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Bank FD - A Safe And Secure Way To Invest

5 minsMay 13, 2018

Holding large sums of money in a savings account has never made anyone rich.

Hard-earned money should essential, be deployed productively so that it generates wealth in the long run. This can provide a sense of financial well-being and security.

There are galore of investment avenues; but for safe and secured returns, bank Fixed Deposits (FDs) are still a preferred choice.

Bank FD - A Safe And Secure Way To Invest


Here are eight great benefits of bank FDs:

  • Here are eight great benefits of bank FDs:
  • You earn a higher rate of interest, than on a savings bank account.
  • A senior citizen, who would who would like to draw in a regular source of income vide interest, can earn a 50 bps (0.50%) higher rate.
  • Effectively, the returns earned on bank FD can counter inflation with the power of compounding working in your favour (as interest is calculated on a quarterly basis).
  • Similarly, a bank FD can also take care of your liquidity needs and address short-term goals, provided you’ve thoughtfully selected the tenure.
  • You can even avail a loan against a bank FD, particularly when you don’t have a credit history.
  • A bank FD to get an Insta Easy Credit Card over-the-counter with minimal documentation and guaranteed approval.
  • Even tax planning is possible with a Tax Saver bank FD. You can avail of a tax benefit of upto Rs 1.50 lakh under Section 80C of the Income-tax Act, 1961.

So, if you are conservative or averse to risk and want to deploy money for the short-term, a bank FD is apt for you.

Resident individuals, Hindu Undivided Families (HUF), sole proprietorship firms, partnership firms, limited companies, Trusts, almost anyone can invest in a bank FD.

All you need is valid documentation.

The minimum investment to open a bank FD varies across banks, but ranges between Rs 1,000 to Rs 10,000, while there is no upper limit. To book a bank FD with Axis Bank, the minimum investment is Rs 5,000 (no maximum limit).

The tenure ranges from 7 days to 20 years, varying across banks. Axis Bank offers a minimum tenure of 7 days to 10 years across types of bank FDs.

Besides the regular bank FD, here are the other variants of bank FD from Axis Bank

Encash 24 Flexi Deposit:

Encash 24 Flexi Deposits can be linked to your Axis Bank savings account facilitating automatic transfers in multiples of Rs 5,000 to a fixed deposit when the balance in the savings account crosses Rs 25,000.

And the money in fixed deposit can be accessed easily via a cheque or ATM withdrawals. This amount is automatically reverse-swept from the most recently formed FD (in units of Rs 5,000) to your savings account whenever the balance in the latter (i.e. savings account) falls below Rs 25,000.

Thus, it offers dual benefits:

  • Takes care of liquidity needs; and
  • Earns a high rate of interest via bank FD

However, it is important to note that the units withdrawn (in multiples of Rs 500/-) from the Encash 24 Deposit Account will cease to earn the interest applicable to Encash 24 Deposit.

You even have the facility to auto-renew the FD booked under Encash 24 from a minimum of 6 months and upto a maximum of 5 years.

If you wish to invest in ‘Encash 24 Flexi Deposit’ and know more, click here.

Fixed Deposit Plus:

With Fixed Deposit Plus, you can earn a higher rate of interest compared to regular rates. Both retail investors and institutions can book Axis Bank’s Fixed Deposit Plus (in single or joint name), however, the minimum investment required is Rs 15,00,000 and above, while there is no ceiling on the maximum investment amount.

You can pick from a choice of: short-term; reinvestment; and monthly/quarterly interest payout ––depending on your cash-flow requirement.

But premature withdrawals from Fixed Deposit Plus are usually not permitted. In case the deposit is held jointly, all holders must sign a declaration, so that in the event of the death of one of the holders, the bank can pay the maturity proceeds prematurely to the survivor.

Note that auto renewal facility is not available for Fixed Deposit Plus.

If you wish to invest in ‘Fixed Deposit Plus’ and know more, click here.

Tax Saver Fixed Deposit:

A Tax Saver Fixed Deposit can help you reduce your tax outgo, as investment in these are eligible for deduction under Section 80C of the Income Tax Act, 1961. The tax benefit is available only to resident individual and HUF. Hence, only a resident individual or a HUF is allowed to invest in a Tax Saver Fixed Deposit.

The minimum amount that you can invest is Rs 100 with an upper limit of Rs 1.50 lakh in a financial year. Note that a Tax Saver Bank FD comes with a lock-in period of 5 years, which in fact is good to compound wealth. The FD Interest Rate offered by Axis Bank on a tax saver deposit is currently 6.90% p.a

You can choose between reinvestment of interest; and quarterly/monthly payout of interest.

A tax saver fixed deposit can be held in single or in joint name; but in case of the latter, a deduction under Section 80C of the Income Tax Act, 1961 will be available only to the first holder –– who should possess a valid PAN (Permanent Account Number).

If you wish to invest in ‘Tax Saver Fixed Deposit’ and know more, click here.

Ways to invest in a bank FD

Investments in bank FD can be done online, i.e. through internet banking or mobile banking––—in the comfort of your home/office/ or wherever you are–––or even by physically visiting the nearest bank branch.

In case you are considering booking your FD online, the steps are as follows:

Internet Banking:

Step #1: Login to Internet Banking and select the deposit option. Axis Bank customer can login here.

Step #2: Click on create bank FD

Step #3: Fill in the require account details, including nominee details

Step #4: On confirmation, the selected amount will be debited from your savings bank account and your bank FD will be created almost instantly.

Step #5: Post creation, a bank FD advice will be emailed to you, if you have registered for e-statements. And in case you have not registered for e-statements, a physical advice will be dispatched to your postal communication address. You will be able to view your bank FD advice on your internet banking account, after one working day.

Mobile Banking:

Step #1: Login to your mobile banking app and select the deposit option

Step #2: Select on open/create a bank FD

Step #2: Select on open/create a bank FD

Step #4: On confirmation, the selected amount will be debited from your savings bank account and your bank FD will be created almost instantly.

Step #5: Post creation, you will receive an email of the bank FD advice, if you have registered for e-statements. And in case you have not registered for e-statements, a physical advice will be dispatched to your postal communication address. You will be also able to view your bank FD advice on your mobile banking app after one working day.

Always make it a point to have a nomination. A nominee is a person who will have legal right after your demise. A nominee can be your legal heir (a family member) or anyone who is not a part of the family. So, do not forget to fill in your nomination form and submit it to the bank.

Note that for joint holdings, the nomination process needs to be carried out jointly. Further, a nomination can be made only in an individual capacity and not official capacity, using designations. In most cases, one can nominate only individuals and not organisations, barring for certain Trusts.

Tax implications of investing a bank FD

The interest earned on bank FD is taxable. Tax is deducted at source by the bank as per the prevailing Income Tax regulations. Tax Deduction at Source (TDS) with respect to interest earned on your bank FD is deducted on the basis of the total interest projected on the aggregate of your bank FD for the financial year. This is in accordance to Section 194A of the Income Tax Act, 1961.

Thus, if the total projected interest in a financial year crosses the threshold limit, which is currently Rs 10,000 for non-senior citizens, TDS is deducted proportionately from the existing fixed deposits at the time of interest application.

For senior citizens, this year the union budget 2018, increased the exemption of interest income on deposits with banks (includes fixed deposits) and post offices from Rs 10,000 to Rs 50,000. Thus, TDS will not be deducted for senior citizens, unless it crosses this new limit.

The rate of TDS is 10% if PAN is furnished, and if not, then 20%. No surcharge or cess is levied over and above this basic rate.

Yet, in case you have no other income apart from interest income, then in order to avoid TDS, you can submit a declaration under Section 197A of the Income Tax Act in Form 15-G (for general or non-senior citizens) or Form 15-H (for senior citizens), as applicable.

To conclude:

From an allocation and diversification standpoint, holding a portion of your total invisible surplus in bank FDs is a wise thing to do in the journey of wealth creation.

Even to handle contingencies, in addition to a saving bank account, a bank FD can be considered with a tenure of few months or more.

So invest in Digital FDs, and consider Axis Bank for a hassle-free experience.

Happy Investing!

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.