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FAQs on Fixed Deposits

Q1. Can I get a loan against a Fixed Deposit?

Yes, you can. Most banks offer a loan against fixed deposits. By using the fixed deposit as a collateral for the loan you can get a loan at lower rates. The rates are usually pegged at a few percentage points higher than the fixed deposit. Usually banks advance up to 90% of the fixed deposit being held in a loan.

Q2. When do I become liable for TDS?

If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 5,000 in a financial year, you become liable for TDS.

Note: Tax liability for TDS purpose is determined at branch level. Deposits held by minors are also subject to TDS. The credit for the TDS can be claimed by the person in whose hands the minor's income is included.

Q3. How to avoid loss of interest on Overdue Term Deposits?

The best way of avoiding loss of interest on overdue deposit is to give renewal instructions before the due date. Remembering various due dates and ensuring that renewal instructions along with original deposit receipts reach the bank is cumbersome. Many banks have an automatic renewal scheme wherein the entire amount (principal + interest) is reinvested into a fixed deposit of the same tenure on the maturity date. The original deposit receipt is retained by the bank and the depositor has an option of not renewing by giving prior instructions.

Q4. Does any change or enhancement in my deposit portfolio affect TDS liability?

Yes. If the change or enhancement in your deposit portfolio earns a cumulative interest along with that of the earlier portfolio greater than Rs 5,000 you will be liable for TDS on your current portfolio.

Note: If interest on the current portfolio is not sufficient to cover TDS, it will be recovered from the principal

Q5. At what rate is TDS deducted?

TDS on fixed deposits is deducted at the following rates for the following category of account holders:

Type of Account Holders - TDS (%)

Resident Individuals, Sole Proprietorship, Trusts, Association of Persons, Hindu Undivided Family (HUF) - 10.2%

Domestic Companies- 20.4%

NRO Deposits - 30.6%

Note: With the exception of FCNR (B) Deposits and NRE F.D's, TDS is deductible on every other foreign currency deposit. The TDS rate applicable will depend on the category of the account holder as per the above schedule.

Q6. How and when can I apply for exemption on TDS?

If you believe that your total interest income for the year will not fall within overall taxable limits, you should inform the Bank not to deduct TDS on deposits. You can do this by submitting a form as per the provisions of the Income Tax Act. The forms required for different categories have been listed below:

Category of Account Form required

Individual 15H

Companies 15AA

Association of Companies 15AA

Trusts 15AA

Q7. When does the Bank issue a TDS Certificate?

A consolidated TDS Certificate in Form 16A, for TDS deducted during a financial year will be issued in the month of April of the following financial year.

Q8. What happens to accounts of a NRI's NRE or FCNR accounts which he/she has opened abroad after his/her return to India?

A returning Indian's NRE/FCNR accounts is usually designated as a Resident account. Most banks allow these deposits to continue to run till maturity at the contracted rate of interest.

Q9. What documentation is required to open a senior citizen FD?

While opening the senior citizen fixed deposit account, the customer needs to provide proof of age - to ensure that account holder is a senior citizen. He can provide either of the following:

Secondary School Leaving Certificate (Class 10)

LIC Policy

Voters Identity Card

Pension Payment Order

Birth Certificate issued by the competent authority

Passport / Defence ID Card / Govt ID Card (Provided they have the cardholder's photo,signature and date of birth)

PSU issued ID Cards

Senior Citizen Cards

Q10. What is the maximum deposit amount insured by the DICGC?

Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's license or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

Q11. When is TDS deducted?

TDS is deducted every time the Bank pays interest during the financial year and the interest earned for the year is more than Rs 10,000 in a single branch. In addition, TDS is also deducted on interest accrued (but not yet paid) at the end of the financial year viz. 31 March.

Q12. Can a senior citizen open a joint account with a non senior citizen and still avail benefits ?

Yes, the account can be opened joint with a non-senior citizen, provided the first account holder is a senior citizen. This joint account would be eligible for the preferential interest rates for senior citizens fixed deposits.

Q13. Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?

No. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership(single account and joint account) or are deposited into separate banks they would then be separately insured.

Q14. Where do I get rates for deposits more than 15 Lakhs ?

Deposits more than 15 Lakhs are priced on a daily basis and the treasury departments of the various banks release the rates for the day. You can approach the bank directly to get your quote for the day.

Q15. Can I open a fixed deposit account without having a savings account at the same bank ?

Yes, you can open just a fixed deposit account relationship at any bank. The documentation required at a new bank would be the same as opening a new account where identity and address proofs might be required. At a bank branch where you have an existing account you would need just a cheque or an electronic transaction to make the fixed deposit.