Why you and your family should know about the various modes of holding an FD?
A very large population of Indians have invested in an FD at least once in their lives for secured and fixed returns. As most investors know, a fixed deposit may be opened jointly with another person or with a nomination facility—or even without either of the two. The mode of holding a FD affects the disbursal of returns on the maturity of the FD in case of the death of a FD holder. So FD account holders should be aware of the options available to ensure that their family is not hassled in the event of their death in the future.
Modes of holding an FD:
- Joint holding with ‘Anyone or Survivor’ option: In this mode of FD holding, if any of the joint holders pass away, the survivor is easily able to claim the deposit. The survivor needs to submit the death certificate with the lender so that the name of the deceased person is removed from the fixed deposit. This helps in continuing the FD as normal in survivor’s name without any issues. It is thus considered the best and most convenient mode of opening a fixed deposit.
- Joint holding with ‘joint holding’ option: Such fixed deposits are started in joint names, and the signatures of both the joint holders are required to claim the maturity amount. So in case either of the joint holders passes away before maturity then the surviving holder can continue his single claim on deposit by depositing required documents with the bank. In case both the joint holders pass away then the rights of nominee are activated.
- Single holding with ‘nomination’ option: FD account holders can assign nominees to their deposit. So if the depositor dies before maturity then the nominee can claim his or her rights over maturity proceeds as a trustee. The trustee will then need to honour the will or succession certificate made by the depositor, if any.
- Single holding without ‘nomination’ option: In this case, to claim maturity proceeds, the family members needs to produce the required documents such as legal heir proof, succession certificate, etc. Hence, claiming maturity proceeds on event of death under this mode of holding becomes a very complicated and lengthy process.
Documents Required to Claim the Maturity Proceeds:
Here the list of documents that are generally required to claim the maturity proceeds:
When there is a nominee or joint holder:
- Claim form: This is the simple format prescribed by lenders that you can use if you are the nominee, inform the lender that the FD holder has passed away and that you being the nominee are claiming the maturity amount.
- Death certificate: A death certificate issued by local authorities needs to be presented to the lender
- Proof of address and ID proof: Proof of address and photo ID proof needs to be submitted by nominee or joint holder as well.
When there is no nominee assigned:
- Succession certificate from legal heirs
- Indemnity bond as per a format provided by lenders
Continuation or Withdrawal of FD:
It is the option of the nominee to continue or withdraw the fixed deposit. No penalty is charged by the lender in this case even where there is pre-maturity withdrawal of funds.
The maturity proceeds received by the nominee or legal heirs is not taxable; however, if any interest is also received then this it taxable in the hands of the recipient and will be added to the total income of the recipient.
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