A quick checklist for FD investorsby Bhavna S. Financial Advisor
Fixed deposits are easy investment plans offered by various banking and non-banking financial institutions. They involve depositing money for a more extended period and yields high Interest on the principal.
Fixed deposits are a prevalent form of investment scheme in India. Almost every bank offers various fixed deposit investment schemes. Choosing a fixed deposit scheme that best suits your requirements can be a bit of a job. The following are a few things that you must check before investing in any fixed deposit scheme:
The Rate of Interest
In the case of fixed deposits, the interest rate on fd is the essential element. The price of Interest on a fixed deposit differs from bank to bank. Other factors affecting this rate is the amount of money invested, tenure of the investment, and the age of the investor. You must compare the interest rates provided by different institutions and then choose the most appropriate scheme.
The frequency of Paying Interest
Generally, the Interest of a fixed deposit is paid on a cumulative basis, along with the principal maturity amount. This payment frequency can be changed to a quarterly, monthly, or annual basis. By default, all the fixed deposits of a bank are compounded every quarter.
The Investment Period and the Amount
You should be clear about the total amount you want to invest in a fixed deposit scheme. The time duration for which you want to invest is also essential. Clarity of these two aspects can help you find the best investment schemes that suit your choice.
Penalty on Withdrawl of the Fixed Deposit
In case you want to withdraw your fixed deposit before its tenure is done, you must know what action will your financial institution will take on that. While most banks levy penalties in such cases, it often differs from bank to bank. Sometimes, banks wave off death in case you have any re-investment plans with the same bank.
Tax on the Fixed Deposit
The income that you earn from a fixed deposit is taken as ‘Income from other sources’ when you file an income tax return. This income is taxed at the rate of income tax applicable to you. So, you may have to pay advance taxes in case you are receiving large interest amounts.
Tax Deduction at Source or TDS
TDS or the Tax Deduction at Source is a system where a person has to make specified payments such as commission, salary, Interest, professional fees, etc. It is applicable at a rate of 10%.
Before opting for any fixed deposit scheme, it is essential to know what documents are required to start the investment process. This depends on whether you are opening a fixed deposit scheme with a new institution or with which you already have a relationship.
Fixed deposits are known to have several added benefits. For raising loans, these deposits can be used as collateral. Before investing in any fixed deposit, you must check for the added benefits that are getting along with it.
Thus, this article proves a list of a few things that you must check and keep in mind before making any investment in a fixed deposit scheme.
Created on Feb 11th 2020 05:51. Viewed 265 times.