Fixed deposits

Here are the key features of fixed deposits:

1. Fixed Tenure:

Fixed deposits have a fixed tenure or maturity period. The depositor chooses the period for which they want to keep their money locked, usually ranging from a few months to several years.

2. Fixed Interest Rate:

The interest rate offered on fixed deposits is predetermined and remains fixed throughout the tenure of the deposit. This means that the rate at which the deposit is made remains constant, regardless of any changes in the market interest rates.

3. Guaranteed Returns:

Fixed deposits offer assured returns on the principal amount invested. Unlike market-linked investments, FDs are not affected by market fluctuations, providing a sense of security to investors.

4. Interest Payouts:

Investors can choose to receive the interest payouts at different intervals: monthly, quarterly, annually, or at the end of the maturity period, depending on the terms and conditions set by the bank.

5. Tax Implications:

The interest earned from fixed deposits is taxable in India. Banks deduct Tax Deducted at Source (TDS) on the interest income if it exceeds a certain threshold limit. However, investors can submit Form 15G or 15H (for senior citizens) to avoid TDS if their total income is below the taxable limit.

6. Premature Withdrawal:

While fixed deposits are intended to be held until maturity, most banks allow premature withdrawal under certain conditions. However, there might be a penalty or reduction in interest rates for premature withdrawals.

7. Renewal Options:

Banks often provide the option to renew the fixed deposit for another term upon maturity. If the investor doesn’t need the funds immediately, the FD can be automatically renewed for the same duration or a different tenure as per the investor’s instructions.

8. Nomination Facility:

Fixed deposit holders can nominate a beneficiary who will receive the maturity amount in case of the depositor’s demise.

9. Loan Against FD:

Banks offer the facility to take loans against fixed deposits. Depositors can avail of a loan, usually up to a certain percentage of the FD amount, without breaking the FD prematurely.

Fixed deposits are considered a safe and stable investment option, especially for individuals who prioritize capital protection and a regular income stream. However, investors should carefully consider the interest rates offered, the tenure, and the terms and conditions before investing in fixed deposits.