A Fixed Deposit (FD) is a popular and safe investment option in India, offering assured returns and capital protection. Many individuals opt for joint FD accounts with family members, such as spouses, parents, or children, for convenience or to ensure financial support for loved ones. A common feature in these joint accounts is the 'Either Or Survivor' clause. This clause is often misunderstood, leading to assumptions about ownership and rights. This article aims to clarify the implications of the 'Either Or Survivor' clause in joint Fixed Deposits, specifically addressing whether the surviving joint account holder becomes the legal owner of the FD funds upon the demise of the other holder. Understanding Joint Fixed Deposits A joint Fixed Deposit account is opened by two or more individuals. The funds deposited are owned jointly by all account holders. The primary purpose of a joint account can vary, from shared financial goals to providing a safety net for family members. Types of Joint Account Operations Joint accounts can typically be operated in two ways: 'Either Or Survivor' (EOW): This is the most common mode. Under this clause, any one of the joint account holders can operate the account independently. This means either account holder can deposit funds, withdraw the principal and interest, or close the account without the consent of the other. In the event of the death of one account holder, the survivor(s) can operate the account and withdraw the entire amount. 'Both Or Survivor' (BOW): This mode requires the signatures of all joint account holders for any transaction, including withdrawals. However, in the event of the death of one account holder, the survivor(s) can operate the account and withdraw the funds. The 'Either Or Survivor' clause is particularly relevant when discussing the rights of the surviving account holder. The 'Either Or Survivor' Clause Explained The 'Either Or Survivor' clause grants significant operational freedom to the joint account holders during their lifetime. It allows either party to conduct transactions independently. This is often chosen for convenience, especially when one account holder might be less mobile or frequently away. Implications During the Account Holders' Lifetime As long as both account holders are alive, the 'Either Or Survivor' clause means: Either account holder can make premature or full withdrawals. Either account holder can close the FD account. Either account holder can renew the FD. Either account holder can pledge the FD as security for a loan. It is crucial for all joint account holders to be aware of and comfortable with the transactions being made by the other. Implications Upon the Death of One Account Holder This is where the clause is often misunderstood. Upon the death of one joint account holder, the 'Either Or Survivor' clause allows the surviving account holder(s) to withdraw the entire amount from the Fixed Deposit. This is a procedural convenience to ensure the funds are accessible to the surviving family member without undue delay. Ownership vs. Operational Rights The critical distinction lies between the right to operate the account and the legal ownership of the funds. The 'Either Or Survivor' clause primarily governs the operational rights. Who Owns the Fixed Deposit? The ownership of the funds in a joint FD account is determined by the source of the funds and the intention of the depositors. Generally: If the funds originated from a single account holder: Even with an 'Either Or Survivor' clause, the funds legally belong to the person who deposited them. The survivor can withdraw them due to the operational clause, but they are not the legal owner unless explicitly stated otherwise (e.g., through a will or nomination). If the funds are from multiple account holders: Ownership is typically considered proportionate to the contribution of each holder, unless specified otherwise. Nomination: A nomination made during the opening of the FD account is a separate and crucial aspect. A nominee is a person authorized to receive the proceeds of the account in the event of the account holder's death. A nomination simplifies the process of claiming the funds and is legally binding for the payout, but it does not confer ownership during the account holder's lifetime. The nominee acts as a trustee to receive the money. Therefore, the surviving joint account holder, by virtue of the 'Either Or Survivor' clause, gains the right to withdraw the funds but does not automatically become the legal owner of the entire Fixed Deposit amount if the funds were not solely contributed by them or if there is no clear intention of gift or transfer of ownership. Legal Ownership and Inheritance Laws Indian inheritance laws, including the Indian Succession Act, 1925, govern the distribution of assets upon death. The ownership of assets, including Fixed Deposits, is subject to these laws. The Role of Wills and Nominations Will: If the deceased account holder had a valid will, the distribution of their assets, including their share of the joint FD, will be as per the will. The 'Either Or Survivor' clause allows the survivor to withdraw the funds, but these funds might still be part of the deceased's estate to be distributed according to the will. Nomination: As mentioned earlier, a nominee receives the amount as a trustee. The nominee's right to the amount is subject to the provisions of the will, if any. If there is no will, the nominee becomes the beneficial owner. However, if there is a will, the will takes precedence over the nomination regarding the ultimate beneficial ownership. This means that while the survivor can access the funds quickly, the ultimate legal ownership might be contested or determined by the deceased's will or applicable succession laws if the funds were not jointly owned or intended as a gift. Benefits of the 'Either Or Survivor' Clause Convenience: Allows easy access to funds for the surviving family member, especially in emergencies. Speedy Access: Avoids the lengthy process of probate or legal heirship certificate for immediate withdrawal. Operational Ease: Simplifies day-to-day management of the account during the lifetime of both holders. Risks and Misconceptions Misunderstanding Ownership: The biggest risk is assuming the survivor automatically owns the entire FD. This can lead to disputes with other legal heirs. Disputes with Other Heirs: If the deceased had other heirs or a will that contradicts the survivor's claim to the entire amount, legal battles can ensue. Tax Implications: The interest earned on the FD is taxable in the hands of the original depositor(s) or as per the source of funds. The survivor withdrawing the funds needs to be aware of any tax implications on the interest income. Lack of Clarity on Source of Funds: If the source of funds is not clearly documented or understood, it can complicate matters. Documents Required for Withdrawal by Survivor When one joint account holder passes away, the surviving account holder typically needs to submit the following documents to the bank to withdraw the FD funds: A written request for withdrawal. The original Fixed Deposit receipt. A death certificate of the deceased joint account holder (original and copy). Proof of identity and address of the surviving account holder. Nomination details, if applicable. In some cases, especially if there are doubts or potential disputes, the bank might ask for a legal heirship certificate or a succession certificate, or an affidavit confirming the source of funds and the survivor's right to withdraw. Charges and Fees Generally, there are no specific charges for operating the 'Either Or Survivor' clause or for withdrawing funds after the death of a joint holder, provided the terms and conditions of the FD are met. However, premature withdrawal of an FD usually attracts a penalty in the form of a reduced interest rate, as per the bank's policy. Interest Rates on Joint FDs Interest rates on joint FDs are typically the same as for single FDs, based on the tenure and the bank's prevailing rates. The interest earned is taxable. If the FD is solely funded by one person, the interest is taxable in their hands. If funded jointly, the interest may be taxable in the hands of each depositor proportionate to their contribution, or as per the bank's policy and tax laws. It's advisable to check with the bank regarding how interest is credited and reported for tax purposes in a joint account. Frequently Asked Questions (FAQ) Q1: Can the surviving joint account holder claim the entire FD amount? A: Yes, the surviving joint account holder can withdraw the entire FD amount due to the 'Either Or Survivor' clause, but this does not automatically make them the legal owner of the entire sum if the funds were not solely theirs or if there is a will. Q2: Does the 'Either Or Survivor' clause mean the survivor inherits the FD? A: No, it grants operational rights, not automatic inheritance. Inheritance is governed by wills and succession laws. Q3: What if the deceased had a will? A: If the deceased had a valid will, the distribution of their share of the FD funds will be as per the will,
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