What You Should Be Aware Of Before Investing In Fixed Deposit?

While fixed deposits are one of the simplest investments, there are a couple things that one should be aware before opening an FD account. You need to understand essential things before placing your money in it.

No matter what type of investments you choose, it is essential to get as much as information about them as possible to ensure that your capital stays protected, and you earn maximum returns. While a fixed deposit is not as complicated as other investment instruments, there are several things that an investor should understand before opening the account.

Following are some facts to remember –

Interest rate

As banks have varied rates on FD accounts, it is crucial to evaluate the rates offered by various banks before opening the FD. Always invest in companies that provide competitive rates.

Fixed deposit duration

For meeting the needs of various investors, banks now offer FDs for tenure ranging between 7 days to 10 years. Choose the term carefully as you will need to stay invested in the account for the selected duration. Even the interest rate varies depending on the term.

Maturity date

You can also know the maturity date on the acknowledgement you receive for opening an account. If you are opening the account for purpose, for example child’s education, verify the maturity date to ensure that the FD matures at the right time.

Auto-renewal

Most banks also provide FD auto renewal facility. Here your principal amount, as well as the accumulated interest, gets reinvested for a duration of your choice. If you have chosen this facility, the same will be mentioned on the acknowledgement receipt.

Nomination

When you open an FD account, you will need to select a nominee. In case of your demise during the FD tenure, your nominee will handle the same. The details of the chosen nominee are also mentioned on the account opening acknowledgement receipt.

Payment of interest

You can also select the interest pay-out frequency of your choice. Most banks give monthly, quarterly, half-yearly, annual and full tenure interest payment options.

Interest rate for senior citizens

Senior citizens are given a slightly higher fixed deposit interest rates as compared to regular investors. If you are a senior citizen or keen to open the account for a senior family member, ensure that you verify what rate the bank offers on the same for senior citizens.

Minimum account balance

You should also verify the minimum amount that you require for opening an FD account. Most of the top banks let you open it for as little as INR 10,000. If you open the account for a minor, the minimum balance usually is INR 2,000. You can take help of a fixed deposit calculator to understand how much your amount can earn at the end of the duration.

TDS Declaration

The bank deducts Tax Deducted at Source (TDS) if the interest income accrued is more than INR 10,000 in a year. However, if you come under the no income tax bracket, you will have to give Form 15H or 15G to declare the same. Ensure that your declaration gets updated with the bank so that no TDS gets deducted from your FD interest.

A fixed deposit is the most secure investment option in India. Keep the mentioned points before opening the account and choose a reputed bank to have maximum convenience and safety. Some of the online-only banks provide facilities to deposit via the online banking apps.

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