Fixed deposits (FDs) are considered to be a good investment tool due to safe and assured returns, but investing in FDs without thinking is also not a good idea.
While getting an FD, some important things should be kept in mind including its tenure and penalty for breaking the FD. Today we are telling you about 6 such things…
It is important to choose the right tenure
Before investing in an FD, it is important to think about its tenure. This is because if the investors withdraw before maturity, they will have to pay the penalty. Before the FD matures, he will have to pay a penalty of up to 1% for breaking it. This can reduce the total interest earned on the deposit.
Do not invest the entire money in a single FD
If you are planning to invest 10 lakh rupees in FD in any one bank, then instead invest in 8 FDs of 1 lakh rupees and 4 FDs of 50 thousand rupees in more than one bank. With this, if you need money in the middle, you can arrange money according to your need by breaking the FD in the middle. Rest of your FD will be safe.
Tax is to be paid only on the interest earned on FD
The interest earned on your FD is taxed as per the income tax slab. If the interest earned on FD exceeds Rs 10,000 in a financial year, then there is TDS deduction on that interest. This will be 10% of the total interest earned. For senior citizens, this limit is 50 thousand. However, if your income is below the taxable range, you can submit Form 15G and Form 15H to the bank to not allow TDS deduction on FD.
Withdrawal of interest
Banks earlier had the option to withdraw interest on quarterly and annual basis. Now you can also do monthly withdrawal in some banks. You can choose it according to your need.
Penalty to be paid for breaking FD prematurely
If you break the FD prematurely, then you do not get the interest at the rate at which you have made the FD. For example, suppose you made an FD of Rs 1 lakh at the rate of 6% for 1 year, but you break it only after 6 months and the 6 months FD is getting interest at the rate of 5% per annum, then like this In India, the bank will give interest on your money at the rate of 5% and not at the rate of 6%.
According to the rules of the country’s largest bank SBI, if a person makes an FD up to Rs 5 lakh, then he will have to pay a penalty of 0.50% on breaking the FD before maturity. Similarly, on FDs above 5 lakhs and less than one crore, 1% penalty will have to be paid for premature break. Your money is given to you by deducting 0.50 or 1% interest, depending on the amount of FD, after ensuring tenor interest (as mentioned above). Most banks charge a penalty of up to 1% only.
You can take loan against FD
You can also take a loan against your FD. Under this, you can take a loan up to 90% of the value of the FD. Suppose the value of your FD is 1.5 lakh rupees, then you can get a loan of 1 lakh 35 thousand rupees. If you take a loan against FD, then you will have to pay 1-2% more interest than the interest on FD. For example, suppose you are getting 4% interest on your FD, then you can get a loan at 5 to 6% interest rate.