Fixed Deposits, FD for short, continue to be the favored and safest investment vehicle for countless Indians. However, have you ever pondered the fate of your FD if you, unfortunately, pass away prematurely? It is prudent to be aware of the consequences so that your loved ones do not suffer in your absence. So, explore the provisions inbuilt within the product to protect the survivor’s interests.Read more
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RBI guidelines are explicit for dealing with claims for the premature demise of the FD account holder. Therefore, a closer look at the issue in totality is imperative.
It is in your interest to understand the various options when investing in an FD, either singly or jointly. After all, a stitch in time saves nine. The first is that you appoint a nominee in the FD regardless of the operational instructions. Then, in the event of your demise in a single FD or all the joint holders, the nominee can claim the proceeds. However, it is subject to complying with the rules stipulated per the RBI guidelines.
After learning about the holding pattern options, you must now learn how the claims play out in the different FD holding already discussed.
Individual Account: What happens if you have not nominated anyone in the account while opening the account? The two emerging scenarios in such an event are:
With Nomination: Your designated nominee must comply with the prescribed documentation as the beneficiary to the FD maturity value. An appropriate claim form supported by a death certificate and KYC documents is a must.
Without Nomination: Documents supporting the legal heirs, death certificate, claim form, and KYC compliance of each claimant are necessary to receive the FD maturity value.
Either or Survivor: The most uncomplicated operational instructions allow the survivor to continue with the FD account unhindered after producing the primary holder’s death certificate.
Jointly or Survivor: The primary holder’s death certificate allows the survivor to assume ownership of the FD until maturity.
Former or Survivor: The FD’s ownership vests upon the survivor after the primary account holder’s demise, described here as the “former.” Therefore, a death certificate is a must to establish the claim.
Anyone or Survivor: The following member after the primary holder assumes the primary role till the FD matures. The consent of the other joint holders under signature supported by the death certificate is necessary for the transition.
Points to Note:
If all the joint account holders expire, the nominee is the beneficiary subject to compliance with the rules. The legal heirs have to establish their claim in the absence of an appointed nominee.
It is thus essential to appoint a nominee in all the FD accounts without fail.
Claims for premature FD withdrawal due to the account holder’s death are a bit more complicated. However, RBI guidelines are followed for the settlement of deceased account claims. Let us explore further:
Individual Account: The appointed nominee or the legal heirs can request premature FD withdrawal in its absence, subject to document compliance. Proof of death, KYC documents of the claimants, and other supporting documents are obtained to close the account. However, a consequential interest loss depends on the premature withdrawal’s timing with a reduced interest rate application for the compelling deposit tenor.
Joint Account: The survivor can claim premature FD withdrawal only if all the joint account holders have given the mandate at the FD’s opening stage. Most investors are unaware of the RBI’s master circular defining the provision in 2015. However, premature withdrawal is allowed only upon the concurrence of the survivor and the deceased primary holder’s legal heirs. If there are no survivors, the appointed nominee can claim premature withdrawal after complying with the requirements. If no nominee has been appointed, the legal heirs can lodge a claim for premature FD closure, subject to compliance with the rules.
The appointment of a nominee is essential in your FD account to secure the future outcome in unfortunate events, but the solution is not absolute. You must clearly understand the nominee’s role and rights to dispel any harbored misconceptions before proceeding further.
A nominee is the custodian of the assets until the deposit proceeds reach the genuine legal heirs.
Thus, the nominee is a trust beneficiary of the deceased FD account without any right over the asset.
The nominee can assert the right over the asset when specified in a will.
The nominee is the contact person on the depositor’s demise before maturity.
The nominee must be an individual.
Trusts, HUF, and Societies cannot appoint nominees.
Proper documentation is critical for the settlement of deceased FD accounts. Accordingly, the indicative documents you must submit to establish your claim is listed below:
Claim Form detailing your request for settlement of the deceased FD account.
Death certificate from the local authorities.
Photo ID and address proof of all the claimants.
Succession Certificate if no nominee has been appointed.
Investing in the FD is an excellent investment choice for its safety and higher returns. Yet, you must provide for unfortunate outcomes that may inconvenience your loved ones in your absence. The simplest option is to appoint a nominee in the FD account, whether a single or joint account. In addition, it is sensible to educate your family members about the procedures beforehand to avoid future inconvenience in claim settlement.
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^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
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