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How to Choose the Best Fixed Deposit Scheme for Your Financial Goals?
Fixed Deposit

How to Choose the Best Fixed Deposit Scheme for Your Financial Goals?

| @indiablooms | 23 Nov 2023, 03:17 pm

When it comes to safe and reliable investment options, Fixed Deposits (FDs) stand out as a popular choice among investors in India. Known for their stability and guaranteed returns, FDs are an excellent way to secure your financial future. However, choosing the right Fixed Deposit scheme is crucial to stay on track with your financial goals.

This comprehensive guide will help you navigate through the intricacies of selecting the best FD, keeping in mind the varying FD interest rates in India.

Understanding Fixed Deposits

A Fixed Deposit is an investment instrument where money is deposited with a bank or financial institution for a fixed period at a predetermined interest rate. Upon maturity, the investor receives the principal amount along with the accumulated interest.

FDs offer a risk-free return and are an ideal choice for those who prefer a conservative approach to investment.

Assessing Your Financial Goals

Before diving into the nuances of Fixed Deposit schemes, it's essential to have a clear understanding of your financial objectives. Are you saving for a short-term goal, like funding a vacation or a major purchase? Or are you looking at long-term financial stability, perhaps for retirement? Your goals will largely dictate the type of FD and the tenure you should opt for.

Factors to Consider When Choosing an FD

1. FD Interest Rates in India

One of the first and most critical factors to consider is the interest rate offered. FD interest rates in India can vary significantly between financial institutions and over time. They are influenced by several factors, including the Reserve Bank of India's policies and the economic environment.

Higher interest rates translate to higher returns, but they often come with longer tenures or higher deposit amounts.

2. Tenure

FD tenures in India can range from a few months to several years. A longer tenure usually offers higher interest rates, but it also means your money will be locked in for a more extended period. Choose a tenure that aligns with your financial goals and liquidity needs.

3. Credibility of the Financial Institution

The safety of your investment is paramount. Opt for Fixed Deposits offered by reputable and established banks or financial institutions. Check their credit ratings and history to ensure the safety of your funds.

In this regard, Mahindra Finance stands out as a stellar example. With its highest safety ‘CRISIL AAA/Stable’ and ‘IND AAA/Stable’ ratings, Mahindra Finance has established itself as a reliable and trustworthy non-banking financial company, ensuring that your investments are not only secure but also positioned for stable growth. Their commitment to financial integrity and customer trust makes them a preferred choice for Fixed Deposit investments.

4. Interest Payout Options

Fixed Deposits come with various interest payout options – monthly, quarterly, half-yearly, annually, or at maturity. If you need regular income from your investment, opt for an FD with a periodic interest payout. If your goal is wealth accumulation, reinvesting the interest until maturity would be more beneficial.

5. Loan Facility

Many Fixed Deposit schemes offer the option to take a loan against your deposit. This can be a useful feature if you require liquidity without breaking your FD.

6. Premature Withdrawal Terms

Life is unpredictable, and you might need to withdraw your FD prematurely. Understand the terms associated with premature withdrawal, including any penalties or reduced interest rates.

7. Taxation

The interest earned on Fixed Deposits is taxable under the Income Tax Act. However, certain types of FDs, like tax-saver FDs, offer tax benefits under Section 80C. Consider the tax implications based on your income bracket.

Fixed Deposit Schemes in India

Fixed Deposit schemes in India are diverse, catering to different needs:

  • Regular Fixed Deposits: These are the standard FDs offered by most banks and financial institutions. Investors can choose their investment period, which typically ranges from a few months to even years. The interest rates vary based on the tenure and the amount invested.
  • Tax-Saving Fixed Deposits: Designed to offer tax benefits under Section 80C of the Income Tax Act, these FDs have a lock-in period of 5 years. The investment made in a tax-saving FD (up to a certain limit) is deductible from the gross total income to compute taxable income.
  • Senior Citizen Fixed Deposits: These are specifically for individuals aged 60 years and above. Senior citizen FDs usually offer higher interest rates compared to regular FDs, providing a better return for the elderly who often rely on interest income post retirement.
  • Flexi Fixed Deposits: These FDs are linked to a savings account and offer higher liquidity. Funds exceeding a certain limit in the savings account are automatically transferred to the FD to earn higher interest. Investors can withdraw the money from the FD when needed.
  • Corporate Fixed Deposits: Offered by companies and not banks, these FDs typically offer higher interest rates but come with higher risk compared to bank FDs. The safety of the investment depends on the company’s credit rating.

Choosing the right type of FD depends on one's financial goals, investment horizon, and risk appetite.


Choosing the best Fixed Deposit scheme requires a careful understanding of your financial goals, assessing various FD offerings, and staying updated with the FD interest rates in India. By considering factors like interest rates, tenure, credibility of the financial institution, and your personal financial objectives, you can select an FD scheme that not only secures your investment but also helps in achieving your financial aspirations.

Remember, the best FD scheme is the one that aligns seamlessly with your financial goals and provides a balance between returns and safety.

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