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Written by Hatim Dudhiyawala
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Callable FDs are a type of fixed deposit that can be withdrawn before the maturity date. Although it offers flexibility and liquidity, early withdrawal can often incur penalties. These are ideal for investors who need immediate access to funds at any time. It offers slightly lower interest rates, and investors can withdraw either a partial or the full amount before the tenure ends.
Conversely, non-callable FDs don't allow early or premature fund withdrawal before the maturity date. It has a fixed lock-in period and is designed for high-value investments. Compared to callable FDs, these offer a higher interest rate. Exceptions for premature withdrawals may be permitted only in cases of bankruptcy, the holder's death, or court orders. The choice between a callable and non-callable FD depends on your current financial situation. Keep reading to know more about callable and non-callable fixed deposits to make the right choice.
Key Takeaways
- Callable FDs allow early withdrawals, whereas non-callable FDs cannot be withdrawn before maturity date and has strick lock-in period.
- Callable FDs are ideal for investors seeking liquidity or short-term goals. Conversely, non-callable FDs are best for individuals seeking higher returns with long-term investment goals.
- Non-callable FDs offer higher interest rates as compared to callable FDs.
- Callable FDs have a low minimum investment requirement, while non-callable FDs often require a higher minimum investment.
- Callable FDs attract penalties on premature withdrawals, while non-callable FDs don't allow premature withdrawal, hence have no risk of penalties.
Difference Between Callable and Non-Callable Fixed Deposits
The table below lists the key differences between a callable and a non-callable fixed deposit:
|
Basis |
Callable Deposit |
Non-Callable Deposit |
|---|---|---|
|
Meaning |
These FDs can be withdrawn before maturity |
These FDs cannot be withdrawn before maturity and are locked in until maturity |
|
Interest Rate |
May be lower, with penalties applied on early withdrawals |
Since withdrawals are not allowed, the rates are more competitive |
|
Liquidity |
Highly liquid, as you can access funds in emergencies |
Low liquidity because funds cannot be accessed until the term ends |
|
Ideal for |
Investors who may need quick access to money |
Investors seeking higher returns and long-term investment |
What is Callable FD?
Callable FD (fixed deposits) allows the investor to withdraw the deposit before the maturity date. It offers the flexibility to 'call' or redeem your deposit whenever you want, before the term ends. This can be done either fully or partially. However, banks may charge a penalty for withdrawing the money before the deposit's maturity.
These types of FDs are ideal for individuals who may need quick access to their funds in case of an emergency or unexpected fund requirement.
Key Benefits of a Callable Fixed Deposit
Here are some of the key benefits of a callable fixed deposit:
- Callable FDs offer liquidity to the investor. The funds are easily accessible anytime to fulfill financial emergencies for both big and small investors.
- These FDs are risk-free and have a low minimum investment requirement, usually starting from Rs. 1,000.
- In terms of investment and tenure, a callable FD investment offers great flexibility. The tenure may vary from 7 days to 10 days based on your financial goals and budget.
What are Non-Callable Fixed Deposits?
A non-callable FD doesn't allow premature withdrawals. It comes with a fixed lock-in tenure, and you cannot withdraw the funds before the specified maturity date. In special cases, premature withdrawal may be permitted, such as a court order mandate, death of the account holder, etc.
Compared to a regular FD, the initial deposit requirement for a non-callable FD is higher. It also offers higher interest rates as your funds remain locked for the entire investment tenure duration. These FDs are ideal for investors seeking long-term investment and higher returns. For NRIs, it is ideal for those who wish to maximise the return on their foreign earnings while also keeping the funds secure in India until maturity.
Key Benefits of a Non-Callable Fixed Deposit
Here are some of the key benefits of a non-callable fixed deposit:
- Non-callable FDs offer higher interest rates as compared to regular callable FDs.
- It locks in your investment for a predetermined duration, which may vary from 1 to 2 years.
- It has low reinvestment risk, and the returns for non-callable FDs are highly predictable.
Choosing Between Callable and Non-Callable FDs
The choice between callable vs non-callable FDs depends on your current financial situation. It includes the predictability of your income and expenses and the duration for which you can lock away funds. Here is how you can choose between callable vs non-callable FDs:
|
Callable FDs |
Non-Callable FDs |
|---|---|
|
It is ideal if you think you need access to your funds before the deposit term ends |
It works if you are confident that you will not need the funds |
|
For short-term goals or unexpected financial situations |
For long-term goals where the funds remain untouched |
|
Ideal for conservative investors as it carries lower risk due to its liquidity |
It offers higher returns but has the disadvantage of not getting access to funds during emergencies |
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The Bottom Line
Callable and non-callable FDs satisfy the needs of different types of investors who have various financial needs. Callable FDs are ideal for individuals with short-term investment goals as it offers flexibility and liquidity. Conversely, non-callable FDs are ideal for individuals with long-term savings goals and who want to earn higher returns.
Moreover, if you need assistance with making the right choice for NRI investments, connect with Savetaxs. At Savetaxs, our team carries good knowledge and expertise regarding tax regulations, global compliance requirements, and NRI investment options. We can help you choose the right investment option that yields higher returns. Contact us today and make smart Indian investments while staying compliant with the RBI rules for NRI investment
Glossary
- Capital: Capital, a Financial Term Used for Business Operations, Like Bank Accounts, Stocks, Assets, Etc.
- Capital Gain: Capital Gains, Profits on the Financial Assets at the Time of Selling.
- Double Taxation Avoidance Agreement (DTAA): DTAA, an Agreement Signed Between the Countries to Avoid Double Taxation.
- MAT Credit: MAT credit, the difference between MAT and normal tax liability, carried up to 15 years.
Disclaimer
Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.
About Author
Hatim Dudhiyawala is a Certified Public Accountant (CPA) with SaveTaxs and specializes in Indian and NRI taxation. He advises individuals, NRIs, and businesses on income tax filing, capital gains taxation, DTAA benefits, fund repatriation, and tax compliance. With experience in cross-border tax matters, Hatim helps taxpayers understand complex regulations and make informed decisions. Through his articles, he shares practical insights to help readers stay compliant and manage their tax obligations with confidence. See Full Bio
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Frequently Asked Questions
A callable fixed deposit allows an investor to withdraw the deposit before the maturity date, while a traditional FD continues for the entire tenure without interruption.
No, the interest rate remains fixed once you open the FD. However, if the bank recalls the FD, only the tenure may get shortened.
No, a non-callable FD cannot be withdrawn before maturity. It comes with a strict lock-in period, and funds cannot be withdrawn until the tenure ends, except in special cases like the depositor’s death or a court directive.
The better option depends on your financial goals. If you need flexibility and emergency access to funds, callable FDs are suitable. If you want higher returns and can lock in funds for a fixed tenure, non-callable FDs are a better choice.
The minimum deposit for a callable FD is generally low, usually starting from ₹1,000 to ₹10,000, depending on the bank or financial institution.