Fixed Deposits (FD) are among the most popular investments, as they are considered safer than other financial products. In contrast to investing in stocks, FD returns are known before the money is invested. Fixed Deposits are also known as “term deposits”, as the money is placed in investments for a predetermined period.
In addition to helping you reach your long-term financial objectives, such as securing your child’s future, higher education, marriage, and other significant needs in the future, FD is the ideal investment option with minimised risks.
Opening a Fixed Deposit account with the same bank as your savings account is relatively easy. You can also open a Fixed Deposit account with some other banks even if you don’t have a savings account with them. To start a bank FD account without a savings account, all that is required is to complete a quick Know-Your-Customer (KYC) procedure.
KYC Process for Fixed Deposits
All individuals, including senior citizens, can easily meet the requirements to open a Fixed Deposit account. To start an FD online or offline, depositors must provide documents to verify their identity and address.
Documents accepted as identity proof are as follows:
- Voter ID card
- PAN card
- Driving licence
- Government ID card
Documents accepted for address proof are as follows:
- Electricity/Phone bill
- Certificate issued by Post office
- Bank statement with cheque
- Rental agreement
Documents needed for Non-Individual Fixed Deposit
A non-individual fixed deposit can be opened by a variety of organisations, such as:
- Trusts, Associations and Clubs
- Public/Private Ltd. Company, Co-operative Societies, Co-operative Banks
- Partnership Firm
Following are the documents required for non-individual fixed deposit:
|Trusts/Associations/Clubs:||Trust DeedRegistration CertificateTrust’s PAN Card CopyTrust’s Address ProofSpecimen signatures of authorised personsPhotograph, PAN Card, Address Proof of signing authorities|
|Public/Private Ltd. Company, Co-operative Societies, Co-operative Banks:||Copy of Byelaws of AssociationCopy of Resolution of InvestmentSpecimen Signatures of authorised personsPhotograph, PAN Card, Address proof of signing authorities|
|Partnership Firm||PAN Card of the firm Declaration of Partnership by PartnersName and Address of PartnersSpecimen Signatures|
Things to Keep in Mind When Submitting FD Documents
When submitting the necessary FD documentation, there are a few considerations for you as an investor.
- Always provide a photocopy of each document and the originals needed for verification.
- Fill the offline FD form using capital letters and black ink only.
- Always countersign if there is any overwriting.
- Use the nominations option, which is usually available.
- Provide your permanent address and phone number.
Key Features of Fixed Deposits You Must Know
|Minimum Deposit Amount||Minimum and maximum deposit amounts vary by bank. Before opening an FD account, you must check with the bank.|
|Tenure||Given that fixed deposits are made for a set period, it is crucial to review the tenure thoroughly. A fixed deposit’s minimum and maximum tenures typically vary between banks. Choose the FD term in accordance with your financial objectives and needs.You can select from a tenure of seven days to twenty years. Early closure or withdrawal of a fixed deposit would also result in a fee, which would lower your overall FD interest rate.|
|Fixed Deposit Interest Rates||The FD interest rates depend on your investment tenure, varying from bank to bank. Senior citizens’ FD interest rates are higher than general FD interest rates.|
|Types of Pay-outs||Fixed Deposit schemes offer both cumulative and non-cumulative payments. You can select either based on your needs. If you’re seeking a consistent source of income on a monthly, quarterly, half-yearly, or annual basis, you can choose a non-cumulative fixed deposit.Alternatively, select the cumulative option if you want to invest long-term and receive returns on both the principal and the accrued interest.|
|Tax Exemption Benefits||The interest you receive on your FD is fully taxable as per your Income Tax slabs. However, the bank would deduct the TDS if the interest earned in a financial year is more than Rs. 40,000, per income tax laws. Alternatively, you can explore the benefits of a tax saving FD.|
|Premature Withdrawals||If you have a financial emergency, you can break your FD before it matures, but the bank might charge you a penalty for early withdrawals. Reviewing the regulations governing premature withdrawals before opening your FD account is a good idea. Some banks provide the option for an early withdrawal without charging a fee.|
|Loan Facility||You might use the fixed deposit you have as security for a loan. A fixed proportion of the principal amount deposited may be the maximum loan amount. But this proportion may differ from one bank to the next.*This feature does not apply to tax-saving FDs|
You can now open an FD account online through mobile banking or banking apps of public and private sector banks like RBL. This enables you to quickly open an FD account without going to the branch.
The information in this article has been collated to answer any of your questions related to a Fixed Deposit Account. It will help you fulfil your investment objectives through a fixed deposit for savings or long-term financial goals.