Creating Multiple Fixed Deposits in a single bank?

POSTED BY niki ON April 8, 2014 5:55 pm COMMENTS (11)

I am planning to invest some money in Fixed Deposits.

Is it a good idea to invest only in a single bank?

Or I should divide amount in atleast 2 or 3 bank to be safe in case bank got bankrupt?

11 replies on this article “Creating Multiple Fixed Deposits in a single bank?”

  1. ashalanshu says:

    Dear Niki, if you are in 10% Tax slab, it means you can not file form 15G to avoid TDS.

    Regarding your fear of bankruptcy, as long as you are dealing with any PSU or Private banks, your fear is misplaced. Yes chances of bankruptcy are very high in co-operative banks.

    Thanks

    Ashal

  2. vijay says:

    If you are a serious and rigorous user of FDs as an investment tool, it would be better to go with 2-3 bank account and multiple FDs in each of them.

    Reason for more bank accounts – each of them insures you up to Rs. 1 lakh. The worst case scenarios ensures at least some safety.

    Reason for multiple FDs in a given bank – easier and cheaper to break and re-start the FDs without affecting the major chunks and their earning potentials.

  3. ashalanshu says:

    Dear Niki, what’s your current Tax slab?

    Thanks

    Ashal

    1. niki says:

      10% slab.

  4. Hemanth Chandra says:

    Dear Niki,

    You can opt for 2-3 banks to avoid TDS from Bank (if total interest earned per customerid is > 10k per year, TDS is applicable @ bank). It doesn’t mean that you don’t have to pay tax.

    Choose only Nationalized Banks. There bankrupt will not be there.

    Don’t go for local banks with 2-3 branches which are giving more interest rates.

    Regards,
    Hemanth.

    1. niki says:

      Hi Hemanth,

      Thank you for answering.
      I am earning more than 10k per year in interest.

      My question is:

      If I have to pay the tax later on interest earned, then how does it matter that I should opt for 2-3 banks to avoid TDS.

      And if they have deducted TDS, then I dont need to pay tax on it later, right?

      1. Hemanth Chandra says:

        Dear Niki,

        Tax on the interest from FDs is to be paid under the tax slab of yours.

        Suppose your taxable income is Rs.1.8L for the financial year.

        Now, suppose, the interest earned by you is 11k (5k+6k) from 2 FDs from two banks, then TDS is not applicable. So, you taxable income for the financial year is Rs.1.91L(1.8 + .11L). Now, you are in non-taxable slab, so you just don’t have to pay tax.

        Suppose, you earn 11k interest from single bank, and TDS is applicable. So, your bank will cut 10% of 11k and give the remaining to you. In this case also, you taxable income for the financial year is Rs.1.91L. Now, also you don’t have to pay tax. But, as the bank has already cut TDS, you have to file the ITR to get the refund.

        So, you have to wait till the TDS is returned for you, which you can avoid by opting for 2 FDs from two banks.

        Now, suppose, if you are in 20% tax slab, then bank will cut only 10%, you have to pay the remaining 10%. You may forgot about paying extra 10% thinking bank has cut TDS. So, if possible, better avoid TDS and calculate tax yourselves and pay accordingly.

        I repeat, avoid TDS doesn’t mean that you don’t have to pay tax.

        Hope my explanation is clear and confusing. Let me know in case of any clarification required.

        Regards,
        Hemanth.

        1. niki says:

          Understood. Thanks.
          But your information I want to make you aware that if we fill form 15G/H
          then bank don’t deduct TDS.

          1. Hemanth Chandra says:

            Dear Niki,

            Yes, I know that and you can do that. But, for that you have to fill the form and you have to go to branch and submit the form, which can be avoided by opening 2 FDs from 2 different banks online from net banking with single click. 🙂

            Regards,
            Hemanth.

  5. uniqueaby says:

    It depends on how much money you want to invest. If the total interest amount will be below Rs. 10000 then its fine else tax will be charged from your FDs. Its better to either divide the money in different banks or open different joint accounts which have names of the members in different order. However, in case of the latter approach, if the taxation things are controlled by Aadhar Card then you will still be taxed.

    1. Hemanth Chandra says:

      Dear Uniqueaby,

      You mean to say that if the interest amount is < 10k, then we don't have to pay tax on it ??

      Regards,
      Hemanth.

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