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You might think that an investment product as simple as a fixed deposit can not have any further options to explain. The purpose of this blog note is to exactly point out how you can reap maximum benefits from a fixed deposit by playing with its different options.

As you may know, fixed deposit simply means depositing your money for a fixed duration and in return getting interest income as a compensation for parting away for your money for the duration of the deposit. The main components for a fixed deposit are:

1. Principal amount – the amount which you deposit with the bank.

2. Compounding method used by the banks to provide interest payment. This is one of the least known aspect of the fixed deposits.

3. Duration of the fixed deposit

4. Interest rate paid on the deposit

 5. Penalty clause.

 Let us counter each of the above mentioned components one by one and identify how to play with them to maximise your returns.

 

 Principal Amount

You return can not be increased by playing with this component of your FD. Simply, the more you put in an FD, the more is the interest payment. However, if I give you an option of creating a FD for Rs. 50 lacs, can you think in your mind and let me know how would you go ahead and do it in a bank. Perhaps most of the investors would go to the bank and get a single FD of Rs. 50 lac at the prevailing interest rate. However, did you ever think what would happen in case you needed to withdraw 10 lacs from your FD in case of an emergency? The bank would liquidate the entire FD by imposing a penalty rate of interest even though you need just a fraction of the FD to be liquidated. To avoid such a situation, you may open you FDs in small denominations, for example 10 FDs of Rs 5 lacs each. Another alternative can be to open several FDs of different denominations. In our example you could alternatively open FDs of Rs. 1lac, 2 x Rs. 2 lacs, 2 x Rs. 5 lacs, 2 x Rs. 10 lacs and so on. The advantage of opening fixed deposits in such a manner is : when ever you would need emergency funds, lets say Rs. 5 lacs, you can liquidate just the required amount of FD and not the entire FD and hence not loosing upon the interest on premature liquidation of entire FD.

 

Compounding Method of Interest Rates

 This is one of the least known aspect around FDs. Generally banks would advertise only the interest rate which they are offering on their fixed deposits. Interest rates offered on fixed deposits can generally be compounded on a quarterly, half yearly or yearly basis. The type of compounding has a material affect on the FD returns. Before giving an example let me explain what compounding means. If you invest Rs. 1000 for 10 years at 10% interest rate, compounded on a yearly basis, the interest schedule would look like the following: 

Year Opening Interest Balance
1

1,000

100

1,100

2

1,100

110

1,210

3

1,210

121

1,331

4

1,331

133

1,464

5

1,464

146

1,611

6

1,611

161

1,772

7

1,772

177

1,949

8

1,949

195

2,144

9

2,144

214

2,358

10

2,358

236

2,594

       
Total  

1,594

 

In the above example, the interest is paid on a yearly basis and added to the opening balance of the FD for the year. In the next year, interest is paid on the opening balance + Interest paid on previous year. This cycle keeps on happening every year. Hence you get interest paid on interest. This is the principal of compounding. In this example, the total interest paid on a deposit of Rs. 1000 over 10 years is Rs. 1,594 on annual compounding basis. If the same deposit is booked at the same interest rate and same duration, but with half yearly compounding basis, the interest paid would be Rs. 1,653. And for quarterly compounding mode, the interest paid would be Rs. 1,685. Hence you may notice that if you have two different banks providing the same interest rates but with different compounding method of interest payment, could result in different interest payouts.

  

Duration of FD

 Following upon from our earlier example, the larger duration a FD is booked for, the more are the yields. In the above table, if we add interest yields, you may notice a sizeable difference in interest yields, This is based upon the concept of power of compounding. The longer the duration is, the more interest is paid on the interest of earlier years. Thus over 10 year period, a 10% FD compounded annually would be 16%. 

Year

Opening

Interest

Balance

Total Interest

Return

1

1,000

100

1,100

100

10%

2

1,100

110

1,210

210

11%

3

1,210

121

1,331

331

11%

4

1,331

133

1,464

464

12%

5

1,464

146

1,611

611

12%

6

1,611

161

1,772

772

13%

7

1,772

177

1,949

949

14%

8

1,949

195

2,144

1,144

14%

9

2,144

214

2,358

1,358

15%

10

2,358

236

2,594

1,594

16%

           
Total  

1,594

     

Banks generally don’t prefer accepting deposits for long durations and hence it is a common observations that they provide lesser interest rate for durations greater than 3-5 years. The maximum interest rate is generally provided between 1-3 year period. Hence it makes maximum sense that in times where the interest rates on their peak, a 10 year fixed deposit may be opened with a bank, irrespective of the fact that the same bank would be offering a much higher rate for 3-5 years fixed deposit duration. The rationale behind this is that you would be able block your funds at an excellent interest rate for a longer duration. If you open a deposit for a smaller duration, once the fixed deposit is matured, you would have no option than to go with an interest rate prevailing on maturity and probably the interest rate on maturity would be lower than what you would have opened your initial fixed deposit for.

 

Loan against FDs

 At times you may require some emergency funds and it is quite probable that you may want to liquidate your Fixed deposit to address your urgent demands. Alternatively, you can go ahead and take a loan against your FDs for your short term funding requirements. Generally the same bank would provide you a short term loan at around 2-3% rate higher than the rate of FD. Once your requirement is met, you can pay back the loan. This would prevent you to unlock your FD and loose upon the compounding interest rate or an excellent interest rate which you may have locked a couple of years back. And the cost is generally 2-3% only for you to get this flexibility.

 

Penalty Clause

 Though the term fixed deposit means a deposit for a fixed duration, you can prematurely terminate a deposit by paying a early termination charge. This penalty charge is based upon the duration the FD has been in place and the prevalent rate for that duration on the date of termination. After that the bank deducts a % penalty charge to arrive at the final amount. For example, if you placed a fixed deposit for Rs. 1000 with a bank for 5 years at a rate of 9% p.a on 1 January 2011. You go to the bank on 30 June 2011 (after 6 months) to liquidate the FD. The bank would identify what would be the interest rate for the fixed deposit if it was booked for a 6 months duration on 30 June 2011. Lets say that the rate of interest for 6 months on 30 June 2011 is 5.5%. The bank would then deduce a small % charge which is generally 1% from 5.5% and provide you interest at 4.5% on your FD for 6 months.

 

If you need any clarifications, please feel free to contact Banyan Financial Advisors via their website www.banyanfa.com or email on info@banyanfa.com.

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85 Responses to Fixed Deposits – How to Benefit the Most Out of them.

  1. Ayush Singh says:

    This is really beneficial….a good insight.

  2. Banyan Financial Advisors says:

    Thanks Ayush.

  3. A.Sundaram says:

    Thanks for this article and the clarification to my query in “jagoinvestor” reg. LVB F.D.

  4. amol says:

    I have one question

    are you sure that if one break my FD on 30 June 2011(as you shown in your example) then the interest rate will be considered for 30 June 2011 less 1% INSTEAD OF 1 January 2011 less 1% ?

    because even if someone breaks FD after 6 months he had locked the rates 6 months back when it was 9%.

    1% or whatever penalty charges are fine and it is assumed…

  5. Banyan Financial Advisors says:

    Hi Amol,
    The penalty rates are fixed by individual banks differently as per their policies. It is important to check with your bank to identify how they would treat premature redemptions. What I have given is an illustration of a general practise prevailing in the banking sector. There would be no lockin of rates when you break your FDs – for a fair reason that the customer is breaking his / her committment to make his deposit fixed for a tenure.

    I would advise you to check with your bank for specific policies.

    Regards
    BFA

  6. Prabal says:

    I wish to invest some of my amount in NRE FD. But when I see the Interest Rate & Annualised Yield/Rate I got confused. Please advice.

    Bank 1 – 8.75% (Interest Rate) & 10.38% (Annualised Yield/Rate) – For 5 Years

    Bank 2 – 9.25% (Interest Rate) & 9.58% (Annualised Yield/Rate) – For 5 Years

    Please advise me which bank will best & why?

  7. Prabal,
    The detail behind your confusion lies in the compounding of interest rates offered by the banks. In the absence of any standard in India, banks offer different types of interest rate compounding options. As a thumb rule, if two banks are offering same interest rates for same duration FD, the bank offering a more frequent compounding option would give you better return. For example, a quarterly compounding option shall give a better yield than a yearly compounding option.

    In my experience, SBI NRE FDs is one of the best options. Its FD rates are competitive as well as offer quarterly compounding.

  8. Prabal says:

    Dear Sir,
    Thanks a lot for your prompt response & valuable advice.

    In my previous mail Bank1 was SBI and Bank2 was ICICI Bank.

    From your reply it’s very clear that, we have checked the compounding method for interest before taking the FD and Annualized Yield/Rate depends on this.

    Can you please also advise me the duration of the FD, which will give more returns?

    Except SBI is there any other reliable bank which offering good returns?

  9. Hi Prabal,
    I am not sure if you have gone through our article http://insight.banyanfa.com/?p=123 which deals in all aspects with NRE FDs.

    Further, I think in the current scenario, it makes perfect sense to go for a 10 year duration FDs. It would allow you to lock in interest rates for long duration.

    The market leaders for NRE FDs are SBI, ICICI & Kotak. To make it hassle free for you, you may want to look into the bank with which you are currently having your NRE account.

    It may be possible that FD rates may be reduced in next couple of days / fortnight. Hence if you are considering NRE FDs, better get them done at the earliest. You may also consider diverting the interest payouts of NRE FDs into SIPs of mutual funds.

  10. manish says:

    dear sir nice article i just curious to know that how did u calculate the yields in excel sheet is it by putting the rate forula or anyother formula would have been used?

  11. Manish,
    The yields in the table above are based upon ‘Compound Interest’ formula. The general formula for Compound interest is
    Principal (1+interest rate)^n
    where n is number of years.

  12. Neha says:

    Sir,

    I have made a fixed deposit in finance company of 250000 lakh on 6.6.2012 for a period of 365 days at the rate of 14%.The problem is the company is in very bad condition and can run away at anytime.when we deposited money we didn’t know about that matter so we went there to break FD. But they are saying we have to wait for the fixed duration so could you please tell me what can be done regarding this matter.

  13. Neha,
    I really understand the unfortunate situation you are in. Generally the rate of interest on a FD is a good reflection of the underlying risk of the FD – 14% should have given you heads up of the underlying credibility of the Company. Even still, you should not have invested a big portion into one single company and should have diversified the credit risk across different company FDs.
    Well that is past – in future please be careful.
    With regards to the current matter – if your FD is secured (please check with your terms), you may be better off. Else, you have no option but to wait. Hopefully they may not run away / become bankrupt. If they do, a retail investor may not have much negotiable power (in practise). You may also want to explore the regulator of the Financial Company – hopefully it is RBI. Try contacting them for your rights.

  14. capt naresh kumar says:

    excellent article

  15. capt naresh kumar says:

    Some banks that I have account with such as Kotak and YES bank donot charge penality on pre withdrawl of FD.

  16. Can be true sir. Some banks may not charge penalty notice. I think that may be the way forward. The article was giving a general indication of the prevailing practise. However, your comment may benefit the readers to go for Kotak / Yes bank since these banks are not charging penalty.

  17. Murali says:

    Hi Sir,

    I want to take a loan against FD. May i know wht is the percentage of maximum amount that i can claim as loan amount. Also can you please brief me Loan against FD.

    Eg: I have made a FD of 5 lacks, so how much laon amount can i claim in a bank?

    Thanks,
    Murali

  18. Murali
    Generally the banks provide loan between 80-90% of the value. At times even upto 100%. It varies from bank to bank. The interest rate offered is around 2-3% more than what is offered on the pledged FD. Again this varies from one bank to another. I would suggest you to get this confirmed with your respective bank.

  19. John says:

    Hi ,

    Thank you for your informative article .Truly informative .Loved reading it.
    Cheers,
    john

  20. Thanks John. I am glad you liked it.

  21. vimal says:

    excelllent article ..

    can u please update the rates for 2013 ….. for 10 years for sbi kotak and icici bank
    i saw an article saying sbi cut the rates .. is it true ??? there site is not giving proper rates :(

  22. All three are offering 8.5% interest rates for 10 year horizon. However, SBI & ICICI would be providing quarterly compounding rates, while Kotak is providing annually compounding rates. Hence the returns on ICICI & SBI would be slightly higher.

  23. Prabal says:

    Check with Union Bank of India. They are offering 8.75% for 8 to 10 years durations and 9.25% for 7 years 7 months (fund will be double in this period). Please check the following link.

    http://www.unionbankofindia.co.in/Rate_Domestic_Rate.htm

  24. rajivahuja says:

    Important points to be considered when booking a F.D

  25. judy says:

    Currently in SBI NRE interest rate on fixed desposit is 8.5% – do you think this interest will raise or fall in next few weeks? If I want to invest 100-200k in NRE fixed deposit- what is your suggestion on how to invest it? do I need to invest 10k per week or all at once?

  26. Judy
    Interest rates are on a downtrend and hence it is likely to see lower interest rates in the next couple of months. You can invest in multiples of 10K and there are no restrictions on weekly investments. Hence if you want to invest in NRE FDs, better do it sooner than later.

  27. judy says:

    Thanks a lot for quick response, what about USD to INR rate, it is currently at 53.75 – do you think rate will go or down in few weeks?

    Also, what kind of services do you provide if I want to use your services?

  28. Judy
    This is a very diff question to answer. However if we look into current India. economic woes, I believe that the rate may touch 55 plus in short term.

    We help our clients in managing their funds and investments. You can contact us at info@banyanfa.com or visit our website http://www.banyanfa.com for more details.

  29. Ramesh says:

    Hi I have NRE fixed deposits in India. Can I pay the income tax in India for the interest earned on my NRE FDs (I know the income is tax free, but I want to pay taxes in India due to lower tax bracket) and claim DTAA from my US taxes, as I have paid income tax in India. Is this legal and correct. Some one in IT dept said this is OK.
    Please advise me.
    Thank you

  30. Ramesh,
    I don’t have extensive understanding of DTAA, but from what I understand you have to pay higher of US or Indian taxes. Hence, it would be better to declare them in US and pay higher taxes there.

  31. Ramesh says:

    Thank u so much for the quick reply

  32. SUSHANT says:

    HI
    Thank you for the guidance.
    I Had a doubt regarding the TAX ON TDS FOR NRE FIXED DEPOSIT
    i had opened a NRE FD IN SBI BANK
    DUE TO EXAMS I M IN INDIA and i m not filing tax returns .
    SO kindly advise ……….

  33. Ashim says:

    Hi,
    I want to make an NRE FD for 4 years. Upon maturity, the cumulative amount would be credited into my NRE account. What happens to the FD if I decide to come back to India and become a resident Indian say after one year? Does my FD status remains NRE or does it automatically gets converted into a normal FD at the same terms? How can I liquidated my FD after four years?
    Thanks,
    Ashim

  34. Ashim,
    You would notice that similar questions have been asked and discussed in this post. If you FD is of 4 year maturity, it would get liquidated automatically.

  35. Sushant,
    No tax is payable in India on NRE FDs as interest on NRE account is Tax free. Hence no TDS will be deductable.

  36. Ashim says:

    Hi,

    Thanks for your reply. But my questions were:
    1. What happens if before the maturity, my status changes to resident Indian from NRI? Since the NRE FD is tax free, will this continue to be tax-free even if my status changes to resident Indian?
    2. Upon maturity, the FD proceeds would automatically be credited into my NRE account. But if I become a resident Indian before maturity, I will have to close my NRE account. In that case, how can I liquidate my FD? Will the bank credit my normal resident / NRO account instead?

    Thank you,
    Ashim

  37. Ashim,
    1. This is a grey area. Income tax act is silent on this. Hence I would assume that it is tax free.
    2. You can avoid closing your NRE account. Just don’t do any further transactions in your NRE account. On maturity the FD will be paid into the NRE account which can then be closed after taking the proceeds.

  38. Ram Gopal says:

    hello sir,
    thanks for a very clear information..
    I have a situation for which ur guidance is required
    My sister is a nri(U.S) and was sending her savings to a normal savings account.Since i had no knowledge about nre fd’s i deposited her savings of rs 10 lakhs in normal fd’s 4yrs ago.Now she has her own nre account and managing her saving through efd’sl.Now she is planning to buy a house in her place for which she wants that 10 lakhs in next 6 months of time.since i have put that 10 lakhs in normal fd’s for 5yrs qtly compounded i don want her to loose tat int.I am a sailor and i have my own nre account as well..I want to put my monthly income to her nre account so that within 6 months i can give her the same amount eg.14 lakhs without disturbing her normal fd’s whichi will take from her after its maturity.Now my question is
    1.can money be deposited directly to her nre SB account by other person(other than the account holder)from different location.
    2.if suppose i have depsoited in her nre account,since my income is exepmted from tax is it required for her to pay tax in her country when she repatriates the money.
    3.or can i directly deposit to her normal US SB account (which is guess will be taxed as per their rules)
    4.can i transfer money from my nre account to her nre account..is it any of use?

    please give ur other suggestions also for this case so that i can escape with minimum loss of money

  39. Ram,
    I am not sure if the current Resident FDs are in your sister’s name or your name. Considering all angles (INDIA tax, US tax and repatriation), I would suggest to do the following :
    1. From your NRE account remit the funds directly to your sister’s US account. Just do some small paper deed that it is some form of a loan you are giving her.
    2. The return of the loan would be the resident FD plus interest. Once the FDs mature, you can transfer the resident funds in your normal NRO account in India.

  40. Apsar says:

    Sir
    I had made a fixed deposit for 12 months in Jan 2012 and it was supposed to be closed in Jan 2013. However, since I was not in town during that period, the bank considered the fixed deposit to continue for another year – so the period ends in Jan 2014 which is fine by me.
    But if I liquidate the amount on the specific date when it ends (say 14th Jan 2014), will the above mentioned penalty charge apply for me? If so, how do I close the FD after the period?

  41. Apsar,
    I don’t think that the bank will apply a penalty charge if you close it on or after the date. Even if you close it after 14 Jan 2014 and the FD gets again renewed, the bank shall not apply any charge of the maturity value as of 14 Jan 2014.

  42. nanmith says:

    The SBH is offering double FD scheme where your FD investment gets double in 7 y and 7 m. do you think its a good scheme to invest ?

  43. UrgentHelpNREFD says:

    Scenario: I have NRE FD locked in for a year. A family friend wants some financial help. So, I ask him to take a loan on my NRE FD.

    Question: How will the loan gets re-paid. Can nm friend pay the EMI directly in Indian Rupees? I am not sure what options are there for repayment.

  44. peter says:

    hi
    i am interested in a 10 fixed nri account with recurring deposit.
    that way i can pound cost average if the rupee devalues . any thoughts …

  45. Hi Neelrav
    You can not get your friend to take a loan on your NRE FDs. The bank will create an overdraft account in your name which you can use to loan money to your friend. However it would be your responsibility to make the payment to the bank else your NRE FD may be forfeited by the bank.

  46. Peter
    Sounds like a plan.Can I ask in how many months do you intend to purchase entire 10 FDs ?

  47. aseem says:

    As per para 13B.12 of the Exchange Control Manual, NRE accounts should be redesignated as resident rupee accounts or as RFC accounts (if eligible), at the option of the account holder immediately upon the return of the account holder to India. In respect of funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account

  48. Jayakumar says:

    Hi, I have an NRE account and FDs as well. Can you tell me whether my interest earning from my FDs taxable when I change my status to resident indian on a later year? Also, wish to know whether any restrictions to invest in stocks / SIPs with my trading account when I was resident?

  49. Hi Jayakumar,
    Correct, interest on NRE FDs will be taxable if you become a resident.

    I am not sure if I understand what types of restrictions you are referring related to your trading account as a resident.

  50. maria says:

    i have nre account,if i plan to settle in india,can i still keep my nre account,do i have to pay tax

  51. maria says:

    i am from goa,i have portuguese passport,i am aloud to have NRE account or not

  52. Sudhir says:

    Hi, I want to start a new NRE fd of 20 lac for the period of 1200 days.could you please tell me any tax deduction is there when the amount gets mature.like nro fd.

  53. Maria,
    As long as you can prove that you are a person of indian origin, you can have a NRE account. If you plan to settle in India, you will have to close your NRE account. Interest on NRE account becomes taxable once you settle in India.

  54. Sudhir,
    NRE FDs are tax free and there is no tax deduction on maturity like NRO FDs.

  55. maria says:

    sir,i am india from goa and have portuguese passort and my husband is indian,and we are planning to settle in india,so my question is whether i can still keep my nre account or i should close it.thank for adive.sir before you said nre interest will be tax able,how much text they charge for nre interest

  56. T. Jacob says:

    I am an NRI, from November 2013 onwards, every month I am investing Rs.1.25 lacks in the Fixed deposit in SBI Bank for 1 year duration + every year renewable. I have planned to continue till October 2014. So from November 2014 onwards I will be getting every month interest from the SBI Bank. Can you let me know the interest which I am going to get every month from SBI is taxable?

  57. Maria,
    Once you return back to India and become an Indian resident (irrespective of your passport), you would have to close your NRE FDs and convert it into a resident account.

    The bank won’t deduct tax on NRE FDs. You will have to disclose it in your return of Income once you become a resident in India. The tax will be based upon the your tax slab in India. (upto Rs. 2lacs – no tax; 2-5 lacs – 10%; 5-10 lacs – 20% and beyond 10 lacs – 30%)

  58. Hi T. Jacob,
    Before I can answer your query, I need to know if your FD is under NRE, NRO or Reside FD status. If it is under NRE, it will be tax free in India. However, you must consider the tax liability under your respective foreign country.

  59. Anchal says:

    Is there any benefit of taking loan on FDs or its just like we are using our own money & paying interest too.

  60. Anchal,
    There is definitely an advantage of taking an OD loan against FD. This gives you the temporary liquidity without breaking your FDs which would have locked in good interest rate returns for long term. Generally we need short term financing (e.g. for less than a year) and we may end up breaking our FDs which may mature in 5-10 years down the future. Once you would have gone through this financial crunch and have surplus cash to invest you may not get attractive interest rates. At this moment the OD facility comes handy.

  61. Sharath says:

    I am an Australian Citizen now ,planning to invest in NRE FD .I am thinking about staying 6 months in india and 6 months in australia ,,So I am just wondering I am still considered as NRI ,or do i have to pay tax for my FD ?

  62. Sharath,
    Determining your tax residency status can be really complicated and would need to be looked into in detail. Please approach us via email at info@banyanfa.com

  63. Krishanunni says:

    Dear Team,

    I reside currently at Dubai. I intend to deposit an amount of 4,000,000 INR for a period of 10 years. Initially, I don’t want take the monthly payouts, which might get compounded annually or quarterly, which may depend on the respective bank’s policies. But, I need to know, whether it is possible to start taking a monthly payouts, maybe after a period of 4 years. Please advice me as to what would be the losses, in %, in the act of conversion of mode of payouts?

  64. Hi Krishnanunni
    You can not change your payout mode once you have opened a FD. If you need to change your payout mode, your existing FD will need to be terminated and a new FD at the prevailing rates shall be opened. It may be possible that the new rates may be lower than the current rates. You also have an option of opting for a .month payout now and booking a recurring deposit of the same amount for say 5 year. Alternatively you can invest the monthly payouts into mutual funds via SIPs. By this way you can continue to make your money work harder for you rather than staying idle in your bank account.

  65. Krishanunni says:

    It was indeed heartening to have seen your reply. Would you mind giving more insights into SIPs, with respect to the assured rates of return as well as the security, as far as the investments are concerned?. How much does it insure itself from the market fluctuations and shed some light on the leverage it has over conventional RDs?

  66. Krishnanunni
    We have a full article on SIPs and Mutual Funds. You may search it on our website. The risk on the investment depends upon the type of fund you are investing in. If you invest into Equity funds, their value will fluctuate daily but will give you the opportunity of getting best returns.

    RDs will not give you more than 10% returns but will give you a comfort that the returns won’t fluctuate. SIPs into Equity funds would give returns much more than RDs over a long term, but their values will fluctuate daily.

  67. Thamizhselvan says:

    Dear Sir,

    Currently i am reside in Dubai I have NRI Account in IOB .Next month my LIC Policy going to complete this policy taken when i was in india , is it possible to transfer my LIC matured amount to my NRI account.

    Regards
    E.Thamizhselvan

  68. Hello Mr Thamizhselvan
    LIC would readily transfer the funds to NRO account. I do not think that they will credit the funds to NRE. Please check with LIC guys.

  69. Vijay says:

    Hi,
    I have FD of 5 lacs,I’m planning take a 2 lacs loan against FD for 1 year.
    How the income tax will be calculated? will it be for 5 laks or 3 laks.

  70. sunny says:

    I would like to know if the NRE FD interest withdraw monthly and place with recurring NRE, any possibility for taxation

  71. Vijay,
    Income tax will be computed on interest income generated from Rs 5 lacs.

  72. dear sir, iam extremely impressed by the way you explained regd fixed deposits in simple language, please suggest me safe methods to deposit money of 20 lacs, iam a dr, have taken SBI life insurance (1 lac/yr), HDFC life for long term investments (25000/month), my mother- senior citizen, does’nt want me to take risks with principal amount

  73. Sunny,
    Any form of interest on NRE FDs is tax free.

  74. Dear Kurakula
    We would need to have a bit more detailed discussion to help you better. Please can you drop us an email on info@banyanfa.com with your contact details and we will get back to you. Thanks.

  75. Rohi J says:

    Great advise; It has also lived through time, now that I am seeing this after almost 3 years. I have a question though:

    What kind of changes are allowed in these NRE term deposits that would not be considered as termination of the FD ?

    The FD has been created with ‘cumulative’ returns meaning accumulated interest adds to the principal to become the new principal. Down the line can I change the FD such that instead of renewing cumulatively, the interest gets deposited to by saving account while the principal stays in the FD ?

  76. Thanks Rohi. If you would want to change from cumulative to interest paid quarterly / regularly, I would think that the banks would want to terminate the FD and book it as a new FD. However, please do check with your bank and provide an update on this blog.

  77. ramesh says:

    Dear sir,
    please give me a suggestion, i have 20 lacks rs where to invest my money
    should i make fixed deposit for 20 lacks on long term or to buy home with loan. i need a home and also i need secondary income. please advise me what should i do

  78. Hi Ramesh,
    The answer can not be straight forward as we would need to have detailed discussions to be able to understand your background and objectives. Please reach out to us on info@banyanfa.com for an appointment and we can discuss it further to arrive at an appropriate investment option for you.

  79. R Ramesh says:

    If NRE FD is started for 10 years from now since i am NRI now. I am losing my NRI status after 3 years. What happens to FD NRE and its interest. It will continue to earn interest till maturity ??

  80. BHARAT says:

    sir i want to invest 7 lac in fd in sbi, i am a student and this money i got as a gift, so i want to know whether i have to fill any form for the tax deducted on income from interest or bank will credit the interest after deducting the tax.or there will be any problem if i invest entire amount in one fd or its better to invest in multiple fd please reply asap and thank u

  81. Bharat,
    If you think that your yearly income including the FD interest will be less than 2.5 lacs, you should submit Form 15G to instruct the bank not to deduct TDS. You would also need a PAN card to be able to do so.

  82. Hi Ramesh – please refer to our article http://insight.banyanfa.com/nre-fixed-deposit/ where lots of similar questions have been answered.

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Delhi – Odd Vs Even Formula

January 2, 2016January 2, 2016

The actual success of the Delhi government’s odd-even formula will be known only by January 15, but if the response of most Delhiities on the first day is any indicator, then the risk taken by Arvind Kejriwal’s Aam Aadmi Party seems to have paid off.

The local government will review the effect on pollution after the 15-day trial and consider including two-wheelers in the second phase of the scheme.

For more click here