A fixed deposit (FD) is a tenured deposit account provided by banks or non-bank financial institutions which provides investors a higher rate of interest than a regular savings account, until the given maturity date.
[2] In India these investments can be safer than Post Office Schemes as they are covered by the Indian Deposit Insurance and Credit Guarantee Corporation (DICGC).
To compensate for the low liquidity, FDs offer higher rates of interest than saving accounts.
[5] Banks issue a separate receipt for every FD because each deposit is treated as a distinct contract.
[7] Many banks offer the facility of automatic renewal of FDs where the customers do give new instructions for the matured deposit.
Income tax regulations require that FD maturity proceeds exceeding Rs 20,000 not to be paid in cash.
With CBS banks can tally FD holding of a customer across various branches and TDS is applied if interest exceeds ₹ 10,000.
Banks issue Form 16 A every quarter to the customer, as a receipt for Tax Deducted at Source.
Under such conditions of high FD rates, FDs become an attractive investment avenue as they offer good returns and are almost completely secure with no risk[citation needed].