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.
- Risk: The risk is absolutely minimum.
- Returns: Pre-determined interest rate for the tenure of the deposit.
- Taxation: The initial deposit is eligible for tax deduction under 80(c) however the interest earned will be taxable as income from other sources.
- Lock-in Limitations: The duration is 60 days to 5 years.Withdrawals – Access to funds will be subjected to penalties.
- Capital Protection: The investment is completely secure up to Rs. 1 lakh.
- Inflation Protection: When inflation is above interest, the account earns no real returns.
The main objective is to provide conservative investors a platform to earn guaranteed returns than that of saving accounts.
|Eligibility||Residents of India and Non Residents (Clauses apply)|
|Fee Structure (Account Opening Fee & Maintenance Charges)||
|Interest||The current rate offered by bank is 6.75% p.a depending on the deposit duration.|
|Tenure||Up to 10 years.|
|Exit Option||Premature exit permitted with penalty.|
|Account Holding Categories||
|Nomination facility||This 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.
Pre-defined interest rates through out the investment tenurity decided at the time of account opening.
The account has limited liquidity as it comes with a predetermined lock-in period and withdrawals can be made but are subjected to penalties.
- 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.
- 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.
- 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.