As an investment option, fixed deposits are quite popular owing to their low-risk nature and steady returns. Most people, however, may have questions regarding fixed deposits that remain unanswered. In this article, we address some frequently asked questions about fixed deposits and provide answers that should make it easier for you to decide whether investing in fixed deposits is the right choice for you.
1. What exactly is a fixed deposit?
A fixed deposit is a type of investment scheme offered by banks and NBFCs. In this investment scheme, an individual deposits a certain amount of money for a fixed period of time at a fixed interest rate. The deposit cannot be withdrawn before the maturity period and the interest earned on this deposit is higher than a regular savings account.
2. What is the minimum amount I can invest in a fixed deposit?
The minimum amount that you can invest in a fixed deposit varies across different banks and NBFCs. Typically, the minimum amount ranges between Rs. 1000 to Rs. 10,000. However, it is important to note that the amount invested also determines the interest rate earned.
3. What is the tenure for fixed deposits?
Fixed deposits typically have varying tenures depending on the terms and conditions of the bank or NBFC involved. The tenure for fixed deposits typically ranges from 7 days to 10 years with most banks offering tenures between 1 to 5 years.
4. Can I withdraw my fixed deposit before the maturity period?
Yes, you can withdraw your fixed deposit before the maturity period, however, there are certain penalty charges that may be imposed by the bank or NBFC based on the terms and conditions of the fixed deposit scheme. The penalty charges are generally around 1% of the interest rate.
5. What are the different types of fixed deposits?
There are different types of fixed deposits, including Standard Fixed Deposits, Senior Citizen Fixed Deposits, Tax Saver Fixed Deposits and Flexi Fixed Deposits. Each type of fixed deposit scheme has its own unique features and benefits.
6. What is the interest rate on fixed deposits?
The interest rate on fixed deposits varies across banks and NBFCs and depends on the deposit amount and tenure. The interest rate also varies based on factors such as economic conditions, regulatory norms and competition. As of July 2021, banks like SBI, HDFC and ICICI are offering interest rates on fixed deposits ranging from 4.9% to 6%.
7. Is the interest on fixed deposits taxable?
Yes, the interest earned on fixed deposits is taxable under the Income Tax Act, 1961, as per the assessment year 2021-22. The interest earned on fixed deposits is added to the investor’s total income and then taxed accordingly.
8. Can I take a loan against my fixed deposit?
Yes, most banks and NBFCs offer loans against fixed deposits. The interest rate for such loans is lower compared to other loans as the fixed deposit is kept as collateral.
9. What happens if I don’t renew my fixed deposit?
If the fixed deposit is not renewed or withdrawn at maturity, it is renewed automatically with the same principal amount and the prevailing interest rate for the same tenure. It is important to note that sometimes the interest rate may change for renewals.
10. How safe are fixed deposits?
Fixed deposits are generally considered safe investment options as they offer low risk and assured returns. In India, bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation up to a maximum of Rs. 5 lakhs per deposit holder per bank.
While fixed deposits are a relatively simple investment option, it is important to note that interest rates for fixed deposits can fluctuate over time. Thus, it’s important for investors to monitor changes in interest rates and choose a fixed deposit scheme that best suits their financial goals.
Bajaj Finserv App – your one-stop-shop for fixed deposits
If you are looking to invest in fixed deposits, Bajaj Finserv App offers you a wide range of options with attractive interest rates and flexible tenure options. The app allows you to open a fixed deposit account with just a few clicks and also provides you with a safe and secure platform to manage your investments.
The app also offers other investment options such as mutual funds, SIPs, and other financial investments that may help in diversifying your investment portfolio.
In conclusion, fixed deposits are a risk-free and profitable investment option that can help in diversifying your investment portfolio. With the Bajaj Finserv App, investing in fixed deposits has never been easier – providing investors with access to competitive interest rates and flexible tenure options. So, download the app today and start investing for a better tomorrow!
