While fixed deposits are one of the simplest
investments, there are a couple of things that one should be aware before
opening an FD account. Read this post to understand the essential things you
should know before putting your money in FD.
No matter what type of investments you choose, it is
essential to get as much information about them as possible to ensure that your
capital stays protected, and you earn maximum returns. While FDs are not as complicated
as other investment instruments, there are several things that an investor
should understand before opening an FD account. Following
are the essential things to know before investing in FD:
Interest rate
As banks have their own interest rates
on fixed deposits,
it is crucial to evaluate the rates offered by various banks before opening an FD
account. Only invest in a reputed bank that gives you a competitive rate of
investment.
Fixed deposit duration
To meet the needs of various
investors, banks now offer FDs from 7 days to 10 years. Choose the term
carefully as you will need to stay invested in the account for the selected
duration. Even the interest rate will vary based on the FD duration.
Maturity date
You can also know the FD maturity date
on the acknowledgement you receive for opening an FD account. If you are
opening an FD account for a particular reason, for example as a gift to your
child on his/her birthday, verify the maturity date to ensure that the FD
matures at the right time.
Auto-renewal
Most banks also provide FD auto
renewal facility. With this facility, your principal amount, as well as the
accumulated interest, is re-invested for a duration of your choice. If you have
chosen this facility, the same will be mentioned on the acknowledgement receipt.
Nomination
When you open an FD account, you will need
to select a nominee. In case of your demise during the FD tenure, your nominee
will be given the FD amount. The details of the chosen nominee are also
mentioned on the account opening acknowledgement receipt.
Payment of
interest
You can also select the interest
payout frequency of your choice. Most banks give monthly, quarterly,
half-yearly, annual and full tenure interest payment options.
Interest rate for
senior citizens
Senior citizens are given a slightly
higher fixed deposit interest rates as compared to regular investors. If you
are a senior citizen or keen to open an FD for your senior family members, ensure
that you verify what rate the bank offers on FD for senior citizens.
Minimum account balance
You should also verify the minimum
amount that you require for opening an FD account. Most of the top banks let
you open FD for as little as Rs 10,000. If you are opening an FD account for a
minor, the minimum balance usually is Rs 2,000. You can take help of a fixed deposit
calculator to understand how much your FD amount can earn at the end of the
duration.
TDS Declaration
The bank will deduct Tax Deducted at
Source (TDS) if your FD interest income accrued is more than INR 10,000 in a
year. However, if you come under the no income tax bracket, you will have to give
Form 15H or 15G to declare the same. Ensure that your declaration is updated with
the bank so that no TDS is deducted from your FD interest.
Fixed deposits are one of the securest
investment options in India. Just keep in mind the above FD investment suggestions
before opening an FD account and choose a reputed bank to have maximum convenience
and safety.
