A fixed-income is a debt security for a specific period, usually issued by banks. A Fixed Deposit is like loaning the bank your money. In return, they pay you interest. FDs are the most popular investment vehicle for retail investors in India because investors find banks very convenient to deal with.
These deposits are perceived to be highly safe and sufficiently liquid. FDs can help you secure your hard earned money for a long duration while giving you higher risk-free returns on your money than a regular savings account.
Indian banks offer a wide variety of fixed deposit schemes to suit almost every need.
What is a fixed deposit?
A fixed deposit is an account that allows you to deposit your money for a fixed period of time, earning you interest at a fixed rate. It gives you a higher rate of interest than a savings bank account.
FDs are fixed-income debt securities issued by banks. Putting money into an FD is like giving a loan to the bank, in return for which the bank pays you interest. This interest may be payable at regular intervals during the term of the deposit or on withdrawal. The date of maturity of the FD is established when the contract is concluded.
Who is eligible to apply for a fixed deposit account?
Any individual or institution is eligible to apply for the account.
How do I apply for an FD account?
You can get a bank FD at any bank. You have to open an FD account with the bank to make the deposit. Some banks may also insist that you maintain a savings account with them to operate an FD account.
Do I have to pay tax deducted at source (TDS) for FDs?
Tax is deducted at source on the interest accrued on FDs as applicable, as per the Income Tax Act, 1961.
What are Company Fixed Deposits?
The deposits made by investors in companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits. Along with manufacturing companies, financial institutions and Non-Banking Finance Companies (NBFCs) also accept these deposits.
Benefits of Company Fixed Deposits
Higher interest rate: The rate of interest is 2-4 percent high, as compared to the interest rate offered by banks on fixed deposits
Regular income: Depending on the scheme, investors have the option to receive interest at monthly/quarterly/half-yearly/yearly intervals
Lock-in period: The minimum lock-in period for most of the schemes is six months, i.e. investors can withdraw their money post six months, anytime
TDS: TDS is not applicable if interest earned is equals to or less than 5,000 for a year in a single company.
Important things to consider
Investors must carefully read the application form
Check the rating of the company before investing
Do a background check of the company before putting money into it
Companies may change the interest rates on the fixed deposit schemes without any prior notice