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Thursday, 29 October 2020

Personal Finance:Here are 7 things to keep in mind before making a fixed deposit, otherwise you may incur losses.

 

  • Before investing in a fixed deposit, it is important to think before deciding on a tenure
  • It would be advisable to invest in a small finance bank for higher interest


Fixed deposit i.e. FD is a popular means of investment in our country. People consider it safe and they get a fixed return. But it is not advisable to invest in FD without thinking. Ignoring some essentials while doing FD can hurt you. So there are some things to keep in mind before investing money in FDs.


You can get FD in private sector or small finance bank for higher interest.
Most of the banks in the country (public sector banks) offer 5 to 6% interest rate on FD. As well as the private sector i.e. small finance banks, you can get 7 to 7.5% annual interest by doing FD here. 


Here too your money will be as safe as a public sector bank. Here also insurance facility up to Rs 5 lakh is available on the deposit amount. This means that in case of bank default, each customer will get a maximum insurance of Rs 5 lakh through DICGC.

It is important to consider how many years the FD is to be done
before deciding on its tenure before investing in a fixed deposit. This is because if the investor withdraws the amount before maturity, he will have to pay a penalty. 


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FDs will have to pay a penalty of up to 1 per cent for breaking it before it matures. This may be less than the total interest earned on the deposit. So choosing a tenor without thinking can get you in trouble. Long-term FDs should be avoided in the lure of higher interest.


Don't invest all the money in one FD
If you are planning to invest Rs 10 lakh in FD in one bank, instead invest in 9 FDs of Rs 1 lakh and 2 FDs of Rs 50,000 in more than one bank. 


This will allow you to manage the money by breaking the FD in the middle according to your need when you need money. The rest of your FD will be safe.

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Tax
Interest earned on your fixed deposit is taxed in accordance with the Income Tax Slab. If the interest earned on FD is more than Rs 10,000 in a financial year, TDS deduction is levied on it. It will be 10% of the total interest. For senior citizens, the limit is Rs 50,000. If your income is below the taxable range, you can submit Form 15G and Form 15H to the bank to avoid TDS deduction on FD.



Withdrawal of interest The
bank had the option of withdrawing interest on a quarterly and annual basis, now some banks can also do monthly withdrawals. You can choose it according to your need.


You can also take a loan on your FD to check the interest rate of the loan on FD. Under this you can take a loan up to 90% of the value of FD. Suppose your FD is worth Rs 1.5 lakh then you can get a loan of Rs 1 lakh 35 thousand. If you take a loan on FD, you will have to pay 1-2 per cent more interest on the fixed deposit. Suppose you are getting 4% interest on FD then you can get a loan at 5 to 6% interest. Which bank gives loan at what interest rate.



BankLoan interest rate (%)Minimum loan (Rs.)Maximum loan
SBIFD rate + 1%

Online: 25000

On the branch: no limit

Up to 90% of FD
Punjab National BankFD rate + 1%

Online: 25000

On the branch: no limit


Up to 95% of FD
Axis BankFD rate + 2%25000Up to 85% of FD
HDFC BankFD rate + 2%25000Up to 90% of FD

Oriental Bank

FD rate + 1%

No limits

Up to 95% of FD
Federal BankFD rate + 2%No limitsUp to 95% of FD

Indian Bank

FD rate + 2%No limitsUp to 90% of FD
Bond bankFD rate + 1.5-2%

No limits

Up to 90% of FD

Read in Gujarati news 

Senior Citizens Get Higher Interest
Most banks offer up to 50% higher interest on FDs to senior citizens. In this case, if you have a senior citizen in your home, you can get more benefits by getting an FD in their name.

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