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Procedure: How to Open a Fixed Deposit (FD)

January 30 , 2013
  1. Fixed deposit is a term deposit that lets you save a lump sum amount for a specific term and pays a decent interest on it. You have the flexibility of choosing deposit amount and term period. Interest rate differs for different term. Minimum term is 7 days and maximum term is 10 years. FDs are an ideal destination for your money not required for up to 3 years.
  2. Interest on FD is cumulative and is paid monthly or quarterly. Interest over Rs 10,000 a year is taxable and attracts TDS. There are also 5 year tax savings FDs which have tax rebate on principal up to Rs 1 lac a year.
  3. Many banks do not require you to have savings account to open a fixed deposit.
  1. If you are a net banking customer of the bank you can create a FD account online. Else you can get the account opening form from one of the branches. Fill in details about term, amount and personal details for KYC. You can include a nominee. You can invest on behalf of a minor too.
  2. If you are a new customer the bank can ask for an introducer's sign and address. The introducer could be anyone who is the bank's customer.
  3. You can make payment by cash, cheque, debit card or net banking. This has to be made in multiples prescribed. Every bank has a minimum amount for fixed deposit. An FD certificate will be issued. Check if details in it are correct.
  1. The date of maturity of your fixed deposit will be mentioned on the certificate. Fill details at the back of it and submit it at the branch after maturity. Proceeds would be credited to your savings bank account with that bank. If you do not have one you can ask for a pay order/banker's cheque and deposit it where you have a savings account.
  2. If annual interest is more than Rs 10,000 the bank would provide TDS certificate. In case they don’t send it ask for it. If your net income is not taxable you can submit form 15 g (or form 15 h in case of senior citizens) to the bank at the start of the financial year for not deducting tax at source.
  3. You can stop making payments midway. Interest corresponding to your deposited amount and term will be paid. If you withdraw prematurely the bank can charge a penal interest rate of up to 1%. If you wish to withdraw prematurely in order to lock-in a higher interest rate through another FD calculate first if you would be better off staying till maturity.

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