What is the best-fixed deposit strategy you should follow?

Fixed deposits or FD are the best places to park your money safely and grow your money. After all, for most investors, the safety of the principal is the most important part. It is good to compare FD interest rates to grow money. However, if you adjust the inflation with interest provided by most FD, then it is quite low. It defeats the purpose of wealth creation. This guide will help you understand the best way to employ a fixed deposit strategy.

1. Rate of interest: The interest rate on an FD varies across lenders and tenure. The interest rate is fixed at the time of the deposit and remains the same through the tenure. You can opt to have high fixed deposit interest rates from new banks. Senior citizens can get higher interest rates on deposit. 

2. FD tenure: Deposits in FD are allowed at varied term from 7 days to 10 years. Keep an eye on the tenure that offers better interest rates while ensuring that your finances are maintained. Instead of locking funds in a 1-year FD, divide it across 1-year, 3-year, and 5-year FDs. As the first FD matures, renew it according to your requirements.

3. Taxability on interest: It is important to understand the post-tax return of an FD. The income from FD is fully taxable. Moreover, you might have to pay TDS of 10% if your interest income is over Rs. 10,000 from the bank FD. 

4. Choose the frequency of interest payments: You can choose to receive interests from your FD according to a payment cycle of your choice. You can go for monthly, quarterly, or yearly payments. If you do not require regular income, you can opt for reinvestment of interest, to get benefits of compounding. 

5. Investment method: You can choose to invest in FD through various methods, including internet banking, visiting a bank branch, ATM, or phone banking channel.

6. Safety: Making investments in Bank FDs is secure, and under DICGC rules, some amount of bank deposits are insured. Investing in mainstream banks is highly secure as the government won’t allow them to default easily, as seen in the past.

7. Premature withdrawal: Premature withdrawal on FD is subject to a penal rate of interest according to the prescribed details while making the deposit, which will be returned along with the adjusted interest. For most banks, this penalty is around 1%. However, the penalty on premature withdrawal for very short term deposits (7-14 days) is not applicable. 


Making investments in Fixed Deposit (FD) is one of the best ways to park your money while keeping it in secure hands. Before choosing to invest in an FD, make sure to take care of all the points mentioned above, and try to avail the best offer for yourself. Bank FDs are suitable for conservative investors as it provides assured returns with high safety. Additionally, people can park their emergency funds in FDs as they are accessible within a few days, and they can grow securely.

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