Things you must know before you invest in FD

CIOReview IndiaTeam | Monday, 21 March 2022, 12:38 IST

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Every investor wishes for an investment that keeps the capital amount safe and also earns some fruitful returns. FD investments is one of the simplest investment mediums preferred by the people. In fixed deposits, an individual deposits a specific amount to the bank for a specific tenure. The bank provides interest on the amount to the depositor. After the maturity of the fixed deposit, the depositor gets their principal amount along with interest.

The structure of FD investments is quite easy. However, there are certain things that every investor should know before engaging in any type of investment.

The top ten things that you must know about FD investments are -

  • Rate of Interest- The interest rate on fixed deposits differs in every bank; therefore you should research properly and compare interest rates of various banks before making your decision. It is advisable to trust only reputed banks which have a good brand name in the market and are offering maximum return rates against your FD investments.
  • Senior Citizen Interest Rate- The interest rate for investment by a senior citizen is generally higher than the normal interest rate.  Therefore it is beneficial for senior citizen investors to check the senior citizens’ category for interest rates before making an FD investment.
  • Tenure- In order to meet the requirements of different investors, banks offer FDs with tenure of as short as 7 days and as long as 10 years. It is important to select the tenure of the FD investments carefully as the amount will be invested in the account for the selected tenure. You can, however, withdraw the amount before the maturity of your FD, only if you pay penalty charges (discretion of the bank). The FD investment tenure influences the interest rate on the fixed deposit.
  • Account Balance - You must be aware of the minimum amount required to open an FD account. On an average basis, the minimum amount required to open an FD account is Rs.10,000. If you register the account in the name of a minor, the minimum amount is Rs. 2,000 generally. You can use the fixed deposit calculator if you want to know how much return rate you will earn on your FD amount.
  • Maturity Date - The maturity date of your FD will be mentioned on the fixed deposit receipt you receive after opening the account. If you are planning to use the FD for a particular purpose like gifting on a birthday or marriage, recheck the maturity date before opening the account. You can calculate the maturity amount using the FD calculator.
  • Renewal Policies - The depositor can also renew their FD investments automatically. This facility is generally helpful for people who aim for long-term investments. Under automatic renewal of fixed deposits, the banks automatically make the accrued amount as the principal amount for the next tenure of FD investments. The depositor gets notified and has the right to alter the fixed deposit tenure.
  • Interest Payment Pattern - There are various scales offered by the banks to pay interest on FD investments like quarterly, annually, etc. The depositor can opt for any scale as per their financial and investment goals.
  • Nominee – It is important to add a nominee to your fixed deposit application. The nominee is the rightful owner of the FD investment in case the depositor faces an unfortunate incident. It is advisable to be thorough with spellings and other details of the nominee.
  • Tax - The depositor is liable to pay TDS if they generate an annual income of Rs. 10,000/- or more from their FD investments. If the depositor is not liable to pay income tax, they will have to submit 15G and 15H duly signed forms in the bank. These forms will ensure that no tax is levied on the income generated from depositors’ FD investments.

 

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