Fixed Deposits

Fixed Deposits for NRIs

1. 1. NRE Fixed Deposits:

      Non-Resident External (NRE) fixed deposits are designed for NRIs who wish to invest their foreign earnings in India:

      • Tax-Free: The interest earned on these deposits is exempt from tax.
      • Repatriation: Both the principal and interest can be fully repatriated to the investor’s foreign account.
      • Currency Risk: The deposited amount is exposed to currency exchange rate fluctuations, which may impact the returns.
   2. NRO Fixed Deposits:

      Non-Resident Ordinary (NRO) fixed deposits are intended for NRIs looking to manage their income earned in India:

      • Taxable: Interest income is subject to a 30% tax.
      • Repatriation: Interest and a portion of the principal can be repatriated, but within certain limits.
      • Currency Flexibility: These deposits can be funded with both foreign and Indian currency, making them suitable for managing income generated in India.

Benefits of Fixed Deposits

1. 1. Assured Returns: FDs provide guaranteed returns as the interest rate is fixed for the entire tenure.
   2. Higher Interest Rates: FDs offer higher interest rates compared to savings accounts and recurring deposits.
   3. Tax Benefits: Certain FDs, like tax-saving fixed deposits, offer tax deductions under Section 80C of the Income Tax Act.
   4. Safety: Bank FDs are considered safe as they are governed by the Reserve Bank of India (RBI) regulations.
   5. Convenience: Opening an FD account is simple and can be done online. Existing bank customers can open FDs through net banking or mobile banking apps.
   6. Flexibility: Various tenures and interest payout options are available, catering to different financial needs.
   7. Premature Withdrawal: Although it may attract a penalty, premature withdrawal options provide liquidity in case of emergencies.

General Steps for Online Fixed Deposit Opening

1. Log in to Net Banking:

• Access your bank’s net banking portal or mobile app.

2. Select Fixed Deposit Option:

• Find the FD section, usually under investment or deposits.

3. Fill in Details:

• Enter details such as the amount, tenure, and type of FD.

4. Confirm and Submit:

• Review the information and submit your application. The FD receipt or acknowledgment will be available digitally.

For Branch Visit

1. Visit the Nearest Branch:

Go to your bank’s branch with required documents (identity proof, address proof, and a passport-sized photograph).

2. Fill Out the FD Form:

Complete the physical FD application form provided by the bank.

3. Submit the Form and Documents:

Submit the filled form along with the necessary documents to the bank officer.

4. Receive FD Receipt:

Once processed, you will receive an FD receipt or certificate from the bank.

Note: Most major banks in India now offer online FD services, but some smaller or regional banks may still require a branch visit. Always verify with your specific bank for the latest information.

Requirements for Opening a Fixed Deposit Account

1. Eligibility

• Individuals: Any resident Indian, including minors (under guardianship), senior citizens, joint account holders.
• Non-Resident Indians (NRIs): Can open NRE or NRO fixed deposit accounts.
• Companies and Firms: Registered companies, partnerships, and proprietorships.
• Trusts and Societies: Registered trusts, societies, and associations.
• Hindu Undivided Families (HUFs): Can open FD accounts.

2. Documents Required

• For Individuals:

  • Identity Proof: Aadhaar Card, Passport, Voter ID, PAN Card, Driving License.
  • Address Proof: Aadhaar Card, Passport, Utility Bills, Bank Statement with address, Ration Card.
  • Photograph: Recent passport-sized photographs (usually 2-3).

• For NRIs:

  • Passport and Visa: Copy of passport, valid visa or work permit.
  • NRI Status Proof: Overseas address proof.
  • FEMA Declaration: Declaration under the Foreign Exchange Management Act (FEMA).
  • NRE/NRO Account: NRE/NRO account details for linking FD.

• For Companies and Firms:

  • Registration Certificate: Certificate of incorporation or partnership deed.
  • Board Resolution: Authorizing the opening of an FD account.
  • PAN Card: PAN card of the company/firm.
  • Authorized Signatories: Identification and address proofs of authorized signatories.

• For Trusts and Societies:

  • Trust Deed/Bye-Laws: Copy of the trust deed or bye-laws.
  • Registration Certificate: Registration certificate of the trust or society.
  • Resolution: Authorizing the opening of an FD account.
  • PAN Card: PAN card of the trust/society.
  • Authorized Signatories: Identification and address proofs of authorized signatories.

3. Initial Deposit Amount

• Minimum Deposit: Varies by bank, typically between ₹1,000 and ₹10,000.
• Maximum Deposit: Generally no upper limit, but some banks may have specific schemes with caps.

4. Bank Account

• Existing Account: Preferable to have an existing savings or current account with the bank.
• KYC Compliance: Ensure KYC (Know Your Customer) details are up-to-date.

5. Mode of Deposit

• Cash: Small amounts can be deposited in cash.
• Cheque/Demand Draft: Larger amounts typically deposited via cheque or demand draft.
• Online Transfer: For online FD accounts, funds can be transferred electronically from your bank account.

6. FD Application Form

• Offline: Fill out the FD application form available at the branch.
• Online: Complete the form on the bank’s internet banking portal or mobile app.

Form 15G and Form 15H Requirements for Fixed Deposits

Form 15G

• Eligibility:
  • Individual or HUF: Must be below 60 years.
  • Income Limit: Total income below the taxable limit (₹2.5 lakh for FY 2023-24).
  • Tax Liability: Estimated tax liability should be nil.
• Purpose: To avoid TDS on FD interest if total income is below the taxable threshold.
• Documentation: PAN Card, FD details, other income details.

Form 15H

• Eligibility:
  • Individual: Must be 60 years or older (senior citizen).
  • Income Limit: Total interest income should not exceed the basic exemption limit after deductions.
  • Tax Liability: Estimated tax liability should be nil.
• Purpose: To avoid TDS on FD interest if total income is below the taxable threshold.
• Documentation: PAN Card, FD details, other income details.

Key Points:

• Submission Frequency: Forms must be submitted at the start of each financial year or when the FD is created or renewed.
• Separate Forms: Submit separate forms for each bank if you have multiple FDs.
• Submission Channels: Online through the bank’s internet banking portal or in person at the bank branch.
• Incorrect Declarations: False declarations may result in penalties.

Tax Calculation on Fixed Deposits

Key Points to Understand

• Interest Income: Considered ‘Income from Other Sources’ and added to total income for tax purposes.
• TDS: Deducted if interest exceeds ₹40,000 (₹50,000 for senior citizens). The TDS rate is 10% with PAN, otherwise 20%.
• Income Tax Slab: Interest income is taxed as per the individual’s income tax slab.

Steps to Calculate Tax

• Determine Total Interest Income: Sum up interest from all FDs.
• Check TDS Deducted: Verify TDS in Form 26AS.
• Add Interest to Total Income: Include interest income with other sources.
• Calculate Tax Liability: Based on applicable income tax slab rates.
• Adjust for TDS: Subtract TDS already deducted from total tax liability.

Example Calculation:

• Interest Income: ₹60,000
• TDS Deducted by Bank: ₹6,000 (10% of ₹60,000)
• Total Taxable Income: ₹4,60,000
• Tax Liability: ₹10,500
• Additional Tax Payable: ₹10,500 – ₹6,000 = ₹4,500

Points to Note:

• TDS Threshold: ₹40,000 for all, ₹50,000 for senior citizens.
• Form 15G/15H: Submit to avoid TDS if total income is below the taxable limit.
• Joint Account Holders: Taxable in the hands of the primary account holder.
• Clubbing of Income: Interest in minor’s FD is clubbed with the parent’s income.