Fixed Deposits Scheme 2016 2017 Tax Saving Investments Bonds‎

Fixed Deposits A Tax Saving

Fixed Deposits Scheme 2016 Important Facts About Fixed Deposits A Tax Saving Investments Bonds‎ 2017 Some of the important facts about fixed deposits There are two type of deposits, banks accept from deposit holders. These are demand deposit and term deposit.Various Banks offer different rates for various time slabs.

Demand deposits are payable on demand. Fixed Deposits Savings Bank and Current account are called demand deposits. Depositors use these accounts for operational purpose. The rate of interest are less in these types of deposits because of their nature.

In contrast, terms deposits are payable after a pre-determined period. These deposits are used as investment avenue and comparatively fetched higher rate of interest. In term deposits also there are two invariant i.e.

Recurring deposits and Fixed deposits. when an investor/deposit holder deposits small money periodically in order to accumulate to a handsome sum are called recurring deposits.
They work just like SIPs (Systematic Investment Plans) and only difference is that return on SIPs are dependent on performance of mutual fund whereas return on RDs (Recurring deposits) are fixed and as per the rate of interest offered by the Bank.
Fixed deposits are lump sum deposits and earn interest on quarterly compounding basis.

Interest on Fixed deposits are calculated quarterly basis and compounded.
Fixed deposits can be withdrawn prematurely. However as the funds are committed for a fixed period by the Bank they charge some penalty and pay the interest for the period the deposit was with the Bank. The rate of interest in such cases are the rate offered for the same period by the Bank.

To meet exigency, loan against these FDs can be obtained from the same bank. Such loans can be in the form of running overdraft limit or in the form of demand loan. A lien is marked on the deposits and FD is pledged with the Bank.

Rate of interest on these loans are one or two percent higher than that of fixed deposits.
Fixed deposits are also issued by corporates and offer higher rate of interest compared to rate of interest offered by Bank because of high risk the corporate FDs carry.

Five years tax saving FDs are also available for the depositors. By investing in these 5yr deposits, tax rebate under sec 80C of IT Act can be claimed. However, these FDs cannot be prematurely closed and loan facility against these deposits are also not available.