The full form of TDR in banking is Term Deposit Receipt. A TDR represents a fixed deposit (FD) made by a customer with a bank for a predetermined period, offering a fixed interest rate. It serves as proof of the deposit and contains details such as the deposit amount, tenure, interest rate, and maturity date.
Features of TDR
- Fixed Tenure: TDRs are issued for a specific period, ranging from 7 days to 10 years.
- Guaranteed Returns: The interest rate on a TDR is fixed at the time of deposit and does not fluctuate during the tenure.
- Premature Withdrawal: While customers can withdraw funds before the maturity date, it may result in a penalty or reduced interest.
- Safe Investment Option: TDRs are considered low-risk investments, suitable for conservative investors seeking stable returns.
Benefits of TDR
- Attractive Interest Rates: Higher than regular savings accounts.
- Loan Against TDR: Banks offer loans or overdraft facilities against the deposit amount, ensuring liquidity without breaking the deposit.
- Automatic Renewal: Many banks offer automatic renewal options upon maturity.
TDR in Tax-Saving Deposits
TDRs also serve as tax-saving instruments under Section 80C of the Income Tax Act, 1961. Deposits with a lock-in period of 5 years qualify for tax deductions, helping customers reduce their taxable income.