A beginner’s guide to choosing the best Fixed Deposit plan in India

Fixed Deposit

Fixed Deposits are a well-known investment instrument in India, known for their safety, stability, and guaranteed returns. However, with numerous banks and financial institutions offering FD plans, choosing the best one can take time and effort, especially for beginners. Here’s a simple guide to help you select the most suitable FD:

Understand your needs

Before diving into the FD market, assess your financial goals and investment horizon. Determine whether you seek short-term gains or long-term stability. Knowing your financial objectives will help you select the right FD plan that aligns with your requirements.

Safety and credibility

Opt for reputed banks with solid credit ratings. Check if the RBI handles and manages the institution for added security. Safety should always be a priority when investing in FDs.

FD tenure

Decide on the tenure of your FD based on your economic goals and liquidity needs. Short-term FDs usually have terms ranging from seven days to a year, while long-term FDs can extend up to 10 years or more. Choose a tenure that suits your investment horizon.

Penalties and premature withdrawal

Understand the penalty charges associated with premature withdrawal of your FD. Some banks may charge a penalty, which can damage your returns. So, select a flexible plan to withdraw your funds before maturity.

Interest rates

FD interest rates vary across banks and tenures. Generally, longer tenures offer higher interest rates. Compare the interest rates different banks offer and select the one that provides competitive rates while ensuring safety.

Tax implications

Be aware of the tax implications of your FD investment. Interest earned on FDs is taxable as per your income tax slab. Consider opting for Tax-Saver FDs or investing in FDs under the 5-year tax-saving scheme to avail of tax benefits under Section 80C of the Income Tax Act.

Automatic renewal option

Some FDs have an automatic renewal feature, where the principal amount and interest earned are reinvested for another tenure upon maturity. This can be convenient if you wish to continue your investment without the hassle of manual renewal.

Online Banking facilities

Today, choose a bank that offers convenient Banking app facilities for managing your FD investments. This includes opening an online account, tracking interest rates, and accessing statements.

Customer service and support

Analyse the customer service and support provided by the bank. Opt for a provider known for responsive customer service and positive feedback.

Read the fine print

Before finalising your Fixed Deposit investment, carefully read the terms and conditions, including the fine print. Pay attention to clauses related to premature withdrawal, renewal options, and applicable taxes.


Following these simple steps, you can smartly and confidently choose the best FD plan that suits your financial goals and preferences. However, be patient regarding your investment choices.

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