bracket, you can only submit Form 15H or 15G as a declaration for the same. Remember to update the bank with TDS form otherwise, the amount will be deducted. The TDS is deducted and deposited every quarter from the interest earned with the income tax department.

Bottom Line:

So, if you want to invest in the fixed deposits then do consider the above-given points to take the right decision, where your income is growing. For the convenience and best interest make sure to do a lot of research. Check FD interest rates of different banks.

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