In this article, you will get a brief idea about Fixed Deposits. This article is going to cover the benefits of fixed deposits, the types of fixed deposits, the procedure to save taxes through fixed deposits, the difference between fixed deposit and recurring deposits, about fixed deposit calculator and finally how can you open a fixed deposit online.
Fixed deposits can be said as money deposits in the bank account for some fixed period. The FDs can be started or initialized by using the same or new bank account. The benefits of FDs are you get a higher percentage of interest than saving accounts.
Why fixed deposits:
Fixed deposits not only provide us money safety but also gives some extra as interest. There are certain features which surely would surprise you.
- High-interest return: In fixed deposits, you get higher returns than the current account. The interest rates vary from 3% to 9% and also varies for different ages of investors. Interest rates also for different periods of investment. Along with the high-interest rates Fixed deposits are safe also. The investor has low chances of losing the principal amount unlike in the case of the share market.
- Compounding in nature: FDs are of compounding in nature. It means the ROI get compounded annually or quarterly as per the terms and condition.
It means for deposit on longer period of time the interest rates are always high as compared to that of previous year. The interest for PNB housing varies for the first year and then it ultimately increases for the next year and so on.
- Guarantee interest on your investment: In fixed deposits, you don’t have to think about the principal. Each time your principal increases. That ensures interest on your investment. Every time the safety o the interest along with the Principal amount is ensured by CRISIL it gives the highest safety rating which is FAAA\STABLE. Like the PNB housing has got the highest safety rating by CRISIL. Similarly for other also CRISIL provides different safety ratings. The CRISIL FAAA rating is the degree of safety regarding the timely payments of interest.
- Minimum investment amount: many of the banks have some minimum investment amount described. Yet there is no maximum amount of investment is defined. For the senior citizen, the interest increases on special offer events the investment can be started in a very lesser amount. Like in the case of PNB housing the minimum interest rate is 10000 which shows us that for a very lesser amount of investment we can get more high returns. In FDs, the investment amount is very less compared to the benefits. In another company like Axis bank, the investment amount is as low as 5000 INR. The AU Small Finance Bank is ready to give start FDs at an initial investment of 1000INR only.
Loan against fixed deposits: Easy availability of loans are provided under fixed deposits. In this type of loan, rates are about 1 to 2 % higher than FDs interest. Yet this is much lower than other types of loans. Many companies are ready to give loans up to 75% of the total amount available under all the branches
Credit card against FDs: Any person who wants to have a credit card can avail that by opening a fixed deposit. Every fixed deposit provide certain benefits, credit card benefit is one among them all.
Premature or partial withdrawal: a person having a fixed deposit and in case of an emergency FDs can be closed even before the maturity period. Some penalty is debited after which the account holder can close their existing FD before the maturity. However some of the banks don’t allow premature withdrawal, in that case, the account holder can’t close their FD.
Company fixed deposit
When a company issue a fixed deposit for a fixed period and with an interest rate, the type of fixed deposit is called Company fixed deposit. Any nonbanking organization, like CARE and CRISIL, uses the scheme of FDs to start a company fixed deposits.
Any individual can choose and start a company fixed deposit based on popularity and trust in the company.
Common benefits of fixed deposits:
- Company fixed deposits generally have higher interest rates than the bank’s FDs.
- These FDs come with nomination facilities.
- For short periods you can make maximum profits in these FDs.
Top five FD providing company in India are:
- Mahindra Finance
- Shriram Transport Finance
- Bajaj Fiserv.
- Sundaram Finance Company
- Kerala Transport development finance corporation limited
Types of Fixed Deposit:
- Cumulative fixed deposit
- Non-cumulative fixed deposit
- Tax saving fixed deposit
Cumulative fixed deposits:
Cumulative fixed deposits are those fixed in which the investor doesn’t get any kind of interest rate every quarter year half year and yearly instead the interest gets compounded every quarter, half-yearly and yearly and added back to the principal amount.
Non-cumulative fixed deposits are those fixed deposits in which the account holder gets Regular interest whether quarterly, half-yearly, yearly. It depends upon the user whether, he/ she chooses which kind of fixed deposits, and the kind of ROI chosen.
Tax Saving Fixed Deposit: Tax-saving FDs are those FD in which there are some criteria through which the customer/account holder gets the benefit and rebate on tax. Taxing saving fixed deposit is legal and the gives the benefit of income debit relaxation.
A fixed deposit calculator is an application cum tool available in which the user/account holder can easily calculate the ROI and amount.
It is easy for any newbie to learn and know the maturity details. The user just needs to enter the details like Deposit Amount, ROI, Maturity Period.
A fixed deposit calculator is the easiest tool to use and know the details. The fixed deposit calculator works in very unique ways. The use of an online FD calculator is suggested is advised to decreases human error. Online calculators are always correct and accurate.
Fixed deposit vs recurring deposit
Both the deposits, FD and RD are beneficial. But people keep on asking which is the best to invest with their investors.
The minimum amount to invest for FD is 100 INR and for RD is 1000 INR which may vary from bank to bank.
In the case of a period for investment, FD has a Period of 7 days to 10 years whereas for RD it is 1 year to 10 years. The interest rates of FD compounds annually or quarterly over the initial sum of amount. For the RD, during the 1st year interest is earned for 12 months and then in 2nd year for 11 months and so on.
For the rebate on tax, the FDs are best as they give tax rebate benefits whereas in case of RDs they do not give any tax benefit.
The condition for premature withdrawal is the same for both cases.
Documents required for Opening a Fixed Deposit Account
One can easily open a fixed deposit account by submitting or providing any of the following documents.
Following is the list of KYC documents which are required for opening a Fixed Deposit Account:
Proof of Identity
- Aadhaar Card
- PAN Card
- Voter ID card
- Driving Licence
- Telephone bill
- Electricity bill
- Bank Statement with Cheque
- Aadhaar card
- Certificate/ ID card issued by Post office
How to open a fixed deposit account online
For opening a fixed deposit account online the user needs to follow two simple steps:
Step 1: In the beginning, the user needs to fill the forms available online with all the necessary details.
Step 2: In the next step the user needs to compare and choose for the best option available according to their needs.