A fixed deposit (FD) is one of the safest and most accessible investment vehicles in India. You can open an FD at the bank branch where you have your personal account and divert your spare cash into it for savings.
You get a better rate of interest than a regular savings account. But all FDs are not the same and can vary slightly from bank to bank. Therefore, you would do well to do a bit of shopping around to identify the best fixed deposit schemes for your purposes.
What to Check for in a Fixed Deposit
Here are a few essential features you should look for before deciding on a fixed deposit for your savings:
- Interest Rate
Compare interest rates that different banks are offering Select a bank that provides the highest FD rates.
- Loan Facility
Most banks will allow you to take a loan on your FD for up to 90% of your deposit. Ensure that your bank offers this facility with easy, repayable tenures and competitive interest rates.
- FD Tenure
A bank will typically offer FD tenures that range between seven days to ten years. But, it’s good to know the tenures that the bank provides.
- Interest Payout Frequency
Find out the frequency with which the bank makes payouts on interest. It can be monthly, quarterly, half-yearly, or annually. You will find this valuable information if you want to reinvest the interest accrued.
- Interest Rates for Senior Citizens
Senior citizens are eligible for higher FD interest rates. So, if you are looking at opening an FD in your golden years or doing it for your aged parents or grandparents, you can get better rates.
- Income Tax Applicable
Interest over ₹40,000 is liable for income tax. Submission of Form 15G/15H to your banker will exempt you from income tax liability on your FD interest. You can find out from your bank about tax-saving fixed deposit schemes.
- Maturity Date
Saving up all those years into your FD will not benefit you if it doesn’t mature when you need the money. Check the maturity date of your FD matures when you will require the money, like, for example, when you need to pay for your child’s college admission.
- Premature Withdrawal
Find out about the rules that the bank has for closing your FD prematurely. Typically, there will be a lock-in period during which you cannot access your money. When you end your FD prematurely, your bank will charge you a penalty amount.
- Auto-Renewal Facility
Auto-renewal is a facility offered by many banks today. Under this system, you can opt for the bank to automatically reinvest your principal amount and interest earned every few years.
- Maximum and Minimum Deposit Limit
Typically, the minimum deposit is ₹10,000 for adults and ₹2,000 for minors. This amount can vary from bank to bank. There is usually no upper limit, but a deposit of over one crore rupees may attract the highest FD rates.
- Nomination of Beneficiaries
When you apply for an FD, ensure to complete the nomination field. It ensures that your nominees will receive your FD benefits in the unfortunate event of your demise without any hassle.
A fixed deposit is a safe and secure way of investing your money for a fixed period to earn better, tax-free interest. If you seriously consider the points discussed here, you can get the best-fixed deposit scheme to suit your specific requirements.