All About Fixed Deposit

Fixed Deposit

Most of us opt for fixed deposit without giving much thought to it. Fixed deposit or FD allows us to deposit an amount of our choice for a tenure of our choice. Fixed Deposit offers a flexible option of long or short term saving at attractive rate of interest. Let’s explore Fixed Deposit a little more.

Who can apply for Fixed Deposit?

Anybody who is a citizen of India or is an NRI or an Indian resident living outside India can open a Fixed Deposit account in all the banks operating in India. Clubs,Trusts, groups and partnership firms originating and operating in India can also open a Fixed Deposit account.

Which Bank offers Fixed Deposit Facility?

Nearly all the banks operating in India and recognized by RBI offers the facility of Fixed Deposit.

How can I open a Fixed Deposit account?

Documents required to open a Fixed Deposit account are

Individual/Undivided Family Trusts Association Partnership Firms
Identity proof such as Driving License or Passport Copy of the Trust Deed Copy of the Resolution authorizing members to operate the account Partnership deed
Introduction from an existing account holder Copy of the Registration Certificate Photographs Copy of Resolution authorizing the ember to open and operate the account
Photographs Copy of the Resolution of the trustees Photographs
Photograph of the trustees

What is the deposit limit for Fixed Deposit and tenure?

Unlike Public Provident Fund where the locking period and the deposit limit is quite rigid, both these are flexible in Fixed Deposit. Generally, locking period varies from 7 days to 20 years. Amount that can be deposited also varies from 1000 INR to 1 crore INR. Interest earned varies from 7% to 9%. Let’s see the deposit, tenure and interest rate limit for some of the leading banks.

Bank Tenure Amount Interest Rate
SBI 7 days – 20 years 1000 – 1 crore INR 7%-9%
ICICI 7 days – 10 years Upto 1 crore 4%-8%
HDFC 7 days – 10 years Upto 1 crore 4%-8%
Axis Bank 7 days – 10 years Upto 1 crore 3.5%-8%
IndusInd Bank 7 days – 10 years Upto 1 crore 3.5%-8.25%

Will I get Loan against my Fixed Deposit?

Yes, nearly all the banks offer loan against the fixed deposit. Although the loan amount depends on the amount deposited and the locking period but one can expect to get as much as 90% of the amount deposited as loan.

Is the interest earned on Fixed Deposit tax-free?

No, interest earned on fixed deposit is not tax-free and often people forget about their Fixed Deposit before filing their taxes. Interest earned on FD is treated as part of your income and is taxed if your overall income is taxable. Banks often deduct income tax from their end  (at 10%) if the interest earned on deposit made is above 10,000. This is called TDS or tax deducted at source. To avoid TDS the account holder has to file for a refund while filing your tax return. One can also submit a 15G form declaring that your income for the assessment year is below taxable income and hence no tax should be deducted on the interest earned.

Senior citizens are exempted from paying tax on the interest earned on their Fixed Deposit. They have to submit form 15H to get the exemption.

If your overall taxable income is high and falls in the 20 – 30% tax slab then you will have to pay tax over and beyond the TDS deducted by the bank( bank deduct TDS at only 10%).

So, although Fixed Deposit offers a very flexible and healthy financial instrument to grow your money, it also is a source of tax deduction. Take a well-informed decision for your Fixed Deposit and as always you can connect with us at talk2us@kountmoney.com.

 

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