Dhanteras is traditionally a good time to make auspicious, lasting investments, and many people choose a Fixed Deposit (FD) for the predictable returns that it offers. However, a hastily made booking may mean that you end up with a tenure that doesn’t suit your plan, or a payout structure that taxes you at the wrong time, and a few minutes spent reviewing your booking can save you from headaches later. These are the three things to review before you book an FD this Dhanteras.
Which Deposit Tenure Does Dhanteras Need?
With durations ranging from 12 to 60 months, deposits give you enough flexibility to invest towards something particular, and the right returns for the time that you need it.
- Match the Tenure to Your Plans and Goals:
Work out how soon you may want the money, and book your FD with a tenure that reflects this. If you are saving for something that you might want to buy in 2 years, for example, a 24-month deposit with interest paid out every 6 months is better than one set for a longer term.
- Compare the Rate Slabs Across Different Tenures:
The rate is not the sole deciding factor when making your booking: different tenures and payout frequencies have varying rate slabs, and some tenures may even have a higher rate than others, and this can be different for general investors and senior citizens.
You should also confirm the minimum investment that applies, which is currently ₹15,000. Senior citizens should also check whether they are eligible for the higher rates that apply to this category and make sure this is enabled.
How Do You Want Your Payout?
Interest on your FD can build up as either a lump sum amount or regular payments made to you depending on the kind of account that you choose, and making the right choice helps to keep your money working for you.
- Cumulative or Non-Cumulative:
With a cumulative FD, your interest will be combined with your initial deposit to pay out as a larger sum at the end of the deposit period, whereas with a non-cumulative account it will be distributed at regular intervals. This means that a non-cumulative FD could provide a useful source of income if you choose the right payout frequency.
- Payout Frequency that Works Best:
Non-cumulative deposits will generally allow you to select from monthly, quarterly, half-yearly and yearly payouts, and these should be selected based on your individual needs.
Retiring investors with other sources of income may find that monthly payouts are ideal for covering regular household costs, while for someone who has no immediate need for the interest, you might consider waiting until it accumulates.
- Taxes Are Taken Into Account:
Your FD interest will be subject to income tax and applicable TDS, so if you are a senior citizen with a low overall income, it may be worth submitting Form 15G or 15H so that your interest is not taxed. Ensure that you understand the rules that apply to your situation before you make a booking.
- Conditions Around Premature Withdrawals:
Insurance companies only allows premature withdrawal after a minimum interval from the date on which you started to earn interest, which is currently three months, so for any money that you’ll need sooner than this, a Fixed Deposit is not the right place to keep it. If you have an emergency, then your top priority should be to review any funds that you already have available.
- Check if You Will Incur Any Penalties:
Early withdrawal generally means that you will receive a lower interest rate, and you may want to compare this against any additional costs or losses that a premature withdrawal may cause you.
Always review the premature withdrawal terms that apply before you finish the booking process. It is a great idea to have an alternative source of funds for any emergency withdrawals, but some depositors may be able to take out a loan against their FD, so look at these options before you make your booking.
Conclusion
A quality FD depends on ensuring that the tenure that you choose can build up enough value to help you reach your goals, that your payout method and frequency support your plans for the money and that you have suitable alternatives in case your circumstances change before the FD matures.
With Bajaj Finance app, you can do this by reviewing the options that you have selected, using the calculator tool to predict your returns, completing the online booking process by submitting your KYC documents, and then following the progress of your investment using the same application. Bajaj Finance is a deposit-taking NBFC with an RBI registration and a high credit rating, so it provides reassurance for investors who value safety.