By Protection of investment, guarantee of returns, flexibility to choose as many periods as desired, fixed deposits (FD) have many advantages.
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- Protection of investment, guarantee of return.. Flexibility to choose as many periods as desired. Fixed Deposits (FD) have many advantages. These include instant cash withdrawals when needed It cannot be combined with other financial schemes. With the RBI once again keeping the interest rates unchanged, it can be said that good days are ahead for FDs. At the same time, banks are offering a guaranteed interest rate of more than 7-7.5 percent on these as they are facing difficulties in raising funds. Some banks have already increased the interest rates. In this context, let’s look at some of the things that depositors should consider.
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- Fixed deposits are offered by banks, small finance banks and non-banking financial institutions (NBFCs) at different interest rates. Some small banks and NBFCs offer higher interest rates compared to government banks. Some other corporates are also making NCDs available at around 9-11 percent interest, It is mandatory to check the ratings given by rating agencies like CRISIL and ICRA while choosing such. The decision should be made by looking at the reliability in the market, debt repayment capacity and past history of the issuer. While depositing in NBFCs and corporate bonds other than banks, preference should be given to those with higher ratings.
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- FDs can be classified as cumulative and non-cumulative deposits. In the cumulative method, the interest is compounded annually on the principal. After the expiry of the period, principal and interest are paid Interest is paid monthly, three, six months and annually in a non-cumulative manner
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- Fixed deposits last for a fixed period. Some delinquency charges apply if taken in between. So, one should act with some foresight while choosing the durations. As far as possible do not make all deposits for a single period The duration should be decided keeping in mind your needs arising in different situations. This allows withdrawal of deposits without any fees.
- Some fixed deposits may offer lower interest. In this case, the deposit should be canceled and a new FD should be made. This can avoid loss of interest It can be examined only when it is obtained at least half percent more. For example, suppose two years ago you made a deposit for a period of five years. According to the prevailing interest rates then, it was not more than 5.50 percent. But, now banks are giving interest up to 7-7.5 percent for a period of three years. So, old deposit can be canceled and new deposit can be made Don’t forget that fees apply.
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- Deposits are also available with special tenor Le. 365 days and 400 days. Senior citizens can look into such schemes
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- In case of emergency, instead of withdrawing the deposits in the middle, one can try to take a loan on it.
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- Now there is no need to go to the bank to make a fixed deposit Deposits can be made easily in the banking mobile apps Corporate FDs and NCDs can be done with the help of a demat account.
- Interest earned on fixed deposits is subject to tax, depending on the applicable slabs. Banks do not deduct tax at source when interest income is less than Rs. 40 thousand (Rs. 50 thousand for senior citizens) in a financial year. Those who are likely to get high interest should submit Form 15G and Form 15H (Senior Citizens) to the banks. This means there is no deduction of tax at source.
