Fixed Deposits are a safe investment option assuring a consistent interest rate, special rates for senior citizens, multiple interest payment options, no market risks, and income tax deductions. This investment has gained people’s trust from different generations thanks to its assured returns and deviation from market fluctuations.

Before forming a new Fixed Deposit Account or renewing an existing one, you should evaluate the rates offered by the country’s leading banks. They are more secure than other investment vehicles, allowing you to earn interest over time. The maximum investment tenure is 10 years without an upper deposit limit. Senior citizens get higher interest rates from banks than the public. Here is a guide to scheme comparison:

Interest rates

The FD interest rate is the percentage the bank will pay you for holding your funds in their deposit scheme. It is crucial to note that interest rates can vary depending on the tenure. Typically, longer-tenure FDs offer higher interest rates. Therefore, it is essential to determine the tenure of the investment that suits your financial goals and compare the interest rates various banks offer to select the best scheme.

Tenure

The tenure is the length of time for which you hold the FD. It typically ranges from a few months to several years. A longer tenure generally translates to a higher interest rate, which means the money remains locked in for longer. Choosing a tenure that aligns with your financial goals and needs is essential.

Credibility and bank reputation

When choosing the best deposit scheme with the maximum interest rate, one of the most important factors to consider is the credibility and reputation of the bank. It is necessary to choose a bank with a good track record of stability and reliability that is well-known and respected in the industry.

Taxation

The FD and RD interest rates attract taxes. The rate of taxation depends on your tax slab. Banks deduct TDS on interest earned, but the investor must pay additional taxes if the total interest income exceeds a certain threshold. However, Tax-Saving FD schemes offer deductions under Section 80C of the Income Tax Act. It is essential to consider the tax implications of an FD scheme before investing to maximise returns and minimise tax liability.

Premature withdrawals and penalties

Consider the premature withdrawal and penalty charges when choosing a Term Deposit scheme with the maximum interest rate. Premature withdrawal is when you withdraw your money before the maturity date. Banks usually charge a penalty, ranging from a percentage of the interest earned to a percentage of the principal amount.

Why hold on to it?

Opening FDs on the Banking app allows your money to compound while helping you avoid premature withdrawal penalties. You can get up to 90% of your deposit amount as an instant overdraft and use as much as you need to meet your cash flow while your deposit earns interest uninterrupted.