Overview

Fixed deposit or FD is an investment instrument which is offered by banks and non-banking financial companies (NBFCs). This allows customers to safely park their savings and earn interest at a fixed rate thus giving them the much sought after stability. FD interest rate is higher than what customers get on depositing their money in a regular savings account.

Fixed deposits are called as term deposits in banking parlance since these deposits are maintained for a specific period (usually ranging from 7 days to 10 years).

Furthermore, these are secured under the insurance cover of up to Rs. 5 lakh by the Deposit Insurance and Credit Guarantee Corporation or the DICGC.

Why FD?

Fixed deposits come with various features and benefits that make investing in fixed deposits a sound decision, especially for risk-averse investors. These are mentioned below:

1. Guaranteed Returns

FD provides guaranteed returns on investments. The fixed deposit interest rate applicable (at the time of investment) is what the bank commits to pay on the investments and is always risk-free. It is because the FD interest rates are not market-influenced but fixed.

Suggested Read: Best FD Interest Rates in 2020

2. Risk-free Investment

Money put into a fixed deposit account with banks (commercial & small finance banks) is 100% safe (up to Rs. 5 lakh). DICGC, a fully owned subsidiary of RBI, guarantees to pay a compensation of Rs. 5 lakh (per bank) if the bank goes into liquidation. This deposit insurance is inclusive of the principal amount as well as the interest earned.

Suggested Read: DICGC - All about the Deposit Insurance

3. Easy Calculation of Returns

Since the parameters (interest rates and tenure) of a fixed deposit are fixed, it becomes easy to predict returns. This, in turn, helps in better financial planning.

With the help of servzone's free FD Calculator, you can easily check and calculate estimated returns on FD investments. Enter the amount, fixed deposit tenure and the interest rate corresponding to that tenure and hit the calculate button to see your estimated returns.

4. Tax Saving Investment

All banks and most of the NBFCs offer customers with 5-year tax-saving FD. This scheme allows you to claim deductions u/s 80C of the IT Act, 1961 while filing the ITR. You can invest from Rs 100 to Rs 1.5 lakh in it.

Tax saving fixed deposit comes with a lock-in period of 5 years. This means that premature withdrawal is not available. However, if the first account holder dies during the FD tenure, the nominee can exercise the premature withdrawal option. Also, the tax-saving fixed deposit does not have the loan against FD feature.

Suggested Read: Best Tax Saving FD Interest Rates in 2020

5. Loan against Fixed Deposit (FD)

Investors can apply for a loan on their FD investments in times of need. Instead of opting for high-interest personal loans, if you have invested in a fixed deposit, you can avail Loan against FD. This loan can be taken for up to 90% of the FD amount (approximately). This means if you have an FD of Rs. 10 lakh, you can easily get a loan of up to Rs. 9 lakh (approximately).

Suggested Read: Loan against FD

6. Credit Card against Fixed Deposit

If you have a fixed deposit, you can avail a secured credit card against it. However, the availability depends on the bank or NBFC involved. Its limit is set in line with your FD amount, thus making it secure.

Suggested Read: Credit Card against Fixed Deposit

7. Premature or Partial Withdrawal

FDs with premature withdrawal facility allow the depositors to close it before maturity (e.g. an FD booked for 3 years withdrawn after only 1 year). However, account holders are required to pay a premature penalty to the bank for withdrawing the FD amount before deposit tenure. This penalty usually goes up to 1-2%.

Suggested Read: How to close an FD

8. Affordability

Fixed deposit is a highly affordable investment option as you can start investing from as little as Rs. 100. However, the majority of the top banks in India allow a minimum deposit of Rs. 1,000.

9. Flexible Tenure

Investors can choose to deposit their savings anywhere from 7 days to 10 days. Some banks (e.g. IDBI Bank) offer an extended period of up to 20 years. The interest rates vary with different tenure options.

However, if you are looking to save on income tax, many consider the tax-saving fixed deposit schemes where savings are locked for a minimum of 5 years and the investment made here qualifies for 80C deduction of the IT Act, 1961.

In order to choose the best fixed deposit scheme, you should consider all the aforementioned points thoroughly.

Top Banks Tenure 1 year

Some facts

Who can invest in a fixed deposit scheme in India?
Resident individuals, private and public limited companies, Hindu Undivided Families (HUF), partnership firms and societies can book fixed deposits.

What are the minimum and maximum terms of FD schemes?
The tenure of FD schemes varies from 7 days to as long as 10 years. Some banks may offer up to 20 years of term deposits. However, NBFCs offer FD investment for a minimum period of 12 months.

What is the minimum lock-in period for a tax-saving fixed deposit?
Tax-saving FD schemes have a lock-in period of 5 years.

What is the minimum deposit amount allowed for opening a fixed deposit?
The minimum amount for opening a fixed deposit is generally set at Rs. 1,000. However, a tax saving 5-year fixed deposit can be opened with a bare minimum of Rs. 100.

How much tax is deducted on FD interest income?
TDS @10% is levied on interest income of more than Rs. 40,000 for regular individuals and Rs. 50,000 for senior citizens. For company FDs, this limit is set at Rs. 5,000.

Is it compulsory to submit a PAN to open an FD?
Yes. It is compulsory to quote your PAN when applying for a fixed deposit. However, if you do not have a PAN, you need to submit duly filled Form 60/61 (not being a company or a firm).

Is it safe to open FD in small finance banks?
Yes. Small finance banks are regulated by the Reserve Bank of India. Also, the deposit insurance of up to Rs. 5 lakh by DICGC is provided on these fixed deposits.

What is NRE fixed deposit?
Full form of NRE FD is Non-Resident External Fixed Deposit. This FD is for Non-Resident Indians (NRIs). They can deposit their foreign earnings in an Indian Account. Interest earned on an NRE FD is not taxable in India. The account is maintained in INR which means that the money deposited is converted as per the later forex rates.

What is the difference between NRE FD and NRO FD?
NRE FD (Non-Resident External) is for NRIs to remit/transfer their foreign earning to an Indian account. NRO FD (Non-Resident Ordinary) is for NRIs to manage their income earned in India.

Read: NRE vs NRO vs FCNR

Can depositors get interests on a monthly basis?
Yes, non-cumulative fixed deposits have this option. You can choose to have interest in your account on a monthly basis.

What benefits are offered to senior citizens under FD schemes?
Senior citizens get an additional interest (up to 0.65%, approximately) on the same FD scheme. Banks like SBI, ICICI Bank and HDFC Bank, till 30th September 2020, are offering extra interest of up to 0.30% on the existing preferential rates to the senior citizens. Check here.

Suggested Read: Senior Citizen Fixed Deposit Interest Rates.

Does premature withdrawal negatively affect FD earnings?
Yes. You have to pay a penalty of up to 1% on premature closure. This 1% of penalty is levied on the effective rate of interest which reduces your earning. Click here to know more about the premature withdrawal of FD.

Can minors open a fixed deposit account?
Many banks and NBFCs offer FD investment options to minors with a parent/guardian acting as co-applicant.
Post Office FD or post office time deposits can be opened in the name of a minor (above the age of 10 years) and be operated by a legal guardian till the minor attains 18 years of age. Check the updated Post Office FD rates here.

Staps to Open a Fixed Deposit Online

Any individual can compare and open a Fixed Deposit Account online at servzone.in by following two simple steps:

Step 1: Fill the Fixed Deposit form on servzone with required personal data like the city that an individual resides in, name of the investor, date of birth, email address and contact number. Once submitted, the Fixed Deposit tool will list the best FD options to compare.

Step 2: Compare the best FD interest rates and choose the one that is suitable for you. Now, the depositor will be either redirected to the selected bank’s website or provided with a reference number.

Check the latest FD rates 2020 here

Alternatively, you can open a fixed deposit online at the official website/mobile application of the respective bank or NBFC. You can also opt to open FD offline by visiting the preferred bank’s branch nearby along with the required documents.

These days, most of the banks and other financial institutions allow customers to open FD via mobile banking or internet banking.

Fixed Deposit vs Recurring Deposit

Fixed deposit and recurring deposit are two of the very safe investment avenues open to investors who wish to earn decent returns and not wet their feet with market risks. Where FD allows one-time deposit, RD allows investors to deposit at monthly intervals.

Fixed Deposit (FD) vs Recurring Deposit (RD) – Which is better?

Fixed deposit rates vary from one bank to another and also for different deposit tenure. To know which option would make as the top FD scheme for you, check the list below:

Interest rates updated on 3rd November 2020

• Fixed Deposit Interest Rates in India - 2020

Tenure - 3 years

Interest rates updated on 3rd November 2020

Note: Aforementioned FD interest rates are applicable on the amount below Rs. 2 Crore.

• Best FD Interest Rates in India - 2020

Tenure – 5 years

Interest rates updated on 3rd November 2020

Note: Aforementioned FD rates are applicable on the amount below Rs. 2 Crore.

Top 10 Bank Fixed Deposit Interest Rates in India – Across Tenure

Interest rates updated on 3rd November 2020

Overview Company Fixed Deposit

Company Fixed Deposits, also known as Corporate Fixed Deposits, are provided by non-banking financial companies (NBFCs) like PNB Housing Finance Ltd. and Bajaj Finserv, etc.

Features of a company/corporate fixed deposit are:

Unlike regular bank FDs, company FDs offer tenure ranging from 12 months to 120 months. There are limited options available as compared to bank fixed deposits.

Companies generally offer better FD interest rates as compared to the likes of SBI FD rates, HDFC FD rates and Axis Bank FD rates, etc. However, small finance banks like Fincare Small Finance Bank and Utkarsh Small Finance Bank are currently offering FD rates at par or in some cases, higher than those offered by company deposits.

Tax on company/corporate fixed deposits is deducted @10% like bank FDs. However, the limit is set at Rs 5,000. This means that if your interest income exceeds Rs 5,000 in a financial year, income tax (TDS) will be deducted.

Please note that for bank FDs, tax is deducted when the total interest in one financial year amounts to more than Rs 40,000 (Rs 50,000 in the case of senior citizens).

To avoid TDS, you can submit Form 15G (for senior citizens, submit Form 15H). This form needs to be submitted every year to the company.

The company fixed deposits are not covered under the DICGC insurance of up to Rs. 5 lakh. This means that if the company goes into liquidation, your money might be at stake. Therefore, it is important to check the credit rating before investing in a corporate fixed deposit.

Top 5 Company Fixed Deposit Providers in India

• Tenure
• Interest Rates
• Tax Deduction (TDS)
• Security

Suggested Read: Corporate/Company Fixed Deposits

Best Company FD Rates 2020

Interest rates updated on 3rd November 2020

The above-stated fixed deposit rates are applicable to Cumulative Fixed Deposit Schemes. Check Non-Cumulative Company Fixed Deposit Interest rates here.

* Note: HUDCO has not been accepting fresh applications from 1st July 2019.

Types of Fixed Deposit

• Cumulative Fixed Deposit
• Non-Cumulative Fixed Deposit
• Tax Saving Fixed Deposit

Cumulative Fixed Deposit

In cumulative fixed deposits, the interest is compounded monthly, quarterly, half-yearly or yearly. This interest keeps on accumulating and is paid in the maturity amount at completion of the FD tenure.

In other words, the interest accrued is kept with the bank which is further reinvested in the next cycle at pre-fixed rates. This leads to exponential returns.

This option is good for those who have a stable cash inflow and are not looking for a top-up to their existing income like salaried people.

Non-Cumulative Fixed Deposit

Non-cumulative FD works exactly the opposite of cumulative. Here, interest is paid off to the deposit holder at regular intervals. This frequency can range from monthly to yearly. However, most of the depositors choose the monthly option.

This acts as regular income for individuals like pensioners, freelancers and homemakers, etc.

Suggested Read: Cumulative vs Non-Cumulative FD

Tax-Saving Fixed Deposit

Tax-saving FD is a type of fixed deposit where one can save on the income tax. An investor can deposit up to Rs. 1.5 lakh every year. This amount can then be claimed as deductions at the time of filing ITR u/s 80C of the Income Tax Act, 1961.

It should be noted that the interest earned on any tax-saving fixed deposit is taxable.

Suggested Read: Income Tax on Bank FD Interest Income

This type of fixed deposit comes with a lock-in period of 5 years. This means that one cannot prematurely withdraw a tax saver FD. However, the depositor can nominate someone to withdraw the accrued deposit amount before or post maturity in the event of their demise.

The nomination is to be filed at the time of application.

Suggested Read: Tax Saving Fixed Deposits

Know about Tax-Saving Fixed Deposit Account

Income Tax (TDS) on Fixed Deposit Interest

Interest earned on Fixed Deposit is added to the investor’s annual income and is fully taxable under the income tax slab applicable. FD interest income is considered under ‘Income from Other Sources’ category in the Income Tax Return.

Under nion Budget 2019 announcement, the government raised the TDS (Tax Deducted at Source) threshold limit on interest earned on bank/post office deposits from Rs. 10,000 to Rs. 40,000. Thus, from April 2019, banks will not deduct TDS if income earned by interest is up to Rs. 40,000. On FD interest income more than Rs. 40,000, banks will deduct 10% TDS.

Earlier, banks used to deduct TDS on interest income of more than Rs.10,000. Any individual who is earning FD interest income up to Rs. 10,000 was not deducted any TDS. There used to be no TDS deduction on FD interest income up to Rs. 10,000, but the interest income was added to the annual income.

However, if an individual fall under 5% income tax slab, then the individual can file Income Tax Return and claim a refund. If an individual is not liable to pay any income tax as per the Income Tax Slabs applicable, then the individual can submit Form15G with the bank to avoid TDS deduction. Senior citizens can submit Form 15H with their bank to avoid TDS deduction.

However, if any individual falls under any income tax slab which is more than 10%, then he/she is liable to pay more tax (above TDS).

Fixed Deposit for NRIs

Apart from residents of India, fixed deposits are also available for those residing outside the country, i.e. Non-Resident Indians or NRIs. There are 4 types of NRI FDs available. These are:

FD Calculator

A Fixed Deposit Interest Calculator (or FD Calculator) is a tool available online which calculates the interest one will earn on a fixed deposit investment. However, it should not be taken as the absolute value but an estimate.

A customer looking to invest in a fixed deposit should use the FD calculator to check and compare returns from various banks/companies at different tenure. This way, customers know what to expect. This leads to well-informed financial decisions.

How to use an FD Calculator?

Using an FD calculator is an easy task. Provide the following details in the fields given in the calculator and the calculator will give you an estimate in seconds:

1. Deposit Amount: It is the amount that an individual wishes to invest in the FD. It starts from Rs. 100. However, many banks offer Rs. 1,000 as the minimum deposit amount.
2. Rate of Interest: It is the interest rate offered by the bank or the company on the deposit amount for the chosen tenure.
3. Deposit Tenure: This is the period for which the FD will be active and earn interest. It ranges from 7 days to 20 years. This can be selected in years or months.

Once all the details are filled, hit the “Calculate” button.