Is the effective annual rate of return,taking into account the effect of compounding interest. Its utility lies in its ability to standardize, varying interest-rate arrangements into an annualized percentage number for comparison.
The ability of a fixed deposit in India to generate interest, which is then reinvested in order to generate further earnings is known as compound interest.
Fixed Deposit Account
Fixed Deposits in India are deposits for a fixed or specified period chosen by the depositor and are repayable on expiry of that period. Such deposits generally carry comparatively higher rate of interest depending on the time span.
The original amount plus the compound interest thereon, stated as of a specific future date.
A Fixed Deposit account that is owned together (jointly) by two or more people. The depositors can decide whether transactions require the signatures of all parties or whether one party can take actions on his/her own.
Know Your Customer(KYC)
KYC norms were introduced by the RBI to ensure customer identification and help control financial frauds, identify money laundering & suspicious activities. To comply with this requirement, NBFCs require the following documents for new depositors – photos, PAN card copy, identification proof and address proof.
The date on which the principal amount of any debt instrument becomes due and is repaid to the investor and interest payments stops.
Companies ask their FD holders to make nominations, which mean that they should nominate persons to whom the the fixed deposit amount should go in the event of their death. Nomination can be made in Fixed Deposit Application form itself or on a separate form indicating the name and address of the nominee.
Non-Resident Fixed Deposits
Non-Resident Fixed Deposits are those, which are maintained by Indian nationals and persons of Indian origin resident abroad, foreign nationals and foreign companies in India. Few Companies accept ordinary Non-Resident Fixed Deposits in the names of private individuals, provided initial deposits for investing in the Fixed Deposits are done through NRO Account.
NRO stands for Non-Resident Ordinary account. It refers to the Savings or Fixed Deposit account of a Non-Resident Indian in a bank in India. This is a Rupee account. Interest earned in this account is taxable. The account can be jointly held with a resident Indian. The principal and interest in this account are non-repatriable.
The original amount invested is called the principal amount.
Tax Deducted at Source(TDS)
As per the tax rules, any person/institution making payments on salaries, rent, interest, commission etc. required to deduct tax before making payments. This deduction is called Tax Deducted at Source (TDS). In the case of banks, TDS is deducted only if the interest earned (both paid and accrued) is more than Rs. 5000 in a single branch. The bank also has to file the appropriate form (Form 16A) annually showing the various details of the deductions made and deposit of tax thereon. This form is needed file filing the annual tax return for the individual.