Fixed Income Products

The most Common Fixed Investment Product is Fixed Deposits. Fixed Deposits are relatively simple instruments which are simple to understand. You invest a certain amount of money for a certain period for a certain interest rate. Fixed Deposits are considered to be safe investments since you know what would be the amount you receive unlike equity investments which tend to be volatile. 

Fixed Deposits in India have a Tax Deducted at Source (TDS) on them, if the total interest earned is more than Ra 10,000. The branch determines the tax liability for TDS by checking for TDS eligibility every time it pays you interest. If the account qualifies for TDS, the bank deducts the TDS. 

For an Individual or HUF, the TDS rate is at 10% for a payment up to Rs 10 lakhs (Rs 1 Million) and an education cess of 3% which brings the total deduction to 10.3%. For interest payments of 10 lakhs and above, there is an additional surcharge of 10%, hence the total deduction comes to 11.3%.

Exemptions from TDS on Fixed Deposits:

Citizens who are above the age of 65 years can avail an exemption from paying TDS by submitting form 15H with the bank.

If a person is a female with no source of income other than the interest and if the interest does not exceed the non-taxable income limit, then she can submit form 15G with the bank branch and not have TDS charged on her interest.

A lot of people take advantage of these exemptions and have Fixed Deposits in the names of their parents who are senior citizens or in the name of their spouses (who are home makers with no other income). Certain people also break their deposits among different banks and branches since TDS is calculated at the branch level only.

Fixed Deposit Rates offered by various banks in India are as follows (Data as on Oct 22, 2011)

Fixed (Term) Deposit Interest Rates offered by Indian Banks for various terms
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