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

IndianMoney.com Research Team | Posted On Wednesday, May 29,2019, 11:06 AM

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

 

 

What Is a Fixed Deposit?

Fixed deposits are investments which offer investors an option to park idle money lying in their savings bank accounts. If you do not need the money immediately, then you can use it to open a fixed deposit. You can choose the amount and tenure of investment. Fixed deposit is one of the safest investment avenues for risk averse investors. Money invested in fixed deposit is quite safe and the investor gets a guaranteed return on maturity.

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

Best Fixed Deposit Interest Rates:

Name of the institution

Tenure

Interest

State Bank of India

7  days to 10 years

5.75% to 7.25%

ICICI Bank

7 days to 10 years

4% to 7.25%

Punjab National bank

7 days to 10 years

4.25% to 7.25%

HDFC Bank

7 days to 10 years

3.5% to 7.25%

Axis Bank

7 days to 10 years

3.5% to 7.55%

India Post

1 year to 5 years

6.8% to 7.6%

Kotak Mahindra Bank

7 days to 10 years

3.5% to 7.3%

Bajaj Finserv

12 months to 60 months

8% to 8.6%

IDFC First Bank

7 days to 10 years

4% to 8.25%

Shriram Union Finance co.

1 year to 5 years

7.72% to 8.65%

Features of Fixed Deposits:

1. Long-Term Investment: Fixed deposit can be an ideal long-term investment. The interest on the fixed deposit, compounds on quarterly basis and the principal grows. This feature enables the depositor earn higher returns.

2. One-Time Deposit: The fixed deposit enables investors deposit a lump sum at the start of the tenure. The investor earns interest on this one-time deposit on a monthly, quarterly or annual basis.

3. Fixed Deposit Receipt: Once the fixed deposit account is opened, the bank provides a certificate which mentions various details like date of issue, date of maturity, deposit amount, maturity amount and tenure, name and account number of the beneficiary.

See Also: Fixed Deposit Interest Rates 2019

4. Interest Payment: The interest payment on fixed deposit depends mainly on the tenure. Fixed deposit with short-term maturities offer lower interest rate than fixed deposit with long-term maturities. Currently, the rate of interest paid on fixed deposit ranges from 6.6% to 7.4% a year.

5. Tax-Efficiency: Fixed deposit is not a very tax efficient saving option, as the interest income is taxed. TDS is deducted if the interest income exceeds Rs 40,000 a year. This is Rs 50,000 for senior citizens. You may choose to invest in 5 year tax-saver FDs that allows tax deduction under Section 80C of the Income Tax Act. Under tax saver FD, the deposit is locked-in for a period of 5 years. You get a tax deduction up to Rs 1.5 Lakhs a year under Section 80C.

Advantages and Disadvantages of Fixed Deposit:

Advantages: Listed below are the pros of investing in fixed deposits:

  • Fixed deposit offers decent returns. This is one of the main advantages of fixed deposits; the returns do not depend on the market conditions, unlike other investment options like equity mutual funds.
  • Opening a fixed deposit is simple and hassle-free. Fixed deposit does not involve elaborate terms and conditions and are easy to understand.
  • Fixed deposit encourages people to save for the future, by putting aside surplus funds and allowing them grow through compounding returns.
  • Fixed deposit offers flexibility and the depositor can choose the tenure as per his/her financial goals. There is no specified upper limit and you can choose the amount you wish to invest. Investors can opt for multiple FD accounts across banks.
  • An investor can avail loans by pledging the fixed deposit as collateral. An individual can avail up to 90% of the FD amount as loan.

See Also: Fixed Deposit Interest Rate

Disadvantages:

Though fixed deposits are the most popular investment option in India, they are not suitable for all types of investors. Listed below are the cons of investing in FDs:

  • Fixed deposit is not liquid and the deposited money gets locked-in for a certain period. You do not have the flexibility to access the deposits until maturity.
  • The returns earned on fixed deposits are comparatively lower than NSC, Post Office Schemes and company fixed deposits.

See Also: Know Fixed Deposits

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