Features & Benefits Flexible Recurring Deposit Scheme
03 Jul 2019
Flexible Recurring Deposit Scheme (Yatha Shakti Jama Yojana)
Bank of Baroda offers its customers a unique scheme that makes it possible for you to save money flexibly, month after month. You can avail the attractive Yatha Shakti Jama Yojana - a flexible recurring deposit scheme which comes with a host of benefits and salient features. Under the flexi recurring deposit scheme, depositors may choose a small core amount to open their deposit and increase the core amount subsequently, up to three times.
Features of the Flexible Recurring Deposit Scheme
Opening the flexi RD
The flexi RD can be opened with a small initial amount of Rs.100 only
Amount of deposit
Depositors may choose their initial amounts in multiples of Rs 100, up-to a maximum amount of ₹10,000. You may choose to deposit either your core amount or up-to 3 times your core amount. Core amount contributions are mandatory in this scheme.
Tenure of deposit
The tenure of the recurring deposit schemes range from 12 months to 120 months.
Interest on the flexi RD will be paid and credited on a half yearly basis in the months of September and March. The interest paid is calculated on daily balances, with half yearly compounding of interest.
Benefits of the Flexible Recurring Deposit Scheme
Additional interest rate benefits
Senior citizens with deposits below ₹1 crore are eligible for 0.50% additional interest. Staff and ex-staff members of Bank of Baroda are also provided with additional interest. Ex-staff members who are senior citizens can avail both bonus interest rates.
Nomination facility is also offered to flexi RD holders.
Premature withdrawal facility
Interest is paid after deducting a penalty of 1% from applicable rates or contracted rates, whichever is lower in only those cases that are subject to charging penalty.
Loan and overdraft facility
You may avail a loan or overdraft facility against the flexi RD of up to 95% of the outstanding balance in your account at interest rates as per Bank of Baroda guidelines.
No penalties are levied for delayed payments of monthly instalments.
No TDS will be deducted for persons submitting forms 15G/15H as applicable
Everything you needed to know about tds on fd rates
A bank or financial institution is required to deduct TDS (tax deducted at source) at 10% from the interest income you earn on your fixed deposits and remit it to the central government, if the interest income exceeds Rs.10,000 in a financial year..
TDS is tax deducted at source. It is that part of your income that is directly paid out in the form of tax by the deducting agency, like your employer or your bank, before passing on the rest of the income in your hands.
In the Union Budget 2018, the Finance Ministry had increased the interest income threshold to Rs.50,000 for senior citizens. Only on exceeding Rs.50,000 as interest income, can the bank deduct TDS for senior citizens or those 60 years of age and above, under the new Section 80TTB of Income Tax Act.
When you have more than one deposit in different branches of the same bank, then the interest income from all the FDs is added up and 10% of this cumulative value is deducted as TDS.
What if a depositor’s annual income is below taxable income bracket?
Now, if a depositor’s annual income is less than Rs.2.5 lakh a year, and Rs.3 lakh in case of senior citizens, then the depositor is liable to pay no taxes. Under those circumstances, the depositor must submit Form 15 G or 15H right at the beginning of the year to prevent TDS from getting deducted from their interest income. Failing which, the depositor will have to file for refund at the end of the year, which can be tedious.
What is Form 15G and 15H?
Form 15 G
When a depositor’s annual income is less than Rs.2.5 lakh (or Rs.3 lakh for senior citizens) and tax due is nil, then the depositor must file Form 15G or Form 15H with the bank requesting the bank to not deduct TDS on interest income from FDs exceeding Rs.40,000 or, in the case of senior citizens, Rs.50,000.
Form 15H is similar to Form 15G, except that Form 15H is exclusively for senior citizens who are 60 years and above in age.
Conditions For Form 15H
The depositor should be 60 or above of age
Annual income should be less than Rs.3 lakh in case of senior citizens and Rs. 5 lakh for super senior citizens.
Should be a resident Indian.
Some examples of Form 15G/H
Mrs. Dsouza is 35 years old. Her annual income is Rs.2,35,000. The interest receipts on her FDs are Rs.50,000. What should Mrs. Dsouza do?
Mrs. Dsouza needs to submit Form 15G because her annual income is lower than Rs.2.5 lakh which is the minimum taxable income threshold. Since, her interest income is Rs.50,000, which is Rs.10,000 higher than the TDS exemption limit, the bank will deduct TDS at 10% if she does not file proof of her zero tax dues through Form 15G. So to prevent her loss of interest income by TDS deduction, she must file the form 15G before her first interest income is received.
Mr. Raina is 66 years old. His annual income is Rs.2,20,000 and his interest income is Rs. 60,000. What should Mr. Raina Do?
The minimum taxable income limit for Mr. Raina’s age group is Rs.3 lakh. Since his annual income is less than that, it means his taxable income is zero. So he should file Form 15H with his bank to prevent TDS deduction on his interest income which is higher than the exemption limit of Rs.50,000 for senior citizens.
In the above example, what if Mr. Raina’s interest income is Rs. 30,000 from his FD?
Since, his interest income is less than Rs.50,000 exceeding which, the bank comes into the picture and deducts TDS at 10%, Mr. Raina does not have to do anything, given that his annual income is also below minimum taxable income limit.
You must submit Form 15G or Form 15H along with a valid PAN, failing which the TDS would be deducted at 20%.
Form 15G/H has to be submitted to all the bank branches where you are receiving interest income from.
If you have multiple FDs and interest income from even a single branch exceeds Rs.10,000 in a financial year, then you must file Form 15G/H to prevent TDS deduction.
Fixed Deposits- Features, Benefits, Disadvantages
A fixed deposit is one of the most popular investment options in India. Several people consider fixed deposits as the best investment option and invest a significant portion of their savings in this instrument. But what is a fixed deposit?
A fixed deposit is a type of deposit in which a sum of money is locked for a fixed period of time. However, the tenure for the fixed deposit is decided by the person who invests his funds. This tenure could be anywhere from a few days to several years. In return for locking in these funds, fixed deposits pay the depositor a fixed rate of interest. All banks offer fixed deposits at different rates. Opening a fixed deposit is extremely simple and can be done both online and offline. To understand whether investing in a fixed deposit is the best option, we need to look at the advantages and disadvantages of fixed deposit account.
Let us examine the fixed deposit advantages and disadvantages.
Advantages of Fixed Deposit:
Assured rate of return:
The major reason why people prefer investing their funds in a fixed deposit is the assured rate of return. Once you invest your funds in a fixed deposit account, you can be guaranteed of receiving the stated rate of return. Banks publish the fixed deposit rate of interest on their website and in bank branches which makes it easy for a customer to ascertain how much return he will get. Banks also have a fixed deposit interest calculator on their websites where a customer can calculate the interest he will receive on investing a particular sum of money for a particular period of time.
Tax threshold for interest:
Banks are not mandated to deduct tax on any interest until it crosses Rs. 10,000. This means unless the total interest earned by a customer on different fixed deposits totals Rs. 10,000, the bank will not deduct any tax. This provides comfort to small deposit holders.
The tenure for a fixed deposit is flexible and depends on the deposit holder. Each bank has their own minimum tenure rules however, the final decision can be taken by the deposit holder. It is also possible to decide whether to redeem the fixed deposit or to extend it for the same period of time.
It is relatively easy to liquidate a fixed deposit. For FDs booked online, they can be liquidated online via net banking as well. Otherwise, most bank branches have a form to liquidate the FD.
Loans against fixed deposit:
An FD is a dependable instrument to keep in case of financial emergencies. Taking a loan against a fixed deposit is very easy. You can take a loan up to 95% of the fixed deposit amount depending on the bank. This makes it a dependable investment.
Disadvantages of Fixed Deposit:
Reducing interest rates:
Even though fixed deposits have a lot of advantages, the interest rates do not move in line with inflation. This means in some cases, they may actually earn less than the inflation rate. The interest rates for fixed deposits have been falling in recent times which has reduced the attractiveness of this investment.
Locked in funds:
Fixed deposits lock in your funds for a fixed duration. These funds are not available for you to use unless you withdraw the funds prematurely. Fixed deposits are not at all liquid and cannot be converted into cash easily.
Penalties on withdrawal:
Banks charge penalty to the depositors who withdraw their fixed deposits prematurely. This penalty is in the form of a reduced rate of interest.
No tax benefit:
The interest earned on fixed deposit is added to the taxable income of the deposit holder. There is no deduction on any interest earned. However, senior citizens get a deduction up to Rs. 50,000 on interest.
Fixed interest rate:
The rate of interest on a fixed deposit remains the same for the entire duration of the fixed deposit. Even if the rates increase, the bank does not pay additional interest to the deposit holder.
After looking at the advantages and disadvantages of a fixed deposit account, it is clear that this is an instrument for people who do not have much of a risk appetite. If you’re a person who likes to see fixed income in his account, then this is the instrument for you. The earnings from this form of investment are limited. However, banks have a sweep in facility where excess funds from a savings account can be diverted to a fixed deposit until the customer needs these funds. By enabling this feature, you can increase the returns from your fixed deposit account.