Got a bunch of questions about Fixed Deposits? Here’s an exclusive post covering all the frequently asked questions. Go on and give it a read.
It can get quite confusing when you’re getting your first Fixed Deposit account opened. You may not be sure of a few things like the rate of interest, tenure and withdrawals. And that could really put you in a predicament.
But, worry not! We will help you breeze through this situation by answering all the frequently asked questions (FAQs) in this article.
Read through. Resolve wisely!
Additional Reading: Everything You Need To Know About Fixed Deposits
What is a Fixed Deposit?
A Fixed Deposit (FD) involves depositing a certain amount with a banking or a non-banking institution for a fixed period of time and for a fixed rate of interest. The depositor receives interest on a monthly, quarterly or annual basis for the fixed tenure. Post that, the principal amount is returned to the investor.
Additional Reading: How Safe Are Your Fixed Deposits?
Am I eligible to invest in a Fixed Deposit?
If you are a resident individual, you can certainly avail Fixed Deposit schemes, irrespective of your age. Hindu Undivided Family, private or public limited companies, societies and partnership firms are also eligible to invest in an FD.
How much money can I lock in a Fixed Deposit?
The lower limit and upper limit vary according to the bank. However, we must mention that if you wish to invest above Rs. 1 crore, you can avail a special customized interest rate from the bank.
What’s the minimum and maximum tenure of investment in an FD account?
While the minimum tenure of a Fixed Deposit is seven days, the maximum tenure can go up to 10 years.
Additional Reading: 5 Simple Tips To Manage Multiple Fixed Deposits
How will I receive the interest amount?
If you have deposited your money under the traditional scheme, the interest is credited to the given Savings Account on a monthly or quarterly basis.
If you have opted for the reinvestment scheme, a compounded interest is added to the principal amount every quarter and this is reinvested.
You can choose to receive the interest amount on a monthly, quarterly or annual basis.
Additional Reading: Fixed Deposit Interest Rates Offered By Different Banks
Are there special rates for senior citizens?
Most finance institutions do offer special interest rates for senior citizens. This can be availed by them even if they apply for a Fixed Deposit with a co-applicant who isn’t a senior citizen.
Can I break a Fixed Deposit before maturity?
Yes. If you need funds urgently, you can avail premature withdrawal of your Fixed Deposit. You can either break your FD or partially withdraw it.
Will I have to pay penalty to withdraw FD before its time?
Yes. If you wish to close your Fixed Deposit account, your bank/finance institution will pay you 0.5% to 1% lower interest.
Are there any tax benefits associated with an FD?
The interest you receive on your Fixed Deposit amount is taxable. However, you can submit Form 15G to the bank to avoid tax deduction.
How does loan against FD work?
Instead of paying a penalty by breaking your FD, you can opt for a loan against the deposited amount. By doing so, you not only get money to deal with your emergency, you still earn interest on the money deposited in the bank. You can avail a loan of up to 70% to 90% of your FD amount. The amount varies depending on your bank.
The interest on the loan amount is generally 2% to 2.5% higher than the interest rate paid on your Fixed Deposit. However, the interest rate is generally still lesser than what you would pay for a Personal Loan.
Additional Reading: Use Your Fixed Deposit To Get A Car Loan
What happens if the depositor passes away?
In case of unforeseen circumstances, the Fixed Deposit amount can be claimed by the nominee on maturity. This can differ depending on the mode of holding.
Hopefully, we’ve answered every question you had about Fixed Deposits. By the way, did you know that you can open a Fixed Deposit without having to physically go to the bank? Don’t believe us? Click the link below and see for yourself.