From your first bank account, you will become familiar with the term “FD.”
An FD is a savings account offered by most banks where you can park a sum of money from your bank account for an agreed number of years and earn interest from it.
An FD or fixed deposit can be for seven days to ten years. After that, the interest rates fluctuate and can vary between 4.5% and 6.5%, depending on the bank concerned.
We all talk about investing in best fixed deposits as a primary saving plan. But there are some things that you maybe don’t know about this versatile savings vehicle.
Read on to learn about aspects of FDs that may take you by surprise:
#1 Higher Returns from Company FDs
Non-Banking Finance Corporations (NBFCs) offer fixed deposits with an inherently high-interest rate than the regular fixed deposit interest rates in India in traditional banks. Therefore, you are not likely to get this information from a conventional bank.
The company fixed deposits, or corporate FDs as they are also called, are term deposits similar to bank FDs, but they are only available from NBFCs.
Although you can get higher interest rates than the regular fixed deposit interest rates in India, ensure to check the credit score and track record of such companies before investing.
#2 Higher Rates for Senior Citizens
If you are a senior citizen (between 60 and 79 years), you are entitled to higher interest rates from an FD. You will be surprised how useful that extra amount you earn from your FD can benefit you in your golden years.
#3 Loans Against Fixed Deposits
Once you deposit your money in an FD, it has to remain there for the term. That is the meaning of this kind of account. But a lesser-known fact is that you can take a loan (at higher interest rates) against the principle after a predetermined time.
A loan against your FD gives you additional security during a financial emergency. In addition, you can pay off the loan in easy installments for an agreed period once you recover financially.
#4 Fixed Deposits Are Tax Saving Vehicles
If you have a company fixed deposit, it is not taxable under the Indian income tax regulations if you earn an income up to ₹5,000 in interest. However, you will have to submit form 15G/15H to avail of this tax exemption.
#5 For Joint Accounts, TDS is Due from the First Account Holder
Sometimes it so happens that two family members may open a joint FD account. It may be a parent and child, two spouses, or two siblings. Whatever the case, the first account holder has to pay tax, and interest is also paid to the first account holder only.
Fixed Deposits are an excellent means for long-term or short-term saving. Moreover, it is the easiest thing to invest in due to the easy proximity, the fact that you only have to approach your local bank branch.
Of course, if you invest in a corporate FD, you may have to approach an external organization. But now that you know that you can get these marginal benefits from an FD, it will surely be worth the effort!