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Home Articles How to Start Fixed Deposit and Best Fixed Deposit Interest Rates-2019

How to Start Fixed Deposit and Best Fixed Deposit Interest Rates-2019

IndianMoney.com Research Team | Updated On Saturday, September 21,2019, 05:25 PM

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How to Start Fixed Deposit and Best Fixed Deposit Interest Rates-2019

 

 

Save for your dream car or your child education with an attractive interest-bearing fixed deposit that grows your savings multifold. As a traditional investment option fixed deposit is the best way to grow your money without the slightest risk of losing your original investment.

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What Is a Fixed Deposit?

A fixed deposit is a long-term investment option that allows investors to park their money and earn interest income. An investor can choose to invest money for long terms and allow the capital to grow at a faster rate due to compounding of interest.

An FD can be opened in all private and public banks in India. To start a fixed deposit you have to visit the bank of your choice and provide your KYC documents. It helps you save a lump sum amount for fulfilling your future goals. The rate of interest varies and once the money is locked-in, you cannot withdraw it before maturity. The interest remains the same throughout the tenure of your investment.

Best Fixed Deposit Interest Rates:

The table below shows the interest rates provided by of top 10 banks in India on fixed deposits:

Name of the bank

Tenure

Interest rate per annum

Bank of Baroda

7 days to 10 years

4.50% to 6.25%

Canara Bank

7 days to 10 years

5.00% to 6.25%

State Bank of India

7 days to 10 years

4.50% to 6.25%

Bank of India

7 days to 10 years

5.00% to 6.35%

Central Bank of India

7 days to 10 years

4.50% to 6.45%

Axis Bank

7 days to 10 years

3.50% to 6.75%

HDFC Bank

7 days to 10 years

3.50% to 7.00%

ICICI Bank

7 days to 10 years

4.00% to 7.00%

IDBI Bank

7 days to 10 years

6.25% to 7.00%

Yes Bank

7 days to 10 years

5.00% to 7.25%

Features of Fixed Deposits

1. Long-Term Investment: the main benefit of fixed deposit is that it keeps your money safe while providing you with a better interest income than a savings account. With a fixed deposit, you can park your surplus money for a long-time.

2. One-Time deposit: fixed deposit requires a one-time payment. If you have some idle money lying in your savings account and you don’t need it immediately then a fixed deposit is the best way to let your money grow while keeping it safe.

3. Fixed Deposit certificate: a fixed deposit certificate is issued once the money is deposited and locked away for certain tenure. You can also request for an online copy of the FD certificate in your net banking account. This certificate is necessary and must be furnished on maturity, for reinvestment or withdrawal of the maturity proceeds.

4. Interest Payment: the interest on FDs is paid out on a monthly or quarterly basis as per the requirement of the investor. If you want to generate a monthly income then you can request your bank to credit the interest income into your savings account.

5. Tax-Efficiency:  FDs provide an ideal option for investors to park their surplus funds as well as gain interest income. However, the interest income on FDs is fully taxable. So make sure the returns on your FDs are in line with the tax bracket you belong to. If the interest income is more than Rs. 10,000 in one financial year then you are liable to pay TDS on your interest income.

See Also: What is meant by Fixed Deposit?

Advantages & Disadvantages of Fixed Deposit

Advantages:

You can watch your savings grow faster with a fixed deposit. A fixed deposit is designed to provide capital protection and provides the advantage of compounding of interest.  

Low risk: An FD is an ideal place to park your money as market risks cannot affect the investment or influence your returns. Nowadays the RBI also offers insurance of Rs. 1 lakh on fixed deposits. So your money is all the more protected.

Loan against FD: the fixed deposit is an investment that can be easily liquidated during emergencies. You can withdraw the money invested in an FD or you can also avail a secured loan where you can avail 90% of the invested amount as loan. Premature withdrawal attracts a penalty. But availing a loan against FD can save you the penalty and will help you to take care of your emergency. The interest rate on the loan is also moderate as most banks keep the interest rate for such loans at 2% more than their current FD rate. You will continue to earn interest on your FD even if you avail a loan on it.

Steady income: since the returns on fixed deposit investments are independent of share market volatility, therefore, you get the same interest payment throughout its tenure. The interest amount is paid on an annual or quarterly basis as per your requirements. You will be able to generate greater returns on a 3-year or a 5-year FD as the interest along with the principal amount gets reinvested due to compounding.

More for senior citizens: all major banks in the country offer a slightly higher interest rate for senior citizens. This is the reason why FD deposits are immensely popular among retirees. It is a risk-free avenue for senior citizens to earn good returns.

Disadvantages:

Returns are not inflation-beating: fixed deposits are the best option to earn risk-free returns. But the other options flooding the market like equity-linked products or mutual fund scheme can double your money in the same period while giving you tax benefits.

Less liquidity: FD s has a fixed lock-in period. Deposits can be withdrawn before its maturity but you will lose a part of your income as you have to pay a penalty. You will be able to earn only a part of your interest and you have to pay a premature withdrawal penalty. Even if you are partially withdrawing your funds you will have to bear the same liquidation fee.

Fewer tax benefits: FDs save your income tax only if you invest the amount for 5 years. FD investments below five years have tax implications where you have to pay 10% TDS if your total interest income exceeds Rs. 10,000 in a financial year.

See Also: Types of Fixed Deposits

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IndianMoney.com Research Team

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