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Save Upto Rs. 45,000 Taxes by Investing in ELSS

FD or Fixed Deposits are long-term investment tool which helps investors save money for the long term. Investors can choose a fixed tenure for which the deposit will be kept with the bank. In general, FD investments are better for those looking for long-term wealth creation as they offer high interest rates as compared to savings accounts.

Almost all the banks in India offer an FD scheme, and the rates are highly competitive. The interest rates on FD schemes can go up to 9% and this usually depends on the market trends. However, once you have added money to your FD account, the interest will remain the same for the duration chosen. The tenure of an FD can vary from 6 months days to 15 years. For this reason, FD schemes make a great choice for those individuals who have some surplus lump sum money and want to keep it safe and earn dividends on it.

Comparison Between Other Bank Rates

BANK Normal Citizens Senior Citizens
State Bank of India 5.25% – 6.25% 5.75% – 6.75%
HDFC Bank 3.50% – 6.75% 4.00% – 7.25%
ICICI Bank 4.00% – 6.75% 4.50% – 7.25%
Axis Bank 3.50% – 6.85% 3.50% – 7.35%
Kotak Mahindra Bank 3.50% – 6.80% 4.00% – 7.30%
IDFC Bank 4.00% – 7.50% 4.50% – 8.00%
Bank of Baroda 4.50% – 6.65% 5.00% – 7.15%
IDBI Bank 4.25% – 6.75% 4.25% – 7.25%
Indian Bank 4.00% – 6.50% 4.50% – 7.00%
PNB Bank 4.00% – 6.60% 4.50% – 7.10%
Allahabad Bank 4.00% – 6.60%
Andhra Bank 4.00% – 6.50% 4.50% – 7.00%
Bank of India 4.00% – 6.60% 4.00% – 7.10%
Canara Bank 4.20% – 6.50% 4.70% – 7.00%
Central Bank 4.75% – 6.60% 5.25% – 7.00%
Union Bank of India 5.00% – 6.75% 5.50% – 7.25%
Corporation Bank 4.50% – 6.50% 5.00% – 7.00%
Syndicate Bank 6.00% – 6.80% 6.50% – 7.30%
Citibank 3.00% – 5.75% 3.50% – 6.25%
HSBC Bank 3.00% – 6.25% 3.50% – 6.75%

Investing into FD : Is it Really Beneficial?

Here’s another example which shows the how SIPs provide superior returns as compared to FDs.
Let us assume that you invest Rs 3,60,000 in one year in your FD account for 15 years. FDs generally offer 6-7% interest rates. Using 7% for FD calculations you will end up with Rs. 9.93 lakhs from your FD (if compounded annually).
Now, if you were to put this money in a SIP with monthly instalments of Rs. 10,000 for 3 years, and an average return of 15%, you would earn Rs. 66.8 lakhs from your SIP.
The total investment in both cases remains the same, but you earn more from SIP than from FD.

Other Investment Options

Instead of making a one-time investment of your surplus money, you can also look towards investing the extra money in Mutual Fund SIPs. A SIP or Systematic Investment Plan uses your monthly deposit amounts to invest in Mutual Funds that return a higher interest rate than normal FD schemes.
On an average, a SIP yields returns at 12-18% which is significantly higher than FD.

Benefits of FD

  • FD schemes are good investment tools for those who have surplus funds and want to earn money from it.
  • The money can be deposited only once. Once deposited, withdrawal of money from the account will accrue a penalty.
  • The depositor can choose to transfer the amount at the time of maturity for a further Fixed Deposit.
  • FD can be used as collateral for taking loans. You can take up to 80-90% loans on your FD amount

Tax Benefits on FD

Similar to other personal tax-saving and investment instruments, Fixed Deposits schemes also attract taxes. A TDS of 10% is deducted on the returns accrued from an FD if the total interest exceeds Rs. 10,000 in a single financial year.

Let’s compare this to the SIP scheme and you can see that SIPs are more beneficial for the long term. Since long-term gains from equity are tax-free, any SIP which invests in ELSS (Equity Linked Mutual Funds) is also tax-free after one year.

FD Interest Rate Calculator

Interest on FD is compounded quarterly, in most banks. The formula for this is:

A = P * (1+ r/n) ^ n*t , where

I = A – P
A = Maturity value
P = Principal amount
r = rate of interest
t = Number of years
n = Compounded interest frequency
I = Interest earned amount

Which is the Best FD – How to Choose?

There are many FD schemes available in the market. There are a couple of criteria you can use to choose between these schemes:
-Check which bank offers you the highest interest rate for the deposit amount and the tenure that you have fixed

-Check for banks with the lowest penalty rates for premature withdrawals.

Documents Required

Identity Proof Address Proof
Passport Passport
PAN card Telephone bill
Voter ID card Electricity bill
Driving licence Bank Statement with Cheque
Government ID card Certificate/ ID card issued by Post office
Photo ration card
Senior citizen ID card

Premature Withdrawal of FD

Generally, all banks levy a small penalty if you wish to prematurely withdraw funds from your FD accounts. Partial withdrawal of funds is also not encouraged.

FAQs

Who can open an FD account?
Answer: You can open an FD account with any bank in India if you are a Resident Individual, an HUFs, an NRIs, a Firms, or a Charitable Trust.

What can I do with my FD account after it matures?
Answer: You can choose to close your FD account and use the returns for your personal needs. Or, you can ask your bank to transfer the amount to a new FD account where it will reap more dividends.

How much loan can I take against my FDstrong>
Answer: 
You can get a loan for up to 75-90% of your FD amount.