Fixed Deposits (FDs) are one of the most preferred investment options for individuals seeking safe, stable, and guaranteed returns. But many investors often wonder, “How many FD accounts can a person have?” The good news is that there is no legal limit on the number of FD accounts you can open.
However, managing multiple FDs comes with its own set of advantages and challenges. In this comprehensive guide, we will break down everything you need to know about opening multiple FD accounts, the benefits, tax implications, best practices, and expert tips to maximize your returns.
Can You Have Multiple Fixed Deposits?
Yes! There is no restriction on the number of FD accounts you can open, whether within the same bank or across multiple banks. However, managing multiple FDs effectively requires strategic planning. Here’s why you might want to hold multiple FDs:
1. Diversification for Safety
- The DICGC insures deposits up to ₹5 lakh per bank per depositor. If your total deposit exceeds this amount, it is wise to split your FDs across different banks.
- Example: If you have ₹20 lakh to invest, placing it in four different banks (₹5 lakh each) ensures maximum insurance coverage.
2. Different Tenures for Better Liquidity
- If you invest all your money in a single long-term FD, your funds will be locked for years.
- Instead, create a FD laddering strategy where you open multiple FDs with different maturity periods.
- Example: One FD for 1 year, another for 3 years, and one for 5 years allows periodic liquidity without breaking the entire FD.
3. Tax Efficiency
- Interest earned from all FDs is taxable under ‘Income from Other Sources’.
- Banks deduct TDS (Tax Deducted at Source) at 10% if total interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
- Splitting FDs across different banks may help in better tax planning.
4. Different Interest Payout Options
- Some investors prefer monthly interest payouts for regular income, while others opt for cumulative interest to maximize returns.
- By holding multiple FDs, you can customize payouts as per your financial needs.
Also Check: Get Rs 25,00,000 from Post Office RD in 10 years, know how much you will have to deposit every month
Types of Fixed Deposits to Consider
1. Regular Fixed Deposit
A standard FD where money is deposited for a fixed period, earning interest until maturity.
2. Tax-Saver FD
- Offers tax benefits under Section 80C of the Income Tax Act.
- Has a 5-year lock-in period with no premature withdrawal allowed.
3. Senior Citizen FD
- Higher interest rates (typically 0.25% – 0.75% more) for individuals above 60 years.
4. Sweep-In Fixed Deposit
- Linked to a savings account, automatically transferring excess funds into an FD for higher interest.
- Allows liquidity while earning higher returns.
5. Flexi-FD
- Allows withdrawals in parts without breaking the entire FD.
- Best for those who may need funds at short notice.
How to Open Multiple FD Accounts?
Opening multiple FDs is simple and can be done through banks, NBFCs (Non-Banking Financial Companies), or even post offices. Follow these steps:
Step 1: Compare FD Interest Rates
- Interest rates vary among banks and financial institutions. Check rates on the bank’s official website.
- Use online FD calculators to estimate returns.
Step 2: Choose Your Tenure and Amount
- Based on your financial goals, divide your funds into short-term, medium-term, and long-term FDs.
- Consider FD laddering to ensure liquidity.
Step 3: Select Interest Payout Option
- Cumulative FD: Interest is reinvested and paid at maturity (best for wealth growth).
- Non-cumulative FD: Interest is paid monthly, quarterly, or annually (best for regular income).
Step 4: Open the FD Online or Offline
- Most banks allow FD account opening via net banking or mobile banking apps.
- You can also visit a bank branch and submit an FD application form along with KYC documents.
Step 5: Monitor Your FD Accounts
- Keep track of FD maturity dates to avoid automatic renewal.
- Reinvest matured FDs in banks offering higher interest rates.
Also Check: Post Office Scheme: If you deposit 1 lakh 20 thousand rupees, you will get 7,09,732 rupees
(FAQs)
1. How many FD accounts can a person open in a single bank?
You can open multiple FDs in the same bank, with different tenures, amounts, and payout options.
2. Is there a limit to FD investments in India?
No, there is no upper limit to FD investments. However, deposits above ₹50 lakh may require PAN disclosure and additional reporting under RBI guidelines.
3. Can I withdraw money from an FD before maturity?
Yes, but premature withdrawal may attract a penalty of 0.5% to 1% on the interest rate.
