What Are Some Of The Fixed Deposit Terms & Conditions?

Updated On Sep 23, 2021

What Are Some Of The Fixed Deposit Terms & Conditions?
Conclusion

Term Deposits, commonly known as Fixed Deposits (FDs), are the most popular savings and investment vehicles for the general public. A fixed deposit has a preset rate of return (interest) and a set maturity date. They provide various other benefits in addition to savings. Depending on their preferences, investors can earn income on a monthly, quarterly, semi-annual, or annual basis. The investing horizon might be anything from seven days to ten years. All banks allow customers to open FDs in their local branch, online, or through mobile/phone banking applications. In addition, under Section 80C of the Income Tax Act of 1961, tax-saving FDs are eligible for tax deductions. Read on to learn about these features of fixed deposits in detail.

What Are Some Of The Fixed Deposit Terms & Conditions?

There are a few crucial guidelines and regulations to be aware of when it comes to fixed deposits.

In A Fixed Deposit, Tax Is Deducted At The Source
TDS is deducted from your deposit by the bank when the interest is credited to your account, not when it matures. A TDS of 20% will be imposed if the Permanent Account Number (PAN) is not submitted to the bank. However, TDS is not charged on Post Office Term Deposits (POTD).

Interest On FDs Is Taxed
Fixed Deposit interest is subject to full taxation. It is calculated according to your tax bracket and surcharge/cess. However, you can submit Form 15G/15H to avoid banks from deducting TDS. These are self-declaration forms that state that interest income is below the taxable limit.

Senior Citizens Are Exempt From Paying Taxes
TDS is not deducted from elderly people' FD interest if the interest amount does not exceed Rs. 50,000 in a financial year.

Senior Citizens Enjoy Greater Tax Benefit
Senior folks typically receive a greater interest rate on FDs than other investors. Furthermore, if the interest received on senior citizen FDs is less than Rs. 50,000 per year, there is no tax deducted at source (TDS) liability.

Benefit from Taxes
If you invest in five-year tax-saving FDs, you can save money on taxes. Under Section 80C of the Income Tax Act, these are eligible for a tax exemption of up to Rs 1.5 Lakh. The minimum lock-in term for such FDs is five years, as the name suggests.

Deposit Insurance
This is a type of insurance that you can purchase for your bank deposits. The Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the Reserve Bank of India, provides this service (RBI). The DICGC assures that each depositor in a bank is covered for both principal and interest up to a maximum of Rs. 1 Lakh.

Facility for Providing Loans
This feature is available at all banks. An individual can borrow up to 90% of the amount of their FD/principal amount. The interest rate charged by the bank is 1% greater than the interest obtained on a fixed deposit.

FD Interest Clubbing
Banks combine interest income from all FDs across all of their branches. This method allows banks to determine whether or not the interest revenue for the year exceeds Rs 40,000/50,000. Recurring Deposits (RDs) are treated the same way.
Payment of Interest
If you earn interest on a cumulative basis at the conclusion of the term, you must disclose it every year since your bank may collect TDS (if applicable) and deposit it under your PAN.

Conclusion

A fixed deposit is one of the safest investment alternatives available, and it pays a reasonable rate of interest. The returns are not market-linked, and the interest rate varies widely between banks. You can consider opening your first fixed deposit now that you know the appropriate fixed deposit regulations. Moreover, it would help if you research interest rates and term lengths before you open an FD.