What Is a Fixed Deposit? AU small bank (2025)

What Is a Fixed Deposit (FD) is widely considered a secure and stable investment option, providing a reliable source of income through interest.

What Is a Fixed Deposit

This financial instrument is offered by banks and Non-Bank Financial Companies (NBFCs) in India, making it accessible to resident Indian citizens.

Features and Benefits of a Fixed Deposit:

1. Term Deposit Structure:

FD is a Term Deposit with a specified maturity date, ranging from 7 days to 10 years based on investor preferences and bank offerings.

2. Interest Rates and Assured Returns:

Offers higher interest rates compared to savings accounts.

Assures a return on investment in the form of interest.

3. Liquidity and Premature Withdrawal:

Low liquidity with the possibility of premature withdrawal under specific terms and conditions.

4. Interest Payment Options:

Interest payments can be received monthly, quarterly, annually, or at maturity.

Options for simple interest or compounded interest based on FD terms.

5. Overdraft Facility:

Some banks offer overdraft facilities against FDs, eliminating the need to liquidate FDs in emergencies.

6. Renewal Ease:

Easy renewal process for Fixed Deposits.

7. Tax Implications:

Tax Deducted at Source (TDS) on FD interest, following the Income Tax Act, 1961.

8. Documents Required for FD:

• Identity and Age Proof: Passport, PAN Card, Voter ID, or any Government ID.
• Residence Proof: Passport, Electricity Bill, Telephone Bill, Bank Pass Book, or any current proof of residence.
• Duly filled application form with a passport-size photograph, signature, and nominee details.
• Original documents for verification.

9. FD Interest Rates in India:

• Interest rates vary among banks, with differences based on deposit tenure.
• The Senior citizens often receive higher interest rates.

10. Fixed Deposit Calculator:

• An FD Calculator helps calculate maturity values based on deposit amount, interest rates, and compounding frequency.

11. Choosing the Best FD Option:

AU Small Finance Bank, for example, offers attractive features:

12. 5-Year Tax Saving FD:

• Tax-saving product with a 5-year tenure.
• Minimum deposit of INR 1,000; maximum INR 1,50,000 per financial year.

13. Regular Fixed Deposits:

• Flexible, secure, and offers a competitive return on investment.
• Net banking, online facilities, and payout options available.
• Sweep-In Facility links FDs to savings or current accounts, ensuring automatic funding in case of processing shortfalls.

Conclusion:

Understanding the features, benefits, and considerations of Fixed Deposits is crucial for making informed investment decisions. It’s advisable to compare interest rates, consider tenure options, and explore additional features offered by different financial institutions before choosing the right FD for your financial goals.

References:

• Income Tax Act, 1961.
• AU Small Finance Bank website (Open Account).
• [Example of Fixed Deposit Calculator]