Fixed Deposit:- Glossary

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Company Fixed Deposit:

Corporate fixed deposits are normal fixed deposits, like bank FD, offered by Companies. The interest rates offered are generally higher than Bank interest rates and can be in range from 9%-16% . Higher the interest rates offered higher are the risks involved.

Annual Yield

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.

Effective Yield

Yield assuming that reinvest of interest payments. Reinvesting the interest will produce a higher yield because interest is earned on the interest payments.

Compound Interest

Compound interest arises when interest is added to the principal, so that, from that moment on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding.

Simple Interest

Simple interest ignores the effects of compounding. The interest is always based on the original principal.

Future Value

The Present Value plus the compound interest thereon, together called Future Value, i.e. The amount to which a specific sum or series of sums will grow on a given date in the future. For example, INR 1,000 has a future value of INR 1,120 in one year, assuming an annual return of 12% p.a.

Present Value

The current value of one or more future cash payments, discounted at some appropriate interest rate.


The original amount of investment is called the principal amount.

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.

Maturity Date

The date on which the principal amount of fixed deposit becomes due and is repaid to investors


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.

NRI 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.

Tax Deducted at Source (TDS)

As per the tax rules, any person/institution making payments on Salaries, Rent, Interest, Commission etc. required to pay tax. 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.