Bank Fixed Deposit - FAQ's

Fixed Deposit Q & A

The Finance System: FAQ- Fixed Deposit 

 What the reasons are of invest in a Fixed Deposit (FD)?

You get guaranteed returns.

Up to Rs 5 lakh per depositor, per bank. is insured under Deposit Insurance and Credit Guarantee Corporation (DICGC)

You can get a tax benefit of up to Rs 1.5 lakh with tax-saving FDs.

You can use it as security for a credit card or loan.

How do I choose a Fixed Deposit (FD)?

When picking an FD scheme, think about how quickly you need your money, your investment goals, how long you want to invest, current interest rates, and how you want to receive interest. Also, look for special interest rates and extra services like secured credit cards or loans against your FD.

Can every Indian invest in an Fixed Deposit (FD)?

Individuals, companies, Hindu Undivided Families (HUF), partnerships, societies, governments, and local bodies can invest in fixed deposits.

Can kids open a fixed deposit account? 

Many banks and finance companies allow kids to open fixed deposit accounts if a parent or guardian helps. Kids over 10 years old can open a Post Office Fixed Deposit, and a guardian can manage it until the child turns 18.

What are the investment time slabs of fixed deposit schemes?

FD terms usually last from 7 days to 10 years. Some non-banking financial companies (NBFCs) offer FDs for 12 to 60 months, while housing finance companies (HFCs) provide FDs for 12 to 120 months. 

What is the minimum amount needed to invest? 

The minimum amount needed to open a FD is usually Rs. 1,000. Public sector banks might allow less, while some big private banks require at least Rs. 5,000. However, you can open a tax-saving 5-year fixed deposit with just Rs. 100.

 

How do depositors receive their FD maturity amount?

If you are already a customer of any bank, the maturity amount will go straight to your linked bank account. If you don’t have an account with the same bank, you can get the money in cash (up to a limit), through a pay order, demand draft, or sent to another bank account electronically.

Can depositors receive monthly interest?

Yes, non-cumulative fixed deposits can pay interest monthly if you choose that option.

What is the minimum lock-in period for a tax-saving FD?

Tax-saving fixed deposits have a lock-in period of 5 years.

What happens to the interest if I withdraw my FD before time?

If you close your FD before time, you will pay a penalty of up to 1% on the interest rate, which lowers your earnings.

Is the interest on fixed deposits taxable income ?

Yes, the interest earned on a fixed deposit is taxable. However, you can claim deductions of up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act, 1961.

What is the rate of tax collected from depositor from FD interest income?

TDS at 10% is deducted from interest income over Rs. 40,000 for regular individuals and over Rs. 50,000 for senior citizens. For corporate fixed deposits, the limit is Rs. 5,000.

What is the FD interest rate for senior citizens?

Many banks offer higher FD rates for senior citizens, usually an extra 0.50%. Different banks may have different rates depending on the deposit length.

What benefits do senior citizens get with FD schemes?

Senior citizens often receive an extra interest of up to 0.50% on the same FD scheme. Banks like SBI, ICICI, and HDFC offer this additional interest.

What documents are needed to open an FD?

You must provide your PAN when opening a fixed deposit. If you don’t have a PAN, you need to fill out Form 60/61.

A fixed deposit saving in Small Finance Banks is safe or not?

Yes, Small Finance Banks are regulated by the Reserve Bank of India, and your deposits are insured up to Rs. 5 lakh by Deposit Insurance and Credit Guarantee Corporation (DICGC)DICGC.

What is an NRE fixed deposit and how does it differ from an NRO FD?

NRE Fixed Deposit stands for Non-Resident External Fixed Deposit, which NRIs use to deposit their foreign earnings in an Indian account. The interest on NRE FD is not taxable in India. The money is kept in Indian Rupees and is converted at current Forex rates. NRO Fixed Deposit (Non-Resident Ordinary) is for NRIs to manage their income earned in India.