Investment is a very important part of an individual’s journey and a Fixed Deposit can be a great stepping stone towards getting a gist of investing.
You can open a Fixed Deposit with a Bank, post office, or NBFC which will be locked for a tenure chosen by you. For opening this account, you’ll earn an interest rate for the deposit.
The interest rate is higher than the savings bank interest rate which makes it a better option for you to park your money instead of a savings bank account.
You can invest in an FD Account from 7 days to 10 years and when the investment is from 7 days to 12 months, the FD Account is called a Short-term FD Account. An account with longer than 12 months of maturity date is called a long-term FD Account.
In this article, we will discuss what is Short-Term Fixed deposit, Who can open this, Eligibility, advantages, and much more.
Table of Contents
What is a Short-Term Fixed Deposit?
A Short-Term Fixed Deposit is a fixed Deposit that is opened with a bank, post office, or NBFC for a shorter period i.e., from 7 days to 12 months.
The interest rate of the Short-term Fixed Deposit varies from bank to bank and is revised as per the internal policies of the bank.
FD Account services multiple purposes for an investor and comes with various options for the convenience of the investor like premature withdrawal, Loan against FD, Credit card on FD, etc.
Who can Open Short-Term Fixed Deposit?
There is an eligibility for opening the short-term FD, not everyone can open the FD account. The individuals who can open the short-term FD is as follows-
- Indian citizen
- Non-residential Indian (NRI)
- Government department
- Partnership firm
- Public or Private limited companies
- Sole proprietorship
- Hindu Undivided Family (HUF)
Factors Considered for Short-Term Fixed Deposit
The following are the factors which are considered for determining the Short-term Fixed Deposit-
- The period of a short-term fixed deposit ranges from 7 days to 12 months, any FD that lies within the timeframe then the FD Account is considered a short-term Fixed Deposit
- The interest rate offered in a Short-term FD account is lower than a longer-term FD
- You can renew your FD account when it matures both online and offline. Some FDs automatically renew if you do not initiate the withdrawal request.
- The minimum amount that you can deposit in the Short-term FD varies from bank to bank however, the minimum deposit amount which is accepted in most banks is Rs.1000/-
- Interest earned on the FD deposit is taxable unless it specifically mentions a Tax-free FD Account. The tax rate will depend on the individual income tax slab rates.
- You can nominate a beneficiary for your funds in case of your death which would allow your family member to receive the fund easily.
Short Term Fixed Deposit Interest Rates
The following are the Short Term Fixed Deposit Interest Rates–
|Some of the Best Short Term Fixed Deposits:||Interest Rates for General Citizens:||Interest Rates for Senior Citizens:|
|Bank of Baroda||2.80% – 4.90%||3.30% – 5.40%|
|HDFC Bank||2.50% – 4.90%||3.00% – 5.40%|
|Kotak Bank||2.90% – 4.40%||3.00% – 4.90%|
|SBI Bank||2.90% – 4.40%||3.40% – 4.90%|
|Bank of India||3.25% – 4.75%||3.75% – 5.25%|
|Canara Bank||2.95% – 5.20%||2.95% – 5.70%|
|ICICI Bank||2.50% – 4.90%||3.00% – 5.40%|
|Axis Bank||2.50% – 5.15%||2.50% – 5.80%|
How to Open a Short-Term Fixed Deposit Account?
The following are the steps that you’ll have to follow to open a Short-term Fixed Deposit Account-
- FD Account can be opened both online and offline from the official bank’s website of branch respectively. Even if you do not have an account with the bank, you can still deposit your money into the FD account.
- For opening the bank account, you’ll need to fill out the application form for opening the FD account with details like name, address, deposit amount, type of account to be opened (here mention FD account), tenure of the deposit (select any no of days or months), etc.
- After filling out the details, you’ll have to attach your KYC documents mentioned below along with your passport-size photograph
- Now, submit the form along with the deposit amount, your request will be processed and you’ll be assigned an FD Account instantly along with the FD Account number.
- You can use the FD Account number to access your FD account deposits easily, also you can use a mobile banking app or online website to access your FD Account
Documents Required for Opening Short-Term Fixed Deposit
The following are the documents required for opening Short-Term Fixed Deposit-
- Passport-size photograph
- Voter ID card
- Driving license
- AADHAAR card
- PAN card
Advantages of Short-Term FDs
There are various advantages to opening short-term FDs which are as follows-
- Investment in short-term FD is a good way of safeguarding your money by putting it in the FD account. Inflation can be a grave danger to your wealth and usually, the FD account pays from than the inflation rate which enables you to maintain the value of the currency
- You can prematurely withdraw the FD account easily both online and offline which gives you liquidity for the investment
- Short-term FD Account provides better interest rate than savings bank account which makes them more useful when it comes to saving money
- You can nominate a beneficiary in case of your death
- You can take a loan against your FD Deposit account up to 70-95% of the value of the deposit amount
Yes, the Post office also provides a Fixed Deposit facility.
The difference between Short-term FD and Long-term FD is the timeframe for the deposit and the interest rate offered. If the deposit ranges anywhere from 7 days to 12 months then the deposit will be considered short-term FD but anything longer than that is long-term FD. Similarly, the interest rate offered in the short term is less than in the long term.
Yes, FD Accounts are taxable instruments and you may have to pay TDS on the interest. TDS on FD is currently charged at a rate of 10% with a PAN Card and 20% without a PAN card. The TDS will only be charged if the total interest earned on FDs for a financial year exceeds Rs. 40,000.
Yes, NRI can open Short-Term Fixed deposits called NRE accounts and NRO accounts which can be used for storing FD Accounts for both Indian Currency as well as foreign currency.
The minimum tenure for short-term FD is 7 days.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
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