Fixed deposits (FDs) are one of the most trusted ways to save and grow money safely. They allow individuals to invest a fixed amount for a specific period and earn assured returns. At maturity, the investor receives both the principal and the interest earned.

FDs are available in two types—cumulative, where interest is paid at maturity, and non-cumulative, where interest is paid at regular intervals. Investors can open an FD individually or jointly with others, making it important to understand how joint fixed deposits work before investing.

What is a Joint Fixed Deposit?

A Joint Fixed Deposit (FD) is a term deposit opened by two or more individuals (usually up to three). The first holder is the primary applicant, and interest is typically credited to their account.

It can be operated under modes like “either or survivor” or “jointly.” Before investing, it’s important to check rules on minimum deposit, withdrawals, and premature closure.

Joint Fixed Deposit Rules in India

Here are the rules that you must keep in mind while opening a Joint Fixed Deposit in India:

1. Account Management

   A joint fixed deposit account offers the flexibility of being managed by either the primary holder alone or by all joint holders acting together. This allows for adjustments to be made as circumstances change.

2. Withdrawal Authorisation

   For withdrawals, all joint account holders will need to sign off and follow the Reserve Bank of India (RBI) guidelines.

3. Tax-Saving Fixed Deposits

   If the fixed deposit is for tax-saving purposes with a maturity period of 5 years, only the primary account holder can claim tax deductions associated with the deposit. Therefore, tax benefits are limited to the primary account holder.

4. Taxation of Interest Income

   The interest that you earn on a joint fixed deposit account is taxable. However, the primary account holder is responsible for reporting the interest income and fulfilling any associated tax obligations in their tax returns.

Joint Fixed Deposit Withdrawal Rules

Depends on Mode of Operation: Withdrawal rules vary based on whether the FD is opened as “Either or Survivor” or “Former or Survivor”

• Either or Survivor: Any one holder can withdraw funds or manage the FD

• After Death (Either or Survivor): The surviving holder can continue or withdraw the FD

• Nominee Access: If all holders pass away, the nominee can claim the funds

• Former or Survivor: Only the primary (first) holder can withdraw during their lifetime

• After Death (Former or Survivor): The secondary holder can access funds after submitting required documents

• Legal Heirs/Nominee: If both holders pass away, funds are transferred to nominee or legal heirs

• Bank-Specific Rules: Premature withdrawal, documentation, and payout terms may vary by bank

Tax Benefits

Understanding the tax implications of joint fixed deposit withdrawals is crucial. Here are the key points to consider:

1. Income Tax Benefits:

   Tax benefits related to joint fixed deposit accounts are applicable solely to the primary depositor. Other account holders in the joint account do not qualify for these benefits. Consequently, any tax advantages, such as deductions or exemptions in income tax, will apply exclusively to the primary account holder.

2. Tax Deducted at Source (TDS):

   TDS is a tax deducted by the bank or financial institution on the interest earned from fixed deposits. In joint fixed deposits, only the PAN of the primary account holder is considered for TDS purposes. As a result, TDS will be deducted based on the PAN provided by the primary account holder.

Joint Fixed Deposit Rules for Premature Withdrawal

Withdrawing money from a joint fixed deposit before it matures (early withdrawal) is different from regular fixed deposits. Here's what you need to know:

• Standard Penalties Apply: As with regular FDs, there are usually penalties for early withdrawal.

• Both Signatories Required: Both account holders must sign the withdrawal request for early access to funds.

• In Case of Death: If one depositor passes away, both the surviving account holder and the deceased's legal heir(s) need to agree to withdraw the money early.

There might be exceptions to these rules depending on the terms agreed upon when you open the account. Be sure to ask the bank representative about any specific terms regarding early withdrawal for your joint fixed deposit.

Joint Fixed Deposit Rules for Transferring Accounts

Today, many working professionals prioritise banks that make it easy to move their accounts. Life changes, you might move to a new place and that often means needing to transfer fixed deposits between branches. Luckily, transferring joint time deposits from one bank branch to another is simple. Just reach out to your current bank branch manager for approval to transfer the joint fixed deposit account. Then, request the transfer to the new branch within the same bank. Once the necessary steps are done, your joint savings account transfer request will be approved.

Closing Thoughts

While joint fixed deposits offer benefits like shared access and potential for growth, it's crucial to understand the account rules and responsibilities beforehand. Carefully consider factors like account operation, withdrawal procedures, tax implications, and premature withdrawal penalties before deciding if a joint fixed deposit aligns with your financial goals and risk tolerance. Discussing these details with all joint holders ensures everyone is on the same page and avoids potential complications down the road.