Fixed Deposit Faqs- What Is A Fixed Deposit?

You can save and invest money in India by numerous ways

. Various investment options including recurring deposits, mutual funds, post-office saving schemes and fixed deposits are considered as popular and safe options to save and invest money. People who want to make long-term investments are often advised to invest their money in a good fixed deposit (FD) scheme. An FD account helps you in numerous ways. It offers great tax saving options as well. You can also seek loan by using your deposit as collateral. There is a great future for fixed deposits in India, with numerous Indians choosing them over other investment options.

What is a fixed deposit (FD)?

A total layman in the financial field may get confused overhearing the terms like FD, let alone investing his future savings in it. The fixed deposit which is also called as term deposit is a financial instrument that provides a fixed rate of interest until maturity. It is a fixed or permanent account from which you cant withdraw money for a predetermined period of time.

If you withdraw money from your fixed deposit before the tenure ends, then the bank may deduct some money as a penalty. Fixed deposits in India are a lot like your regular saving account that you open with any Indian bank. Some Indian banks offer a fixed deposit if you already have a savings account with them. The major difference is in the rate of interest. You get a fixed rate of interest on the FD. The rate of interest for FDs depends on the tenure.

Benefits

Avail loans up to 85% of the principal amount.

Tax saving benefits under Section 80C of Income Tax Act.

Interest is paid once in every 3 or 6 months.

Eligibility

Any resident individual, joint or single account holders, organization, small vendors, clubs, institutions, associations, societies, trusts and agencies can open a fixed deposit. Even a minor and any Indian individual who meets the FD requirements guidelines by the Reserve Bank of India can easily open an FD with any Indian bank.

Deposit

Fixed deposits are high interest yielding money saving options that are offered by almost all government and private sector banks and organizations that offer financial solutions. The minimum amount criteria and the rate of interest are different for every bank for rural and urban areas. However, it will not be less than INR 1,000. You can make the deposits in the multiples of INR 100.

Payments and renewal

Payment of the rate of interest depends on the bank policy and TDS is applicable on it. As mentioned earlier, withdrawal of money prior to account maturity is subject to penalty. In case of early closure of a fixed deposit, the bank pays money at the interest rate, which is applicable on that given day.

Before investing money in any fixed deposit, it is advised to consult the bank or respective organizations. You should also compare different interest rates and minimum amount criteria before investing.

by: lindadale

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