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What is FD ?

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is also known as a term deposit or time deposit. Some banks may offer additional services to FD holders such as loans or Credit cards against FD at competitive interest rates. It’s important to note that banks may offer lower interest rates under uncertain economic conditions.The interest rate varies between 4 and 7.50 percent. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years.These investments are safer than Post Office Schemes as they are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, DICGC guarantees amount up to ₹ 500000 per depositor per bank.They also offer income tax and wealth tax benefits.

Benefits of Fd

  • Safe tool for risk-averse investors.
  • Tax-saving options also available.
  • Earn interest on your deposited amount and see your wealth grow.
  • Highest rates for senior citizens.
  • Tenure can be choose due to Flexibility.

Types of FD

 1. Fixed Deposit for Tax-saving

  • Tax exemption limit on the principal deposit amount of up to Rs.1.5 lakh in a Financial year.
  • There have a lock-in period of 5 years within which you cannot withdraw the amount.
  • its allows only one-time lumpsum deposit.

2. Normal Fixed Deposits

  • your money Deposited for a fixed tenure.
  • Tenure can range from 7 days to 10 years.
  • Interest rates higher than a normal savings account.

3. Cumulative Fixed Deposits

  • Interest is compounded every quarter,half year or year and paid at the time of maturity.
  • It help substantially grow your savings.

4. 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.

5. Senior Citizens’ FD

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

6. Flexi-option Fixed Deposits

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

Is TDS deductible on the interest earned on term deposits?

For Fixed Deposits/ Money Multiplier Deposit/ Recurring Deposits, TDS is not applicable on the interest earned up to Rs. 10,000 under Section 194A. However, TDS will be applicable if the interest received or likely to be received, during the financial year, exceeds Rs. 10,000.

Can I get monthly interest on FD?

Yes,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’s the maximum amount that can be deposited?

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

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.

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Vidhi Agarwal
Co-founder , The Singhania Groups

We believe to satisfy our customers and grow their investments, business, and consulting with our customers, continues to grow ever day.