In our country, people prefer to invest in Fixed Deposit (FD). This is because it is a safe and secure return on investment. However, before investing in FDs, you should know a few things related to it. Today we are going to tell you about 5 things about FD that you need.
Penalty will be given for breaking FD ahead of time
If you break the FD ahead of time, you will not get interest at the rate at which you opened the FD. For example, you get 6% interest per annum on FD of 1 lakh, but if you break it after 6 months, you are getting only 5% annual interest on 6 months FD, in which case the bank will pay interest at 5% on your money. Will not pay interest at the percentage rate.
According to the rules of SBI, the country’s largest bank, if a person gets an FD of up to Rs 5 lakh, he will have to pay a penalty of up to 0.50 per cent for breaking the FD before it matures. Thus on FDs above Rs 5 lakh and less than Rs 1 crore, 1 per cent penalty will have to be paid on premature braking. After fixing the interest for a period of time, you are paid by deducting 0.50 per cent or 1 per cent interest on the amount of FD. Most banks charge a penalty of up to 1 percent.
FDs are also taxable
Interest earned on your fixed deposit is taxed according to the income tax slab. If the matching interest on FD is more than Rs 10,000 in a financial year, TDS deduction is made on that interest. It will be 10% of the total interest earned. The limit for senior citizens is 50 thousand. However, if your income is less than the taxable range, you can submit Form 15G and 15H to the bank to avoid TDS deduction on FD.
Loans can be taken on FD
You can also take a loan on your FD. Under this you can take a loan up to 90% of the value of FD. Suppose your FD is worth Rs 1.5 lakh then you can get a loan of Rs 1 lakh 35 thousand. If you take a loan on FD, you will have to pay 1-2% more interest than the interest earned on a fixed deposit. For example, if you are getting 4% interest on your FD, you can get a loan at 6% interest.
Credit cards can be taken on FD
Most banks offer credit cards on a fixed deposit (FD). Credit cards with a credit limit of up to 80-85% of the FD amount can be obtained at the bank. This offer is good for those who have no credit score or have low credit score. By taking a credit card on FD, the bank takes your deposit as security for the expenses incurred with the credit card.
Up to Rs 5 lakh insurance is available on FD
Your money will be safe in FD. Insurance facility up to Rs. 5 lakhs is available on the deposit amount. This means that if the bank defaults in any condition, you will have a government guarantee of Rs 5 lakh. That means you will get Rs 5 lakh even in case of default.