A Fixed Deposit is commonly called a Term Deposit. It’s the most favored investment in India because it gives guaranteed returns, choice of interest payout frequency, liquidity, safety and easy execution.
Before Invest In Bank Fixed Deposit, You should check these 11 Important things :
1. Minimum and Maximum Deposit Limit :
Various government banks have a minimum deposit limit of Rs 1000 for creating a fixed deposit. Private Banks can have a larger limit for a minimum deposit. There isn’t any maximum limit but if the deposit is above Rs 1 crore it’s called a bulk deposit which usually has more rates of interest than regular FD’s.
2. The frequency of payment of interest :
The FD interest, by default, is paid cumulative along with principal amount on maturity. If required, the frequency of interest payout can be changed to monthly, quarterly or annually for regular income.
3. Compounding interval :
Default compounding for all bank FD happens quarterly. This happens when it’s not stated. But you can state when you want to receive it and get it.
4. Extra Income :
Extra income of 0.25% to 0.75% is offered by many banks for senior citizens. On the day you open FD if you’re 60 or above, you get this facility. Many banks also offer additional interest rate for its employee and ex-employee. Retired staff gets the benefit of staff and senior citizen rate.
5. Tenure :
Tenure for most banks varies from a week to a decade. Some also offer tenure for two decades.
6. After FD Maturity :
You need to instruct what to do with maturity when you open FD online. You have three choices to choose from.
- Credit both Principal and interest in your account
- Credit interest in your account and reinvest the principal in FD
- Reinvest both Principal and interest
On maturity, the FD has renewed automatically if you haven’t instructed anything.
7. Penalty on Premature Withdrawal :
If you break your FD before the tenure completes, you may have to pay penalty.
8. Partial Withdrawal :
Some banks permit you to withdraw FD partially. If you have FD of 8 Lakh you may be permitted to withdraw 3 lakhs. Useful when you require money for a short time.
9. Nomination Facility :
Fixed deposits have nomination facility that you have to use. Even if you have multiple accounts in the same bank you can nominate different people in different FD’s in the same bank.
10. Tax Deduction at Source :
TDS is applicable at the rate of 10% if annual tax accrued is more than Rs 10000 for the general public and Rs 50000 for senior citizens.
11. Tax on Fixed Deposit (FD) :
Income from FD is considered as Income from other sources for filing Income Tax Returns. If it’s a joint account the first holder is liable to pay tax.
These are 11 most important things you have to know before you invest in Bank FD. For more information visit www.moneymindz.com or give a missed call to 022-62116588