Bank Fixed Deposits are financial long-term investment tool which helps you to save and invest money from your monthly income. The investment made in Fixed deposits provide you returns over a fixed period of time and can help you in your rainy days and future.
Bank fixed deposits are one of the most traditional and reliable means to invest, as you get a fixed interest and profit when invested for a particular period of time. Fixed deposits are also preferred by most of the people for wealth creation and saving taxes. Yes, Fixed Deposits are eligible for tax deduction under 80C.
Things to Know About the Bank’s Fixed Deposit Account
Bank fixed deposit offers high-interest rates as compared to savings accounts with the bank. The interest rate offered on FD schemes can go up to 9% but generally, it depends on the bank you chose and on the market.
One can open an FD account with all the top banks.
Once you add money to your Fixed Deposit account, the interest which you will get remains the same throughout the tenure.
You cannot withdraw the money deposited in the fixed deposit before the maturity period.
In case of emergencies, you can liquidate the deposited amount but, it will be done at a lower rate of interest.
Features Offered By a Bank’s Fixed Deposits
One-Time Deposit
To invest in a fixed deposit account one needs to deposit the money only once in the beginning. So, you don’t have to worry about timely payments.
Long-Term Investment
A bank’s fixed deposit is a long term investment plan. When investing in FD your money is kept safely for a longer period at the same time earning you timely interest.
Interest Payout
You get FD interest monthly, quarterly or even yearly as per requested while opening the account.
Tax-Saving
Fixed Deposits are tax efficient and one can save up to Rs. 1.5 lakhs under section 80C of the income tax act.
FD Schemes Offered by Banks
Regular FD
These fixed deposits are made for a fixed period of time and it allows you to earn a high rate of interest on your deposited amount depending on the tenure period of your FD. The interest rate is the same throughout the tenure as offered by the bank at the time of deposit.
Tax Saving FD
This is a special type of fixed deposit which allows you to claim a tax deduction on interest earned on your FD. This deduction is possible under Section 80C of the Income Tax Act.
Loans against these FDs are not available
Money deposited in FD has a particular lock-in-period of a minimum of 5 years.
Premature withdrawal is not allowed for this fixed deposit
How to Open a Fixed Deposit Account
Online
To open an FD account is quite easy nowadays. If you have an internet banking account, you can open an FD account yourself. You just have to fill the online form with your bank. Your bank already has KYC done so, you don’t need to do much.
Offline
One can also open it offline, for that you need to go to a bank and get the application form. Fill the form and submit it in the bank itself. You will be asked to submit some documents along with the form.
Documents Required to Have an FD Account
- ID proof
- Residential proof
- Passport size photographs
- Age proof (in case of senior citizens)
Once you have deposited the amount, you will get an FD receipt. Keep this receipt safely, as you need to show the FD receipt at the time your FD matures.
Advantages of FD
No Risk Involved – When you invest in FD your money is totally safe, there is no risk involved and the return is guaranteed.
Loan Against FD – During emergencies, you can rely on FDs. One can liquidate an FD easily, but in this case, you will be getting less interest. One can also avail secured loans against their FDs.
Regular Income – Having a fixed deposit provides your regular income in the form of interest payout throughout your tenure, regardless of the market fluctuations.
More Benefits for Senior Citizens – Bank offers a higher rate of interest to the senior citizens.
SBI offers 6-6.75% interest to senior citizens whereas regular customers get only 5.25-6.25%.
Tax Benefits – When you invest in FD, you can avail tax-exemptions when deposited for five years.
