At this time the interest on FD is increasing again. Due to this, there is a continuous increase in the repo rate by the Reserve Bank. Make sure to compare the interest rates available in all banks. Let us discuss some important things related to FD.
New Delhi. With the changing times, the methods of investing are also changing. The trend of investing in the stock market and mutual funds has increased rapidly. Despite this, FD is still one of the most popular investment options today. At this time the interest on FD is increasing again. Due to this, there is a continuous increase in the repo rate by the Reserve Bank. Also, investing in FD is one of the safest investment options from the very beginning.
Make sure to compare the interest rates available in all banks. If a reliable bank is offering higher interest on fixed deposits of the same tenure, then give preference to it. In comparing the rates of banks, keep in mind that the new small finance banks and some foreign banks offer higher interest rates as compared to the big public and private banks.
Compounding of interest
Fixed in banks is done in two ways. Both this method is cumulative or non-cumulative FD. In a non-cumulative FD, every customer can choose to earn interest on a monthly, quarterly, half yearly or yearly basis. Cumulative FD does not have this option. In cumulative FD, interest is paid along with the principal amount after maturity. If you choose to get interest every month, quarterly or half yearly, then the interest will not be compounded, whereas the customers get the benefit of compounding of interest if you choose to take the interest along with the principal amount after maturity.
TDS
If the customer’s annual income does not come under the tax slab, then immediately after making the FD, the customer should fill up Form 15G or 15H and give it to the bank. If the age of the investor is less than 60 years then Form 15G has to be filled and if the investor is more than 60 years then Form 15H has to be filled. By submitting this form at the time of opening the account in the bank, the bank will not deduct TDS on the FD. But if the form is not filled, then TDS will be levied on interest earning more than 40 thousand. In the case of senior citizens, this amount is 50 thousand rupees.
No tax exemption
There is no tax exemption on the interest earned on FD. Meaning that the interest received from FD will be added to your annual income and tax on it will be decided according to the income tax slab. For senior citizens above 60 years of age, there is an interest rebate of Rs 50,000. This exemption can be claimed under Form 80C. But for this exemption, FD has to be done for a period of at least 5 years. On FDs with a tenure of 5 years, you will get exemption under 80C on maximum investment of 1.5 lakhs.
Avoid breaking FD
If an investor needs money before the maturity of the FD, then it is better to apply for a loan against FD than to break the FD. Loans against FDs up to 90 percent can be found from most banks.
