Fixed deposit is a deposit offered by banks wherein you agree to make a FD at a
pre-determined rate of interest for a specified period of time. This time
usually starts from 7 days up to maximum of 10 years. The interest rate varies
according to the time limit. It is one of the most liked and safe investment options.
There are few types of FD provided by the banks
Regular
Fixed Deposit Schemes
This is a regular FD where the interest period starts from 7 days
up to 10 years.
This FD has a lock in period of 5 years. An investor cannot
withdraw the amount before FD term gets over, loan cannot be taken against such
FD and auto renewal is not applicable for such FDs.
Recurring Fixed
Deposit Schemes
This deposit allows an individual to deposit a fixed amount every
month and earn interest at a fixed rate. It is more preferred by people having
regular incomes.
Special
Tenure Fixed Deposit
FD made for specific number of days such as 459 days, 779 days, 999
days etc. Special tenure FDs carry a little higher interest rate as compared to
regular FD.
Fixed flexi
Deposit Scheme
This is a flexible FD linked to your saving account wherein if the
balance of account falls below minimum amount, the balance amount is swiped in
from your FD thus avoiding the bank charges.
Floating
rate Fixed Deposit
Few banks have come up with floating rates FD wherein the interest
rate is not fixed and keeps varying. A change in RBI’s rate could benefit such
investors.
The bank pays interest monthly, quarterly, half yearly or yearly
as pre agreed. An individual investing in FD has an option to either receive
the interest amount monthly in a particular account or to let it accumulate and
receive at the time of maturity.
As per Income tax act, interest income up to Rs.10,000/- is
exempt. Any income above Rs.10,000/-
will be taxable if you have given the PAN card details to the bank ( In case
the bank does not have PAN card, it will deduct tax at 20%)and the bank issues
TDS certificates for the amount deducted as tax. This TDS certificate will then
be submitted while filing income tax returns. But, there are few simple ways in
which the interest amount can be received without deduction of TDS.
1) Submission of form 15G/15H
If an individual’s taxable income is Nil or
below the taxable limits, he should fill form 15G (form 15H for senior
citizens) and submit it to the bank. This form is valid for a period of one
year. It is preferable to submit this form at the beginning of the year
2) Splitting the FD in different banks
You can make FD’s in different banks in such a
way that the interest income does not exceed Rs.10,000/- for a particular year.
The bank will include deposits it holds in all of its branches for the purpose
of calculating total interest income earned during the year
3) Preparing FD in the name of family members
The total amount for FDs could be split among
the number of family members like spouse, children and parents in a manner that
any of the interest on FD do not exceed Rs.10,000/-. This way the interest
income will get split between the family members enabling the investor to avoid
TDS deduction
4) Depositing amount in HUF and personal account
You can split the amount under two accounts –
one can be personal account and another can be HUF account thus dividing the
amount to be invested. Both of these
accounts will be treated separately.
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