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What is a Bond?
What is
the tenure of a Bond ?
What
is compounding in Bonds?
Can a Bond
be purchased on cash basis?
How/when
can I redeem the bonds?
Can I take
money before maturity?
Can I have
a Bond in a joint name?
What is
either or survivor?
What is
joint or survivor?
What is
the mode of getting payment after a bond is redeemed?
What is
‘nomination’?
Can a
company reject my application for a bond?
Whom
should I contact in the event of change of my address etc.?
Do
I get the tax rebates/benefits or deductions?
When do
corporate deduct TDS on income from bonds?
Do
companies club interest on different bond in calculating interest
for TDS purposes?
Is there
a ceiling on the number of bonds I can purchase in a company?
What if
my bond certificate is lost, stolen or destroyed?
Can a
bond be bought in the name of minors?
What is
the start date of interest calculations?
What if
the day of any payment of interest or maturity amount is Sunday/
Bank Holiday/Company holiday?
In which
court’s jurisdiction will the disputes go, if they arise?
RBI
Relief Bonds - FAQs
Who can
invest in the RBI Relief Bonds?
What is the
minimum and maximum investment limits for these
Bonds?
What is the
issue price of the Bonds?
What will be
the Date of issue of these Bonds?
What will be
the Period of Holding for these Bonds?
Is the
premature encashment of these Bonds allowed?
What are the
salient features of these Bonds?
What are the
options available regarding the Interest Payment?
What are the
Tax concession available to the Bond holders?
Is the PAN
Number required for applying to these Bonds?
Will there
be any TDS on the interest of these Bonds?
How can I
transfer these Bonds?
Can I
Pledge these Bonds as the Collateral?
Are NRI's
eligible to invest in the Bonds?
Is there
any Nomination facility?
Where can I
get the Forms for RBI Relief Bonds?
Can a
guardian make an application on behalf of a minor?
What are
the provision in case the applicant is a HUF?
What are
the provision in case of application by NRI''s ?
Fixed
Deposits with Manufacturing Companies and
NBFC
What is a
fixed deposit?
On what
factors does the interest rates on the FD depend?
What is the
tenure of FD?
What are
the various tenures available?
When is the
interest added?
What is
compounding in FDs?
What are
the documents required?
Can you pay
cash for making a FD?
Is the PAN
mandatory for making an FD account?
Can I open
different FDs account in the same entity?
How can I
redeem my deposits?
Can I take
money before maturity?
What is
the minimum amount required to have an FD in a company?
Can I have
a FD in a joint account?
What is
either or survivor?
What is
joint or survivor?
What is
rollover?
What is
the mode of getting payment after redeeming of FD?
What is
nomination?
Is FD
transferable?
Can a
company reject my application?
What if I
change my address etc.?
Do I get
the tax rebates or deductions?
When do
corporates deduct TDS in FDs?
Do
companies club interest on different FD in calculation of interest
for TDS purposes?
Is there a
ceiling on the number of FDs I can make or the number of companies
where I can have the FDs accounts?
What if I
lose my FD receipt?
What if we
change the order or inclusion or exclusion of any person from joint
account?
What are
the company’s rights?
Can the FD
be made in the minors name?
Is
nomination facility available in companies FDs?
What is
the start date of interest calculations?
What if
the day of any payment of interest or maturity amount is Sunday/
Bank Holiday/Company holiday?
In which
courts jurisdiction will the disputes go, if they arise?
Fixed
Deposits in the Banks
What is
a fixed deposit?
How is a
fixed deposit in a bank different from savings
account?
What
factors does the interest rate on the FD depend
on?
What is the
tenure of FD?
What are
the various tenures available?
When is the
interest added?
What is
compounding in FDs?
What are
the documents required when opening an FD
account?
Can you pay
cash for making a FD in a bank?
Is the PAN
mandatory for making an FD account?
Can I open
different FDs account in the same bank?
How can I
redeem my deposits?
Can I take
money before maturity?
Can I take
a loan on my FD?
What is
the minimum amount required to have an FD in a
bank?
Can I have
a FD in a joint account?
What is
`either or survivor'?
What is
`joint or survivor'?
What is
rollover?
What if I
forget to rollover or redeem?
Is the
introduction mandatory?
What is
the mode of getting payment after redeeming of
FD?
What is
nomination?
Is an FD
transferable?
Can a bank
reject my application?
What if I
change my address, etc.?
What are
the facilities offered by banks?
Do I get
tax rebates or deductions?
When do
banks deduct TDS in FDs?
Do banks
club interest on different FD and on savings account in calculation
of interest for TDS purposes?
What if
the bank defaults or shuts down?
Is there a
ceiling on the number of FDs I can make or the number of banks where
I can have FD accounts?
What if I
lose my FD receipt?
Where can
I go if the bank fails to address my
complaints?
Q. What is a bond?
A bond, which is a part of fixed income investments, is just an
organization's IOU; i.e., a promise to repay a sum of money at a
certain interest rate and over a certain period of time.
TOP
Q. What is the tenure of a
bond ?
The time period for which the bond is issued is
called the tenure. The tenure of the bond varies from 1 year to 99
years.
TOP
Q. What is compounding
in bonds?
Compounding refers to the interest being
determined on the principal periodically, for eg semi - annually.
This would be carried out twice incase of half-yearly compounding.
As an example, a bond of face value Rs. 100, interest being 10%
compounded semi annually, the interest receivable at the end of six
months would be Rs. 5 and that at the end of one year would be
another Rs. 5. In case of compounding greater than once a year, the
yield to the investor on his investment will always be greater than
the coupon on the bonds (provided that the bond was bought at
par).
TOP
Q. Can a bond be purchased
on cash basis?
Yes, the bond can be purchased by paying
cash at the designated branches of the collecting banks but it is
always advised to pay through cheques or Demand Draft Q. Is the PAN
mandatory for purchasing a bond? The issuer, in the application form
does ask for the PAN No. and it is mandatory if the amount invested
is greater then 50000.
TOP
Q. How/when can I redeem
the bonds?
At the time of the maturity, you can send the
bond certificate signed by all the bondholders back to the issuer or
registrar. The authority sends a DD or a cheque payable at par in
the name of bond Holder(s).
TOP
Q. Can I take money before
maturity?
Yes, now the issuers have started the facility
in which the investor can redeem his bond whenever he needs money.
Another alternative in the case of listed bonds, is to sell the
bonds in the secondary market, that is, the stock exchanges.
TOP
Q. Can I have a bond in a joint name?
Yes, you
can have joint holders while subscribing to the bond but for all the
communication and redemption, the signatures of all the bondholders
are required.
TOP
Q. What is either or survivor?
In this facility
any one of the accountholder (if it is in a joint name) can stake a
claim to the money deposited and operate the account without the
signature of the other account holders. Otherwise also it does not
present a problem if one of the bondholder has expired without any
nomination.
TOP
Q. What is joint or
survivor?
In this both bondholders have to be present at
the time of withdrawal of deposits and their signatures have to be
present on the Bond and on the death of an bondholder it becomes
very cumbersome process to withdraw the money as you are supposed to
furnish the death certificate of the expired account holder.
TOP
Q. What is the mode of
getting payment after a bond is redeemed?
Bondholders get
the redemption amount in the form of a Demand Draft or cheque
payable at par in the name of the bondholder(s)
TOP
Q. What is ‘nomination’?
Nomination is a facility in which the bondholder nominate
a person who will get the proceeds of his bond if he dies.
TOP
Q. Can a company reject my application
for a bond?
Yes, the issuers has all the right to reject
any application for subscription of the bond
TOP
Q. Whom should I contact in the
event of change of my address etc.?
You just have to
write an application informing of any change signed by all the bond
holders and send it to the authority designated by the issuer which
is generally written n the bond certificate.
TOP
Q. Do I get the tax
rebates/benefits or deductions?
The Infrastructure bonds
are eligible for tax rebate u/s88 of the income Tax Act. They are
eligible for rebate of 20 percent on the invested amount subject to
the max tax rebate of 16000. Besides in other types of bonds
investor get the Tax deductions on the interest earned u/s
80L
TOP
Q. When do corporate
deduct TDS on income from Bonds?
Yes the issuers deduct
TDS on the income from Bonds if the cumulative interest is greater
than 2500 in a financial year.
TOP
Q. Do companies club
interest on different Bond in calculating interest for TDS purposes?
Yes, it is mandatory for the issuer to club the interest
income for the TDS purposes.
TOP
Q. Is there a ceiling on
the number of Bonds I can purchase in a company?
Yes, for
the retail investor, the companies like ICICI etc fix the ceiling
that a person can not invest more than 1 crore but in private
placement to the institutions there is no limit.
TOP
Q. What if my Bond
Certificate is lost, stolen or destroyed?
You should
immediately inform the issuer and send the application signed by the
Bondholders alongwith the indemnity Bond, FIR for the issue of
Duplicate certificate.
TOP
Q. Can a Bond be bought in the name of minors?
Yes the Principal can invest the money on behalf of the
minors
TOP
Q. What is the start date
of interest calculations?
The deemed date of allotment or
the allotment date, which is the date from which the instrument
comes into existence, is the start date for interest calculation.
TOP
Q. What if the day of any
payment of interest or maturity amount is Sunday/ Bank
Holiday/Company holiday?
The payment in that case will be
made on the next day.
TOP
Q. In which court’s
jurisdiction will the disputes go, if they arise?
It is
given in the Bond form. It is usually in the region’s court where
the company is registered.
TOP
Q.Who can
invest in the RBI Relief Bonds?
- An individual
- in his or her name or on behalf of a
minor, or
- jointly with one or more individuals
- a Hindu Undivided Family
- a Non-Resident Indian (without the
right of repatriation of principal)
- Government Promissory Notes can also
be issued on anyone or survivor basis
- Bonds can be held by a minor with one
or more major individual/s (including a minor)
TOP
Q.What is the minimum and
maximum investment limits for these Bonds?
There is no maximum limit for investment in the bonds.
Application must be in multiples of Rs.1000/- subject to a minimum
of Rs.1000/-.
TOP
Q.What is the issue price
of the Bonds?
The bonds
will be issued at par. The bonds will be issued for a minimum amount
of Rs.1,000/- (face value) and in multiples thereof. Accordingly,
the issue price will be Rs. 1,000/- for every 1 bond.
TOP
Q.What will be the Date of
issue of these Bonds?
The
date of issue of the bonds in the form of Promissory Note/Bond
Ledger Account will be the date of receipt of subscription in cash
or the date of tender of draft or the date of realisation of the
cheque as the case may be.
TOP
Q.What will be the Period of Holding for
these Bonds?
The period of holding of bonds is five years
from the date of issue. The bonds shall be repayable on the
expiration of 5 years from the date of their issue.
TOP
Q.Is the premature encashment
of these Bonds allowed?
Premature encashment of the Bonds
is not allowed. The Bonds will earn interest upto the date of
redemption, if not redeemed on due date.Proceeds can be reinvested.
The matured bonds in the form of Promissory Note/existing Stock
Certificate will be tendered for reinvestment at Public Debt Offices
of Reserve Bank of India only.
TOP
Q.What are the salient features of these Bonds?
- The bonds will be issued and held at
the credit of the holder in an account called bond ledger account
or in the form of promissory note
- The bonds in the form of bond ledger
account, will be issued and held with the public debt offices of
the Reserve Bank of India or any branch of a scheduled bank
authorized by Reserve Bank of India
- The bonds in the form of promissory
note will be issued only at the offices of Reserve Bank of India
- Where the bonds in the form of
promissory note cannot be issued immediately on receipt of the
subscription due to non-availability of the bond forms, or
otherwise the receiving office will issue a provisional receipt in
favour of the subscriber for the value of the subscription
tendered by him
- The bonds issued in one form will not
be eligible for conversion into the other form
- The bonds issued under 9% Relief Bonds
1993, 10% Relief Bonds 1995 and the existing 9% Relief Bonds 1999
which are not matured will be eligible for conversion into the
bonds in the form of bond ledger account under this scheme for the
remaining tenure of the relative bonds.
TOP
Q.What are the options
available regarding the Interest Payment?:
- Option-A - Interest payable
half-yearly
Promissory Notes
Under this option an
investor will get interest at the rate of 9% per annum payable at
half yearly intervals from the date of issue of bond in terms of
sub-paragraph (I) of paragraph (5) above. The interest will be
paid from the date of issue of bonds upto 30th June/31st December
as the case may be and thereafter half yearly on 30th June and
31st December by means of post dated interest warrants sent to the
investor in advance alongwith the Promissory Note. The interest
warrants would be valid for three months from the date of issue.
Bond Ledger
Account
In case of Bond Ledger Account, by credit to the
Bank account of the holder or by interest warrants or cheques.
- Option-B - Cumulative interest
payable on maturity
Under this option interest at the rate
of 9% per annum would be compounded with half yearly rests and
will be payable to the investor on maturity alongwith the
principal. Under this option the maturity value of the bonds shall
be Rs.1,553/- (Being principal and cumulative interest) for every
Rs.1000/- (nominal) provided that further interest at the rate of
9% per annum shall be payable to such of the investors who do not
encash their bonds on the expiry of 5 years from the date of their
issue, at half yearly intervals or compounded with half yearly
rests, as the case may be. Such interest would be payable from the
date of maturity till the time the bonds are redeemed.
TOP
Q.What are the Tax
concession available to the Bond holders?
- Income Tax : Interest on the bonds
will be exempt from income tax under the Income Tax Act, 1961.
- Wealth Tax : The bonds will be exempt
from Wealth Tax under the Wealth Tax Act.
TOP
Q.Is the PAN Number required
for applying to these Bonds?
PAN
number is required for an application of Rs.10 Lacs & above for
payment vide cheques and drafts and for cash Rs.50000/- & above
TOP
Q.Will there be any TDS
on the interest of these Bonds?
There is No deduction of
any tax at source.
TOP
Q.How can I transfer
these Bonds?
- The bonds in the form of Bond Ledger
Account will be transferable by execution of a transfer deed in
the prescribed form. However, transfer shall not be deemed as
complete until the name of transferee is registered as holder of
the Bond in the Office of Issue. A new Bond Ledger Account will be
opened in the name of the transferee for the remaining period by
closing the BL Account of the transferer.
- The Bond in the form of Promissory
Note will be transferable by endorsement and delivery.
TOP
Q.Can I Pledge these Bonds
as the Collateral?
The Bonds can
be pledged with the Banks for the purpose of obtaining advances
against the security of such bonds.
TOP
Q.Are NRI's eligible to invest in the
Bonds?
NRI's are eligible to invest in the scheme (subject
to the Exchange Control Regulations).
TOP
Q.Is there any Nomination
facility?
- A sole holder or a sole surviving
holder of a Bond, being an individual may nominate in part of this
application form one or more persons who shall be entitled to the
Bond and the payment thereon, in the event of his death.
- Where any amount is payable to two or
more nominees and either or any of them dies before such payment
becomes due, the title to the Bond shall vest in the surviving
nominee or nominees and the amount being due thereon shall be paid
accordingly. In the event of the nominee or nominees predeceasing
the holder, the holder may make a fresh nomination.
- No nomination shall be made in respect
of the Bonds issued in the name of a minor.
- A nomination made by a holder of a
Bond may be varied by a fresh nomination in Part B or as near
thereto as may be, or may be cancelled by giving notice in writing
to the Public Debt Office of the Reserve Bank of India in Form C
annexed to the application form.
- Every nomination and every
cancellation or variation shall be registered at the Public Debit
Office of the Reserve Bank of India where the bond is issued and
shall be effective from the date of such registration.
- If the nominee is a minor, the holder
of the Bond may appoint any person to receive the Bond/amount due
in the event of his death during the minority of the nominee.
- The provisions contained in this
paragraph shall apply only to the Bond issued in the form of Bond
Ledger Account held by an individual.
- Nomination facility is not available
for bonds held jointly or in the name of HUF or minor or in
respect of bonds held in the form of Government Promissory Notes.
TOP
Q.Where can I get the Forms for
RBI Relief Bonds?
The forms are
available with the offices of Reserve Bank of India, designated
branches of State Bank of India and its subsidiaries and designated
branches of Nationalised Banks.
TOP
Q.Can a guardian make an application on behalf of a
minor?
- In the case of a minor applicant the
date of birth, guardian's name and relationship should be
indicated at appropriate place in the application form.
- In the case of a minor applicant, a
Guardianship Certificate granted by a Competent Court under the
provisions of the Guardians and Wards Act (Act 8 of 1890) should
be produced. However, the father of a Mohammedan minor and the
father, or if the father be dead, the mother of a Hindu minor can
sign the application and deal with the bonds on behalf of the
minor without obtaining the certificate of guardianship.
- A Birth Certificate issued by the
Municipal or other competent local authority, Church, Registrar of
births/marriages or a Magistrate, the Head of a Gram Panchayat or
the Head Master of a school disclosing the name of the minor and
the date of birth should be produced in original and a xerox copy
thereof alongwith the application made on behalf of the minor.
- Evidence showing that the ward is
alive at the time must be produced in all cases of negotiation. A
formal declaration by the guardian supported by the signature of
two respectable witnesses and authenticated by Deputy General
Manager/Accounts Asstt. General Manager, Public Debt Office, a
Treasury Officer, a Magistrate, a Notary Public or a Bank Official
(the Bank Official verifying the declaration should be one whose
authority to bind the bank he represents has been registered at
the Public Debt Office) will ordinarily suffice.
The
declaration should be stamped in accordance with the provisions of
the Stamp Act applicable in that State. If the declaration is to
be produced in the State other than that where it is executed,
difference in stamp duty will have to be paid. If the declaration
is made in the presence of any attested by a Magistrate or any
other person empowered to administer oath or affirmation, it will
attract stamp duty as an affidavit.
TOP
Q.What are the provision in
case the applicant is a HUF?
If
the application is made in the name of HUF, the Karta of HUF has to
submit a declaration in the appropriate place in the application
form.
TOP
Q.What are the provision in case of application by
NRI''s ?
In case of an NRI
investor, a letter of undertaking (duly signed by the investor) is
required to be filled in at the appropriate place in the application
form.
Q.
What is a fixed deposit?
Fixed deposit is an account
maintained with a corporate, NBFC (Non Banking Finance Company) or
any other entity wherein the money is given at a particular rate of
interest for a particular period of time.
TOP
Q. On what factors does the interest
rates on the FD depend?
The interest rate on FDs varies
from company to company depending upon the tenure of the FD, amount
of principal etc.
TOP
Q. What is the tenure of
FD?
The time period for which the FD is made is called the
tenure.
TOP
Q. What are the
various tenures available?
The tenures generally vary from
1 year to 5 year but banks take Fixed Deposits for shorter duration
also.
TOP
Q. When is the interest
added?
The interest is usually added every quarter but it
depends upon the company whether it gives quarterly half yearly or
yearly interest.
TOP
Q. What is compounding in
FDs?
The interest rate is given at the per annum basis but
the interest is credited in your account every quarter so you get
‘interest on interest’ in the next quarter. This is the compounding
effect that makes the return on the fixed deposit more than the
interest rates.
TOP
Q. What are
the documents required?
The documents required are the
proof of residence, PAN No. and you have to fill the Company's or
NBFC's form to make an FD. If you are not assessed to tax then you
will have to fill Form No.60 as per the regulations.
TOP
Q. Can you pay cash for
making a FD?
You can pay cash but not more than 20000. It
is always advised to pay through cheque or a demand draft.
TOP
Q. Is the PAN mandatory for making
an FD account?
Yes, the corporates now ask for the PAN in
their Fixed Deposit form. If the person does not have PAN No. and he
is not assessed to tax then he has to fill Form No.60 according to
the guidelines.
TOP
Q. Can I open different
FDs account in the same entity?
Yes, you can open several
accounts with the same but they will club your interest
income.
TOP
Q. How can I redeem
my deposits?
The deposit receipt duly discharged with a
revenue stamp should be surrendered to the company on maturity for
the repayment of the principal amount at least a month before the
maturity to enable the company to renew or refund the deposits as
the case may be.
TOP
Q. Can I take money
before maturity?
Yes, you can take money before maturity
of FD but there is a lock-in period of 3-6 months and the corporate
charge a penal interest of 1-2 percent from the interest rate of the
tenor in which it is redeemed (according to the RBI Guidelines).
TOP
Q. What is the minimum amount
required to have an FD in a company?
It varies from
company to company. Most companies ask for amount above 5000 in the
multiples of 1000.
TOP
Q. Can I have a FD in a
joint account?
Yes, you can have the FD in the joint
account mode.
TOP
Q. What is either or
survivor?
In this facility any one of the accountholder
(if it is in a joint name) can stake a claim to the money deposited
and operate the account without the signature of the other account
holders. Otherwise also it does not present a problem if one of the
accountholder has expired without any nomination .
TOP
Q. What is joint or
survivor?
In this both accountholders have to be present
at the time of withdrawal of deposits and their signatures have to
be present on the cheque and on the death of an account holdder it
becomes very cumbersome process to withdraw the money as you are
supposed to furnish the death certificate of the expired account
holder.
TOP
Q. What is rollover?
If
the FD matures and the person does not take the money then he can
renew deposit for the same or different tenure depending on the
interest rates.
TOP
Q. What is the mode
of getting payment after redeeming of FD?
The payment
after maturity of the FD is paid in the form of demand
draft.
TOP
Q. What is
nomination?
In the nomination a person can fill the form
directing the company to pay to the particular person in case he
dies.
TOP
Q. Is FD transferable?
No,
the FD is not transferable.
TOP
Q. Can a company
reject my application?
Yes, the company reserves the right
to reject any application.
TOP
Q. What if I change my
address etc.?
You just have to write an application
informing of any change signed by all the account holders.
TOP
Q. Do I get the tax rebates or
deductions?
Yes, the interest is eligible for tax
deductions upto a maximum amount of 12000 in a financial year. In
the latest budget provisions, this limit has been made Rs. 9000
instead of Rs. 12000.
TOP
Q. When do corporates
deduct TDS in FDs?
If the interest on the FD is more than
2500 then the company deduct TDS while making the
payments.
TOP
Q. Do companies club interest on
different FD in calculation of interest for TDS
purposes?
Yes, it is mandatory for the companies to club
the interest income on all the accounts of the account holder and
deduct TDS if interest is more than 2500 . Income tax is deducted at
source in accordance with the Section 194-A of the Income Tax Act
except where appropriate certificates/Forms ie. Form 15H is
submitted to the company at least one month before the due date of
interest.
TOP
Q. Is there a ceiling on the number
of FDs I can make or the number of companies where I can have the
FDs accounts?
NO, there is no limit as to the number of
FDs. You can be a customer of as many companies as you
like.
TOP
Q. What if I lose my FD
receipt?
You should immediately inform the company that
will issue you a duplicate receipt after getting an indemnity bond
from you.
TOP
Q. What if we change the order or
inclusion or exclusion of any person from joint
account?
It will be treated as pre mature withdrawal and a
new FD will be made.
TOP
Q. What are the company’s
rights?
The company reserves the right :
1. To alter or
amend withppout notice any or all the conditions stipulated to the
permissible extent.
2. To accept the deposits only for such
periods as it may decide from time to time
3. To reject any
application for a fresh deposit or renewal without assigning any
reason
4. To repay the deposit prematurely before the due
date.
TOP
Q. Can the FD be made in the minors
name?
Yes, the guardian on behalf of the minor can sign on
the form.
TOP
Q Is nomination facility available
in companies FDs?
Yes, you can ask for the nomination form
and nominate any person to be the beneficiary in case something
happens to you.
TOP
Q. What is the start date of
interest calculations?
Some companies start interest
calculation the day Fixed deposit application is lodged with the
companies or broker’s office but some companies take the date of
cheque realization as the start date.
TOP
Q.
What if the day of any payment of interest or maturity amount is
Sunday/ Bank Holiday/Company holiday?
The payment in that
case will be made on the next day.
TOP
Q. In which courts jurisdiction will
the disputes go, if they arise?
It is given in the fixed
deposit form. It is usually in the region’s court where the company
is registered.
TOP
Q. What is a fixed deposit?
A fixed deposit is
an account maintained with a bank wherein the money is given at a
particular rate of interest for a particular period of
time.
TOP
Q. How is a fixed
deposit in a bank different from savings account?
In the
fixed deposit account, you get a higher rate of interest than
savings bank account. At present, the interest rate in savings
account is 4.5 percent whereas in fixed deposits, it ranges from 6.5
percent per annum for a 15-days deposit to 11 percent per annum for
a 5-year deposit.
The period of a fixed deposit is fixed at the
time of making a fixed deposit (although you can renew the deposit,
or premature withdrawal can be undertaken with or without attracting
prepayment penalty), while in savings bank account, the entire
amount can be withdrawn at any time by the depositor by closing the
account or after leaving the minimum balance in the account for
keeping the account active.
You do not get the cheque book
facility in a fixed deposit account. But now banks have started
various schemes in which they give the cheque facility both for
savings and fixed deposits account.
Further, in the case of fixed
deposits, there is no restriction on the type of depositors, whereas
only individuals and HUFs can open a saving account as it is
essentially to create a habit of thrift in people
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Q. What factors does
the interest rate on FDs depend on?
The interest rate on
FDs varies from bank to bank, depending upon the tenure of the FD,
amount of principal etc.
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Q. What is the tenure
of FD?
The time period for which the FD is made is called
the tenure.
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Q. What are the
various tenures available?
Tenures vary from 15 days to
more than 5 years. Mostly, the tenures are:
* 15-30 days
*
30-45 days
* 45-90 days
* 90-180 days
*181-365 days
*
1-3 years
* 3-5 years
* More than 5 years
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Q. When is the
interest added?
The interest is usually added every
quarter, but it depends upon the bank whether it gives quarterly,
half-yearly, or yearly, interest.
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Q. What is compounding
in FDs?
The interest rate is given at the per-annum basis,
but the interest is credited in your account every quarter, so you
get ‘interest on interest’ in the next quarter. This is the
compounding effect that makes the return on fixed deposits more than
the prevailing interest rates.
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Q. What are the
documents required when opening an FD account?
The
documents required to open FD accounts in a bank are:
-Proof of
identity
-Introduction from an existing account-holder
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Q. Can you pay cash
for making a FD in a bank?
Yes, you can give cash, but now
banks do not take more than Rs 50,000 in cash while opening the FD
account.
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Q. Is a PAN mandatory
for opening an FD account?
Yes, banks now ask for the PAN
if the amount is more than Rs 50,000. If the investor is not able to
give the PAN, he is asked to fill up Form No. 60.
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Q. Can I open
different FDs account in the same bank?
Yes, you can open
several accounts with the same bank, but banks club the interest
income for tax deduction purposes.
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Q. How can I redeem
my deposits?
You have to deposit the FD receipt in the
bank, requesting the redemption, with the signature of all the
applicants. The banks, after taking the receipt and verification,
give the demand draft in the name of account-holder(s).
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Q. Can I take money
before maturity?
Yes, you can take money before maturity
of the FD but banks charge a penal interest of 1-2 percent from the
interest rate of the tenure in which it is redeemed.
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Q. Can I take a loan
on my FD?
Yes, the bank grants loans on the FD and levies
interest at the rate of 1-2 percent higher than the rate of interest
on the FD.
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Q. What is the
minimum amount required to have an FD in a bank?
It varies
from bank to bank. Most private banks ask for Rs 10,000 as the
minimum amount but most of foreign banks do not take deposits for
less than Rs 50,000.
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Q. Can I have an FD
in a joint account?
Yes, you can have an FD in the joint
account mode.
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Q. What is either or
survivor?
In this facility, any one of the account-holders
(if it is in a joint name) can stake a claim on the money deposited
and operate the account without the signature of the other
account-holders. Otherwise also, it does not present a problem if
the other account-holder has expired without having nominated
anyone; in this case, the survivor can operate the account.
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Q. What is joint or
survivor?
In this, both account-holders have to be present
at the time of withdrawal of deposits and their signatures have to
be present on the cheque; on the death of an account-holder, it
becomes very cumbersome to withdraw the money as you are supposed to
furnish the death certificate of the expired
account-holder.
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Q. What is
rollover?
If the FD matures and the person does not take
the money, then he can renew the deposit for the same or different
tenure, depending on the interest rates.
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Q. What if I forget
to rollover or redeem?
If the FD matures and the person is
not able to redeem and take the money, then the bank automatically
renews the deposit for the same tenure for which it was applied
earlier.
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Q. Is an introduction
mandatory?
Usually, banks ask for an introduction from an
existing account-holder, but if the person cannot provide an
introduction, then he can furnish a proof of identity to open a FD
account.
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Q. What is the mode
of getting payment after redeeming of FD?
The payment
after maturity of the FD is by a demand draft.
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Q. What is
nomination?
A person can fill the form directing the bank
to pay the amount to any particular person in case of his death;
this is known as nomination.
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Q. Is an FD
transferable?
No, FDs are not transferable.
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Q. Can a bank reject
my application?
Yes, the bank reserves the right to reject
any application.
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Q. What if I change
my address, etc.?
You just have to write an application,
informing the bank of any change, signed by all the
account-holders.
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Q. What are the
facilities offered by the banks?
Various innovative
schemes have been introduced by banks to carve a niche for
themselves, where you have the liquidity of a savings bank account
with the cheque facility alongwith rates of a fixed
deposit.
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Q. Do I get tax
rebates or deductions?
Yes, the interest on FDs upto a
maximum of Rs 12,000, is tax-deductible under section 80-L. In the
latest budget provisions, this limit has been made Rs. 9000 instead
of Rs. 12000.
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Q. When do banks
deduct TDS in FDs?
If the interest on the FD is more than
Rs 10,000, then banks deduct TDS while making the payments. In the
latest budget provisions, this limit has been made Rs. 2500 instead
of Rs. 10000.
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Q. Do banks club
interest on different FDs and on savings account in calculation of
interest for TDS purposes?
Yes, it is mandatory for the
banks to club the interest income on all the accounts of the
account-holder and deduct TDS, if interest is more than Rs 10,000 in
a financial year .In the latest budget provisions, this limit has
been made Rs. 2500 instead of Rs. 10000.
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Q. What if the bank
defaults or shut down?
The DICGC(Deposit Insurance and
Credit Guarantee Corporation) insures deposits upto Rs 1,00,000
only, but now many banks have opted out of it as it has been in
deficit for quite some time.
But the money kept in the banks is
supposed to be one of the safest investments because of the strict
policy guidelines and monitoring by RBI.
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Q. Is there a ceiling
on the number of FDs I can make or the number of banks where I can
have FDs accounts?
No, there is no limit as to the number
of FDs or the number of banks. You can be a customer of as many
banks as you like.
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Q. What if I lose my
FD receipt?
You should immediately inform the bank and it
will issue you a duplicate receipt after getting an indemnity bond
from you.
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Q. Where can I go if
the Bank fails to address my complaints?
In case of any
complaints regarding your deposits, against any bank, you could
write to the following:
The Department of Banking Operations
& Development,
Reserve Bank of India,
The Arcade,
World Trade Center,
Cuffe Parade, Mumbai 400 005.
OR
The All India
Bank Depositor’s Association,
Primal Mansion, 3rd
Floor,
235, Dr.D.N.Road, Mumbai 400 001.
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