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5 Myths About Fixed Deposit That You Thought Were True

  • Highlights

  • Get higher returns with company fixed deposits

  • Choose company FDs with high safety ratings

  • Learn how to avoid TDS on your FDs

  • Breaking an FD is a simple process

Fixed deposit is one of the most preferred investment avenues for investors, who are looking for guaranteed returns. While a fixed deposit is quite popular as an investment, there are several myths associated with it too. These myths may make it difficult for investors to maximise their returns with fixed deposit.

Read along to familiarise yourself with the right information on fixed deposit, so you can grow your savings easily.

DID You Know? Bajaj Finance Fixed Deposit offers assured returns of up to 7.35%, along with multi-deposit, loan against FD, and auto-renewal facilities. FD Online


1. How safe is your money in a company fixed deposit?

Company fixed deposit offers higher returns than bank FD, but the safety of your savings is a big question, especially amid the recent economic turmoil. In order to make a smart choice and strike a balance between attractive returns and safety consider researching before investing.

Some factors to remember, when conducting your research are listed below:

  • Net Interest Margin- A Net Interest Margin (NIM) of 4% or more indicates good financial management, as NIM reflects the difference between interest earned on loans and interest paid on deposits. Thus, the higher a company’s NIM, the safer your deposits.
    You can choose to invest in company FD like Bajaj Finance Fixed Deposit, which maintained an annualised NIM of 11.08%, which indicates the level of safety on your deposit.

  • Capital Adequacy Ratio – Higher Capital Adequacy Ratio (CAR) of 18% or more indicates the ability of the institution to meet its obligations and improve business, while absorbing losses without needing to dilute equity. Bajaj Finance has a strong CAR of 25% with a liquidity of Rs. 15,800 crores as on March 31, 2020. This indicates the safety of your savings with this FD.

  • Safety ratings – Amid today’s volatile economic climate, several reputed rating agencies have downgraded ratings for most banks and NBFCs. However, it is important to invest in company FDs with high safety ratings.
    Thus, investing in a safe option like Bajaj Finance Fixed Deposit, with the highest ratings of FAAA by CRISIL and MAAA by ICRA, is one of the best options. These are the highest ratings, which indicate the highest safety of your money.

Additionally, Bajaj Finance is one of the only NBFCs with ‘0 unclaimed deposits’, which makes it another good reason to invest in this FD. This FD offers you guaranteed returns and is not affected by market fluctuations. Senior citizens can earn an attractive interest, and enjoy other benefits like flexible tenor and the option to choose your corpus as per your financial plan.

2. Is it impossible to avoid tax on FD?

While your investment in a fixed deposit is taxable, it would be false to say that there is no way to avoid tax. You are taxed, only if your income exceeds Rs. 5,000 from a company in a single financial year. For senior citizens, this limit stands at Rs. 50,000 on a bank FD.

Also, if you don’t have any other source of income and your total income is lower than the tax bracket, you are exempted from paying tax. You just need to submit form 15G or 15H to avoid TDS.

3. Do frequent interest payouts means higher income?

You can choose to invest in a fixed deposit offering periodic interest payouts. With Bajaj Finance Fixed Deposit, you can choose the frequency of your interest payouts, from monthly, quarterly, half-yearly to annual options.

However, choosing a monthly interest payout doesn’t mean you’d gain a higher interest income. Rather, the FD interest rate is applicable for a period of 1 year and the gains are divided, based on the payout frequency that you choose. You can plan your deposits in advance using the FD amount calculator, which helps you ascertain the best way to grow your savings, before you invest.

Contrary to popular beliefs, a non-cumulative FD offers you lesser interest income than a cumulative FD, which adds your interest earnings to your corpus and allows your savings to compound over time.

4. Are premature fixed deposit withdrawals allowed?

Breaking an FD is a simple process and depends on your fixed deposit provider and the terms governing your FD. You just need to be aware of the guidelines for premature FD withdrawal, to save yourself from heavy penalties. All you have to do is fill the application form, attach relevant documentation, pay any applicable charges and your FD will be liquidated.

5. Is premature withdrawal the only way to fund emergencies?

For those looking to fund urgent expenses by withdrawing from their FD before time, taking a Loan against Fixed Deposit is another good option. By taking a Loan against FD, you can fund your expenses easily, without losing interest on your deposits. You can get these loans at nominal rates from your issuer, and use your FD as a collateral easily.

In today’s economic scenario, it is wise to lock in to attractive FD interest rates, before they come down. You can consider investing in a Bajaj Finance online FD right away, wherein existing customers can enjoy a paperless online FD process that helps you invest within a few minutes and make your savings grow easily.

DISCLAIMER: The mentioned fixed deposit interest rates are indicative only, and may be subject to change periodically. Please check the interest rates on our website.

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