Bank Fixed Deposits Compare

Additional Useful Information

• For example, let us say an investor invests ₹ 10,000/= in a fixed deposit with a private or a nationalized bank. The duration selected at the time of investing is 1 year and the rate of interest offered by the bank is 7%. At the end of this tenure of 1 year, the bank will return an amount of ₹ 10,700/= to the investor. This includes the original invested amount of ₹ 10,000/= plus ₹ 700/= which is the interest earned on the original amount at the rate of 7%).

• Bank Fixed Deposits can be Cumulative or Non – Cumulative.

• In a Cumulative Bank Fixed Deposit, the return / interest is given to investors at the end of the fixed period (Tenure), along with the original, invested amount.

• In a Non – Cumulative Bank Fixed Deposit, the return / interest is given to the investor periodically (monthly / quarterly / six monthly etc.), and not as a lump – sum at the end of the tenure.

Returns *

• A Bank Fixed Deposit generally guarantees returns in the form of a fixed interest rate.

• Interest earned is the only return that is available from a Bank Fixed Deposit.

• In recent years, the return has ranged between 3% – 8.5%.

• In general, longer the period of the fixed deposit (Tenure), higher is the rate of return.

• Senior citizens (aged above 60 years) typically receive a higher rate of return than the non-senior citizens.

Risk Level

• Bank Fixed Deposits are almost riskless. Some amount of credit risk always exists. However, this risk is very low.

• In a world with so many investment options, a Bank Fixed Deposit is one of the safest, and simplest modes of investment.

Liquidity

• Bank Fixed Deposits are considered highly liquid.

• At any time during the tenure, an investor can place a request with the bank to close the Fixed Deposit. Upon receiving this request, the Bank will give back the original invested amount along with any due interest and / or less any penalty deductions due to premature closure.

Interesting Facts

• Many times, investors may want to invest small amounts periodically. This is not possible with fixed deposits but is possible with recurring deposits. Recurring deposits allow investors to periodically invest a fixed amount at regular intervals. Apart from this, the entire concept of a recurring deposit is like a fixed deposit.

• Bank Fixed Deposits are NOT entirely risk-free contrary to popular belief. If a bank defaults, depositors may not get all their invested money back. However, the government has insured Bank Fixed Deposits up to ₹6,00,000. This means, in the event of a bank default, depositors are assured up to ₹6,00,000. However, this is a rare scenario.

• The only Bank Fixed Deposits that are entirely risk free are Bank Fixed Deposits with Government banks. In the event of any default, the government can just print more money, something which private banks can’t do!

Tax Implications

• This scheme is taxable. Taxes are levied on the interest collected.

• Any interest that investors receive is added to their taxable income and they need to pay tax according to their income slab.

• There are certain special Bank Fixed Deposits which fall into the Tax Saving category. Such Fixed Deposits have a lock-in period for 5 years during which an investor cannot withdraw the money invested. The amount you invest in such Bank Fixed Deposits can be used to reduce your taxable income. For example, if you invest ₹1,00,000/= in such a Bank Fixed Deposit, then your taxable income can be reduced by ₹1,00,000/= under section 80C of the Income Tax act. This will help in reducing the investor’s overall tax outflow.

Where To Invest

• Fixed Deposits - Open FD online for attractive Interest Rates | HDFC Bank

• Fixed Deposit - Open FD Online at Attractive Interest Rate (icicibank.com)

• Open FD Online at an Attractive Interest Rate - Axis Bank