Life’s events are unpredictable. Emergencies arise at any time without warning. They need immediate attention and financial availability for all kinds of treatments. Without money, it is not easy to survive, let alone meet luxuries. Lots of mental and financial preparation goes into meeting all these emergencies and tackling them.
Fixed deposit schemes are one of the most popular kinds of investments in India. They not only offer financial security but also give investors a fixed interest rate which they get every month, quarterly, half-yearly and yearly, as per the tenure. The returns are stable and do not get affected by the volatility in the market. Investors also do not require to monitor the market regularly as it is hassle-free and stable investment scheme.
Types of schemes
There are three variations of FD schemes available in the market with excellent stability in their investments. They have many different features and benefits which customers can enjoy after applying for these deposits. Following are the variations in the schemes:
- Regular schemes: These schemes are regular ones where the minimum deposit amount is INR 1,000 without an upper limit. The Tax Deduction at Source (TDS) amount on the scheme is applicable only when the payable interest amount exceeds a limit of INR 50,000 annually.
In case of a financial emergency, investors can opt for an overdraft facility through a digital banking app. Early withdrawals invite penalty charges which vary from different banks. Understand the conditions for early withdrawals. It is compulsory to present a copy of the PAN card for investing an amount higher than INR 50,000.
- 5-Year Tax saving schemes: While opening a bank FD, Indian residents can save tax under section 80C of the Income Tax Act of India. They have a five-year lock-in period. The maximum amount to invest per year is INR 1.5 lakh. The interest rate applicable is the same as that of a five-Year Regular Deposit Scheme.
- NRE/ NRO Fixed Deposit Schemes: They available to non-resident Indians as well. They can use both NRE and NRO schemes.
In NRE Schemes, the principal amount and your interest rates get exempted from tax, and the principal plus interest are fully repatriable. The minimum tenure for is 12 months, and the maximum is 10 years.
On the other hand, NRO Schemes are taxable. The tax on the interest earned on them is 30.90 per cent and is very high as compared to the tax applicable on Domestic Fixed Deposit Schemes. The term varies from seven days to 10 years and is like regular schemes.
The fixed deposit interest rate depends on demand and supply. When there are more borrowers, banks need to keep funds at hand to get a higher rate of interest. Other factors that influence it are monetary policy, fiscal policy and the prevailing rate of inflation. Once agreed upon, it will remain constant throughout the investment tenure.Add paragraph text here.