Planning to Open a Fixed Deposit Account? Know the Top 4 Things

Fixed deposit or FD is an investment in the financial market, provided by commercial banks and other financial institutions. It is one of the most preferred modes of investment in India. To avail of a fixed deposit you have to open an account with the bank where your money will be kept in a separate savings bank account, enabling it to earn interest which can be claimed upon maturity.

Fixed deposits, popularly known as FDs or term deposits, are an excellent channel for those on the lookout for an assured amount of income because fixed deposit accounts are risk-free. In fixed deposits, you lock in a lump sum amount of money for a specific period.

In most cases, investors get the chance to choose a tenure ranging from as little as seven days to as long as ten years.

You can open fixed deposits at commercial banks, small financing banks, and non-banking financial companies or NBFCs. Due to the numerous options, choosing the best one can be difficult. Therefore, if you plan on opening fixed deposit account, it is essential to note the following aspects.

Investment Tenure

The tenure of your investment is a critical aspect in the case of fixed deposits. This is primarily because if the depositor withdraws the invested amount before it matures, they will be asked to pay a foreclosure penalty. This then decreases the interest they earn on the deposits made.

You need to make wise financial decisions. Do this depending on whether or not you will need a substantial amount of money in the recent future. They should opt for a tenure of one to two years in case they would need money. If you are uncertain about your future financial requirements, then you can spread out the money between several fixed deposits with differing tenures.

Rate of Interest

The Reserve Bank of India (RBI) has issued guidelines limiting interest rates that financial institutions and banks can levy on borrowers. However, banks and other financial institutions can offer varied interest rates in the scope of these limits. Therefore, fixed deposit rates differ based on the institution or bank you use for financial services. As an investor, you must compare multiple service providers before investing.

Taxes on Investment

If the interest accumulated on a fixed deposit goes over Rs. 10,000 in a financial year, the interest will become subject to a TDS deduction. A TDS deduction is 10% of the interest accrued in total. But in case the investor’s income is not taxable, then they can submit form number 15G/H. Submitting this form can help you claim exemptions from taxes.

Frequency of Interest Payouts

Previously, banks and financial institutions offered annual and quarterly withdrawals on interest. However, nowadays, some financial institutions are starting to provide monthly withdrawals, alongside yearly and quarterly. As an investor, if you are looking at using the interest you have earned on the fixed deposit as an income source, you should undoubtedly consider different interest pay-out frequencies offered by various banks.

Fixed deposits can be a great way of investing your money. Not just that, they guarantee you an increase upon withdrawal. You can use it in emergencies or for big purchases that require a lump sum pool of cash. After all, it is no wonder that this stable investment is so popular.

Get started with such sound financial decisions to secure your economic well-being today!


A fixed deposit is a bank account where you offer to keep a certain amount of money safe for a fixed period of time. In return, you earn interest on the money. The bank is also obliged to pay interest if inflation is greater than the interest rate paid, or if it decides to make a loss.

Also Read: Dos And Don’ts While Opting For A Housing Loan In India

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