Bank Fixed Deposit

Investments for Wealth Generation

What is Bank Fixed Deposits?

Fixed Deposits is a way to park your money for a long period of time after which you take away a substantial interest of 6.75%. Most conservative Indians would choose an Fixed Deposit because it doesn’t fail to protect the investment especially when it comes to inflation.

A Fixed Deposit can be opened with an minimum amount of Rs.1000 easily by anyone who has an account. You can also withdraw your funds after paying a penalty.

Receive tax benefits on your Fixed Deposits with a rate of just 10% taxable on your interest above Rs. 10,000. As you remain invested for 5- 10 years with a bank fixed deposit you tend to earn more returns than that of savings bank account.

Risk averse investors who can remain invested for more than 5 years looking for steady returns through lump sum deposits.

  • Investors looking to build a corpus over a long period regardless of earning inflation beating returns.
  • Investors who are able to make regular small deposits.
  • Debt Mutual Funds 
  • National Savings Certificate
  • Post-office time deposits
  • Company Deposits

Highlights

  • RiskThe risk is absolutely minimum.
  • ReturnsPre-determined interest rate for the tenure of the deposit.
  • TaxationThe initial deposit is eligible for tax deduction under 80(c) however the interest earned will be taxable as income from other sources.
  • Lock-in LimitationsThe duration is 60 days to 5 years.Withdrawals –  Access to funds will be subjected to penalties.
  • Capital ProtectionThe investment is completely secure up to Rs. 1 lakh.
  • Inflation ProtectionWhen inflation is above interest, the account earns no real returns.

Investment Goal

The main objective is to provide conservative investors a platform to earn guaranteed returns than that of saving accounts.

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Overview

FeatureDescription
EligibilityResidents of India and Non Residents (Clauses apply)
Entry Age

  • Individuals over 18 years of age

  • Guardians can open accounts for minors.

Fee Structure (Account Opening Fee & Maintenance Charges)

  • Minimum amount is Rs.1000.

  • Special interest rates for deposits over 15 lakhs.

  • No maximum limits

InterestThe current rate offered by bank is 6.75% p.a depending on the deposit duration.
TenureUp to 10 years.
Exit OptionPremature exit permitted with penalty.
Account Holding Categories

  • Individual (Minors through a guardian)

  • Joint Account

  • Companies/ associations/ trusts

  • Hindu Undivided Family (HUFs) uninvolved in trade or business.


Nomination facilityThis provision is available.

Capital & Inflation Protection

Your capital is completely safe as a sum of maximum 1 Lakh only is insured by the DICGC.

There is no protection when the rate of inflation is more than the rate offered by the savings bank account. Hence the account earns no real returns.

Guarantees

Pre-defined interest rates through out the investment tenurity decided at the time of account opening.

Liquidity

The account has limited liquidity as it comes with a predetermined lock-in period and  withdrawals can be made but are subjected to penalties.

Tax Implications

  • Under Section 80 (C), a  deposit with maturity of 5 years is eligible for tax deduction.
  • The interest amount is treated as income from other sources and taxed accordingly.
  • The tax is deducted at source (TDS) at the rate of 10% when interest is above 10,000 or 50,00 in the case of senior citizens.

Account Setup Information

How to open?

An account can be opened in any Nationalised, Private-Sector or foreign bank with a chosen nominee and completion of the KYC process with your current bank.

How to operate?

Start a deposit with a cheque issues through your current savings account for which you receive a certificate with details of the same.

Online Access

  • E-banking or internet banking enables the user to open the account conveniently with a few clicks from home or workplace.
  • It allows you to access your account, transfer funds from savings bank to fixed deposit and redeeming it at the end of the tenure.

Key Takeaways

  • A term deposit scheme issued by Central Government of India(CBI) in 2006 offers 5 year tax saving FDs without premature withdrawals and auto-renewal options.
  • A bank fixed deposit offered guaranteed returns with maximum leave of safety.
  • The senior citizens relish an exemption on interest upto Rs.50,000.

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