How Many FDs Can You Have?

The value or purchasing power of money generally drops every year due to inflation. That is why many people invest in various assets to increase their wealth. A safe investment plan thus becomes important and requires a lot of caution and understanding.

Investing in traditional options like Fixed Deposits (FDs) has been one of the many ways to help tackle this issue. You can invest a lump sum amount in a single fixed deposit account. You could also consider dividing the amount into smaller investments.

Doing so helps you increase liquidity and diversifies your investment profile. However, when it comes to FDs, you may wonder, “How many FDs can be opened?”

Opening More Than One Fixed Deposit Account

You may be asking yourself, “how many fixed deposits can I open?” The simple answer is that you can open as many FD accounts as you want with a single bank or across multiple banks. 

Not all investors want to invest in risky assets like mutual funds, cryptocurrencies, stocks, and more. Fixed deposits, on the other hand, help you invest safely and provide assured risk-free returns.

Number of FD Accounts That I Can Have

You can have two or more FDs in the same bank, as there is no limit on how many FD accounts you can have. However, if you plan to open an FD account with different banks, the minimum deposit amount may vary. 

It ranges anywhere from ₹1,000 to ₹1 Lakh, depending on the issuer you choose. One of the major perks of investing in multiple FDs is diversifying your investments. This way, you can easily withdraw money from a single account while all your other accounts continue to earn interest.

Advantages of Having Multiple Fixed Deposits

Choosing multiple FDs rather than one lump sum investment has several benefits, which include:

• For short-term financial needs, you can divide your single FD into multiple FDs to have earlier access to funds with higher liquidity.

• You can optimise your overall returns with flexible access to changing interest rates and reinvestment tenures.

• You can choose multiple FDs to avoid reinvestment risks for long-term FDs. The different maturity tenures allow you to reinvest the principal amount at the latest interest rates.

• Multiple FDs save you from tax liabilities. They lower your taxable interest income by spreading your maturity tenures over several financial years.

• As FD interest rates keep fluctuating based on market scenario changes, you can still reduce your chances of this risk. Even if the interest rates go down, reinvesting at higher rates can give you greater returns.

• If you still wonder, “How many FD accounts can I have?”, the answer will depend on your financial goals. Multiple FDs enable you to lower unnecessary expenses and focus on your financial goals.

Challenges of Having Multiple FD Accounts

Having multiple fixed deposit accounts may also pose some challenges that an investor needs to be prepared for:

• Managing multiple accounts at once

• Keeping tabs on the maturity dates of different accounts

• Excessive follow-ups about interest credit, TDS deduction, and renewal

• All FD accounts will be linked to the same customer ID

• Interest rates vary depending on the amount and time period

Investing in FD Every Month

In a fixed deposit account, you need to invest a lump sum amount at the beginning of a fixed tenure. As FDs are one-time investment schemes, monthly deposits are not an option. For monthly deposits, you can consider a systematic deposit plan or recurring deposit schemes.

However, you can invest money into multiple fixed deposits every month, as there is no limit to how many FDs you can create.

Tax-Free FD Amount

As per the Income Tax Act of 1961, interest earned from fixed deposits is fully taxable. However, for senior citizens, interest income up to ₹50,000 does not attract TDS (tax deducted at source). That is capped at ₹40,000 for non-senior citizens. 

However, you can opt for a tax-saving FD account. Under Section 80C of the Income Tax Act, such FDs will help you claim a maximum deduction of ₹1.5 Lakhs per financial year. The minimum tenure for a tax-saving fixed deposit (FD) account is 5 years.

Thus, you can invest in multiple tax-saving FD accounts, each with a 5-year-long tenure. However, remember that the maximum deduction is capped at ₹1.5 Lakhs.

Investing in Multiple Small Fixed Deposits or One Large Fixed Deposit

This is quite a common question asked by several investors. As per a famous investment quote, you ought to "never put all your eggs in a single basket". In simple terms, having multiple FDs across different banks will help you achieve the right balance between risk and returns. 

Multiple small fixed deposits also help you stay below the TDS threshold on interest income.

Things to Consider When Opening Multiple FDs

When creating several fixed deposits in a bank or financial institution, you need to consider some important factors. They include:

• Splitting the Amount Right Way

When you invest in multiple FDs, carefully check the amounts of your deposits. Doing so will help you avoid tax liabilities and increase the interest amount. That will also let you access your funds earlier. 

• Carefully Choosing the Maturity Period

Choose the right maturity tenure to keep track of short-term financial goals while avoiding pre-mature withdrawals for your capital needs. This also helps you in evaluating the FD tax rate for the financial years. It thus saves you from losing higher returns.

• Evaluating Interest Rates

Carefully evaluating the interest rates on your FD tenures helps you maximise your returns for different maturity periods.

• Avoiding Pre-mature Withdrawals

You can ensure that your FD amount keeps growing till maturity when you choose not to make a pre-mature withdrawal. You can reinvest the returns to maximise your earnings.

• Understand Tax Exemptions

Tax liability depends on your FD maturity amounts and can increase based on your final return value. To reap the benefits of tax exemptions, you need to check the tax applicability laws based on your total income.

Alternatives to Multiple FDs

Instead of investing in several fixed deposits, you can explore other options designed to offer higher returns with flexible maturity periods. Some of these options include:

• Recurring Deposits (RD)

It is a term deposit enabling you to invest for a fixed period. However, instead of investing a lump-sum amount at the start of the tenure, you can make recurrent payments monthly. It finally provides you returns based on the investment amount, typically compounded quarterly.

• Gold Investments

Gold is one of the most preferable options you can invest in. Gold serves both as wearable jewellery and a reliable financial asset. Investing in gold is wise, as its value tends to increase globally over time.

• Systematic Investment Plans (SIPs)

SIPs are equity funds that allow you to invest in the stock market in a systematic approach. You can invest smaller amounts monthly. In the long term, this scheme provides high returns.

• Equity-linked Savings Scheme (ELSS)

It is a tax-saver mutual fund scheme allowing you to invest in equities. However, it has a higher risk and is a long-term investment plan.

• Public Provident Funds (PPF)

This scheme is backed by the government and is an affordable option since it is tax-free. Up to a specific limit, tax deductions are not applicable.

Reasons to Invest in Multiple Fixed Deposits through Bajaj Markets

You can invest in several FDs through Bajaj Markets, as it enables you to earn greater returns with a higher interest rate. It partners with various banks, offering a balanced approach to managing risk and returns.

With Bajaj Markets's multiple fixed deposit schemes, you can ensure that you do not cross the applicable TDS threshold for interest income on FDs. You can also leverage the benefits of flexible tenures and an easy online application process to start investing with just ₹5,000. 

This way, your regular liquidity is fixed, and your investment portfolio is diversified. You can choose from various FD schemes that will fit perfectly with your investment plans.

Conclusion 

You can open and invest in multiple FDs across different banks. Having multiple FD accounts comes with its challenges, such as managing and tracking them effectively.

However, it also offers advantages, like diversifying investments across varying maturity periods and interest rates.

Similarly, you can directly apply for multiple fixed deposits through Bajaj Markets. It provides an easy and seamless online application process, ensuring convenience and quick access to its various services.