A fixed deposit is an investment to grow your savings and earn a higher rate of return than a regular savings account. It is offered by banks and NBFCs (Non Banking Financial Companies). A fixed deposit has the lowest risk in the portfolio of investment. Money is invested in a fixed deposit with a lock in period and interest is given either at the end of the maturity date or as a regular payout.
Parking your investment in the correct Fixed Deposit in 2021 will ensure high fixed deposit returns on maturity and also a choice of regular interest payouts throughout the chosen tenure.
To ensure high returns you must look for a Fixed Deposit scheme with a high-interest rate payouts before opening a new fixed deposit account or renewing an existing one.
The fixed deposit interest rate varies depending on factors such as Government policies, economic conditions and liquidity conditions in the market.
While calculating fixed deposit interest rates, we need to keep in mind that fixed deposit interest rates have features that are different for senior citizens in a lot of ways compared to the general public.
- At the time of opening the fixed deposit account, the depositor should be 60 years or more.
- Depending on the bank, interest rates are higher by 0.25% to 0.50%
- Interest rates for senior citizens are higher by 0.25% to 0.5%. The actual increase is different from bank to bank.
- The tenure is between 7 days and 10 days
- Loan can be availed against FD
- Penalties for premature withdrawal are the same as for the general public
There are many factors which contribute to the calculation of fixed deposit interest rates. Some of them are noted below:
- Deposit Tenure: A lower tenure will yield a lower interest rate. For a higher interest rate, the tenure should be high or medium range
- Deposit Amount: Higher deposit amounts will fetch you higher interest rates, especially bulk deposits exceeding Rs.1 crore. Deposit amounts are also directly proportional to interest rates. A higher deposit amount will fetch you a handsome interest rate, specially bulk deposits exceeding 1 cr.
- Depositor type: Senior citizens typically get 0.25% to 0.50% additional interest rate on fixed deposits.
To determine the Fixed Deposit maturity amount, you can simply use the Fixed Deposit Calculator or Term Deposit Calculator. A few simple steps are to be followed to check the FD maturity amount. Firstly, go to the FD calculator and choose the type of customer you are. Then put in the FD type (cumulative or non-cumulative) and the amount of your principal and the tenor. The final amount of interest and your total amount earned at maturity will be displayed on the screen.
Fixed Deposit Interest and Income Tax
- The interest earned from your Fixed Deposit is fully taxable as it comes under the term of income from other sources.
- If your interest income from Fixed Deposit is less than Rs. 40,000 in a year, banks will not deduct TDS.
- You need to submit Form 15G and Form 15H with the bank at the beginning of the financial year. Banks will not deduct TDS following the form submission.
CRISIL & ICRA Rating List for Corporate Fixed Deposits
Credit ratings of corporate Fixed Deposits determine the consistency, stability and credibility of the companies that offer FDs and it is hence beneficial to understand the credit rating.
The CRISIL credit ratings for FDs fall under the categories as given below:
FAAA has the highest safety followed by FAA, FA, FB, FC and FD in the decreasing order of Safety and increasing order of risk.
The ICRA credit ratings for FDs fall under the following categories in decreasing order of quality. The highest credit quality is MAAA followed by MAA, MA, MB, MC and MD being the lowest quality of credit.