These days many banks offer decent rates of interest on Fixed Deposit. This has always been an attractive option for the Indian investor. If you don’t mind taking risks when it comes to investments and want to keep some liquid cash but would not mind some interest on it then Fixed Deposit is the perfect option for you.
The main reason to invest in Fixed Deposit is to get high interest rates. Keeping money with Savings Account usually gives 3.5% per annum. It is very low compared to the interest rate offered by Fixed Deposit. It is okay to save your money in the Savings Bank Account but it is good only if money is required for urgent needs. If money is not needed for spending then Fixed Deposit is a better option to bag the highest rates.
The interest amount applicable with Fixed deposit is taxable income. It is deducted as Tax deduction on Source (TDS) before giving the interest money.
Loan on Fixed Deposit
Loan can also be taken on Fixed Deposit. The interest rate is usually 1.0% p.a. more than FD interest rates that depends on various banks. So one does not need to close the FD if money is needed urgently.
These days many banks like HDFC, ICICI have online facility that allow directly moving the balance to create the Fixed Deposit account. Fixed deposit schemes can be opted in lot of private and nationalized banks in India.
Banks Offering Best Return for Fixed Deposit:
Fixed Deposit Interest Rate Comparison:
ICICI Bank Fixed Deposit
It ranges from 3.75% per annum to max 10.5% per annum.
Link: ICICI Bank Fixed Deposit
HDFC Fixed Deposit
It ranges from 3.5% per annum to max 11.0% per annum.
Link: HDFC Fixed Deposit
ING Vyasya FIxed Deposit
It ranges from 5.0% per annum to max 11% per annum. It offers good interest rates compared to the other banks.
Link: ING Vyasya FIxed Deposit
Axis Bank Fixed Deposit
It ranges from 3.0% per annum to max 10.75% per annum.
Link: Axis Bank Fixed Deposit
The above rates are for investment below 15 lakhs and if investing above 15 lakhs the rates would be different. The FD Rates for Senior Citizens(above 60 years old) will be 0.5% more in all the banks. One can also invest in the name of their parents if they are above 60. This way you will get 0.5% more on the money.
RBI Directives:
There are time limits prescribed by the Reserve Bank of India for which Fixed Deposits can be made.
- Foreign Currency(Non-resident) Account (Banks) Scheme (FCNR) – 12 months to 60 months
- Non-resident(External) Rupee Account Scheme (NRE Account) and Non-resident Ordinary Rupee Account scheme(NRO Account) – Duration depend on the bank
Types of FD
The minimum amount required to open a fixed deposit account is USD 600 in US and RS 1000 in India. There are two types of fixed deposit accounts.
- Special Term Deposits
The interest that is earned is added to the principal and it is compounded quarterly. Once it matures the amount is repaid along with principal amount.
- Ordinary Term Deposits
The interest that is earned is credited to the account of the investor, once a quarter. However interest may be credited on a monthly basis. It all depends on the bank.
Documents required for investing in Fixed Deposit:
For Identity proof:
PAN card, passport, MAPIN card, driving license, Voter ID card, photo identity and pension payment card by the government organization.
For address proof:
Driving license, passport, electricity bill, telephone bill, ration card, bank account statement of a public sector/private sector/foreign bank
PROS of FD
- Safety
- Regular income compounded quarterly
- Saves tax:
According to the income tax department fixed deposits investments up to a max of Rs. 100,000 for 5 years are eligible for tax deductions under section 80C of Income Tax Act.
CONS of FD
- Lower returns compared to stock markets. Stock markets might give you 20% return whereas fixed deposits will give you only 10%. Money grows slowly.
- Fully taxable interest earned. It is added to the annual income of an individual. While stock gains are considered as capital gains and ether is no tax on dividends.
- Peak in inflation can slash the interest benefits.
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{ 2 comments… read them below or add one }
I want to name of nationallies bank for maximum interst fixed deposit scheme
Hello,
This is a very good article which gives the benefits of a fixed deposit.
One place where users can get updated interest rate information is at
http://www.way2goals.com.
The information on the site is updated frequently and the site has provision to find the maturity value of your investment for duration of your choice.
It also gives information about rates for senior citizens and Saving Bank Rates.