When opening a joint fixed deposit, banks typically offer operating options such as 'Either or Survivor' or 'Former or Survivor'. According to reports from The Economic Times, these operating instructions become crucial after one depositor's death. In an 'Either or Survivor' FD, either holder may operate the deposit while both are alive, and the surviving holder can generally receive the maturity amount when the FD matures. RBI guidelines state that banks need not take signatures from both depositors for payment on maturity in such cases.
If one joint holder dies before the maturity date, the surviving holder may not always be able to close the FD immediately. As reported by The Economic Times, RBI rules permit premature withdrawal by the surviving holder only if the depositors had earlier given a specific joint mandate allowing such withdrawal after the death of one holder. If such a mandate was not given, the bank may require consent from the deceased holder's legal heirs before allowing premature closure.
According to tax experts, interest income earned up to the date of death forms part of the deceased's income, while interest income earned from the date of death until maturity forms part of the legal executor's income. This distinction is crucial for tax filing purposes, as the surviving nominee or legal heir must report different portions of the FD interest in their respective tax returns. The legal executor typically receives a separate PAN for handling tax obligations related to the deceased's assets.
Nomination serves as an additional layer of protection but should not be confused with joint holding. As reported by The Economic Times, in a joint account with a survivorship clause, the surviving joint holder usually gets priority in dealing with the bank after the death of one holder. In many bank policies, including SBI's depositor policy, the nominee's claim arises after the death of all joint holders. A nominee mainly helps the bank identify the person to whom the money can be released after relevant account holders have died, but nomination does not automatically override succession rights.
When opening a joint FD, holders should not focus only on interest rates and tenure but also check operating instructions, nomination details, and premature withdrawal clauses. According to The Economic Times, joint FD holders should keep copies of the FD receipt, nomination, and account-opening form with important family documents. The article emphasizes the importance of understanding these complex rules before opening joint deposits to avoid complications during inheritance and succession processes, particularly regarding tax implications and legal ownership distinctions.
