FD or Fixed Deposit is a popular investment option in which an investor deposits a sum of money with a bank or financial institution for a fixed period, and earns interest on it. While FDs are a common investment option, there are some lesser-known facts about them that many people are unaware of. In this article, we will explore some of these lesser-known facts about FDs.

1. Penalty for premature withdrawal: Many people are unaware that if they withdraw their FD before the maturity date, they will have to pay a penalty. This penalty varies from bank to bank, but it is usually a percentage of the interest earned on the FD. Therefore, it is important to check the penalty clause before investing in an FD.

2. Tax on interest earned: The interest earned on FDs is taxable as per the income tax laws of the country. This means that the investor will have to pay tax on the interest earned at the applicable rate. It is important to factor in the tax liability while calculating the returns from an FD.

3. TDS on interest earned: Banks and financial institutions deduct TDS or Tax Deducted at Source on the interest earned on FDs. This means that the investor will receive the interest amount after deducting the TDS. The TDS rate is 10% if the interest earned exceeds Rs. 40,000 in a financial year. However, if the investor's income is below the taxable limit, they can submit Form 15G/15H to the bank to avoid TDS deduction.

4. Nomination facility: Banks and financial institutions offer a nomination facility for FDs. This means that the investor can nominate a person who will receive the money in case of their demise. It is important to make use of this facility to ensure that the investment does not get stuck in legal hassles in case of an unfortunate event.

5. Loan against FD: Many banks and financial institutions offer a loan against FD facility, which means that the investor can take a loan against the FD amount. The interest rate on such loans is lower than personal loans, making it an attractive option for those in need of funds.

6. Automatic renewal: Most banks and financial institutions offer automatic renewal of FDs on maturity. This means that if the investor does not withdraw the FD amount on maturity, it will automatically be renewed for another term at the prevailing interest rate. It is important to keep a track of the maturity date to avoid any unwanted automatic renewals.

7. FDs are safe investments: FDs are considered safe investments as they are backed by the government guarantee of up to Rs. 5 lakhs per account. This means that even if the bank or financial institution defaults, the investor will receive up to Rs. 5 lakhs as compensation.