What is a Fixed Deposit?
Fixed Deposits are fixed income investment options that have traditionally garnered appeal in India due to the low-risk. The pre-decided interest rate offered on the deposit is fixed through the tenor and not subject to market fluctuations, making it suitable for a conservative investor. It is a perfect option if you are saving for a specific near to medium term goal and want to be certain about the interest that you would earn.
Even for investors who have higher risk appetite, it is advisable to invest in fixed deposits and other fixed income assets. Maintaining a healthy ratio of high-risk and low-risk investment in your portfolio helps in preserving value by asset reallocation given changes in the external business environment.
The minimum amount for FD in Finserv MARKETS is 25,000 rupees and tenure is 1 months.
Features of Fixed Deposit
- The FD interest rate is decided by the bank or the NBFC based on the current market rate of interest
- Once locked in, this rate will remain static till maturity which makes it a suitable option for the risk-averse investor
- Fixed Deposits can be dissolved prematurely by paying a penalty
- It is not the best security against inflation thus unsuitable for a very long tenure
- A fixed deposit scores high on safety at a decent interest rate but there are other, higher-risk investments in the market that carry higher returns
- Minimum amount for FD at Finserv MARKETS is 25,000 rupees
- A Fixed Deposit can be used as a collateral against a bank loan.
Minimum Amount for an FD
The minimum amount for FD is as low as 5000 rupees for most banks. However, if it is your first fixed deposit then some banks may require an amount of 10,000 rupees. At Finserv MARKETS the minimum amount in FD is 25,000 rupees.
Different types of FD
There are two types of Fixed Deposits: Non-Cumulative and Cumulative Fixed Deposit. A Non-Cumulative deposit is a traditional fixed deposit where there is a monthly/quarterly payout of interest and it is best for those who need a regular flow of money. However, those who are aiming at saving for a specific near to medium term goal and do not need the interest payout should choose the cumulative fixed deposit. Here, instead of the payout the interest is reinvested and compounded in intervals. At Finserv MARKETS the fixed deposit minimum amount is 25,000 rupees and the minimum tenor is 12 months.
There are also FDs where one can get tax exemptions under Section 80 C of the Income Tax Act of maximum 1.5 lakhs but this cannot be withdrawn before the lock-in period of 5 years. One should calculate interest with an FD calculator before investing.
How to Open an FD Account
Steps to open FD account:
- To be eligible you need to be an Indian
- At the website of the bank or NBFC, sign up to create ID or sign in if already a customer
- Go click on the ‘open FD account’ option.
- Enter principal amount, tenure and nominee
- Confirm above details and make payment
Individuals who are new to the entity that they chose to open an FD with will have to submit original documents to complete the Know Your Customer process.
- KYC documents for identification and address verification
- PAN details
- Passport-size photographs
All of these are eligible for identity proof:
- PAN card
- Voter ID card
- Driving licence
- Government ID card
- Photo ration card
- Senior citizen ID card
And these documents are eligible for address proof:
- Telephone bill
- Electricity bill
- Bank Statement with Cheque
- Certificate/ ID card issued by Post Office
Is FD safe?
FDs are very low risk investments as the interest rate is fixed and not linked to markets. As for the principal amount, a deposit in a bank upto 1 lakh (inclusive of interest) will hold even if the bank goes insolvent. As for NBFCs, your deposit would be safe in a credible institution with high ratings.
What is the minimum amount required to Open Fixed Deposit?
The minimum amount for FD at Finserv MARKETS is 25,000 rupees.
What are the Tax benefits on FD?
The interest earned on an FD is taxed. However, money invested in a tax saver FD, is eligible for a deduction of up to 1.5 lakh rupees, under Section 80 C. TDS on interest income can be avoided if you have no income other than that by submitting a declaration under Section 197A in Form 15-G or Form 15-H.
How much amount can we deposit in FD?
There is no ceiling on the amount one can invest in an FD at Finserv MARKETS. However, there is a ceiling of 1.5 lakh rupees on a tax-saving FD.
Is FD considered for minimum balance?
An FD can be withdrawn prematurely subject to a penalty. Some institutions allow a partial withdrawal without a penalty. However, a tax-saving FD cannot be withdrawn before the lock-in period of 5 years.