Fixed deposit (FD) is a quintessential investment instrument trusted by all Indians. It is hard to find an Indian citizen who has never invested in fixed deposits.

However, not all fixed deposit accounts generate similar returns, a reason why you need to know the things discussed here. The tips mentioned below can help you choose the best fixed deposit before opening an account. 

The Top Tips to Choose The Best FD Account 

Here are the best tips you need to know before opening a fixed deposit account:  

1. Account Opening

Opening a fixed deposit is a no-frills experience when you choose corporate institutions like PNB Housing Finance. Unlike most conventional banks, these corporate financial institutions offer online account opening facility for internet-savvy investors and doorstep services for others. You need to keep address and identity proof, along with the investment amount, ready to be uploaded or handed over to the institution’s representative.

2. Minimum Investment Amount

Before opening a fixed deposit account, you must inquire about the minimum investment criterion. Corporate financial institutions usually offer the best FD interest rates in the market. Many such institutions accept a minimum cumulative deposit of INR 10,000 and a non-cumulative deposit of INR 25,000. However, if you choose conventional banks, you can invest as little as INR 1,000; but, the interest rate offered is much lower than corporate institutions. 

3. Tenure

Knowing the tenure before opening a fixed deposit account is crucial for getting maximum returns. Fixed deposit duration typically ranges between one year and ten years. You can expect a 2%-3% difference in interest rates between a one-year FD and ten-years FD. Ten years FDs generally provide the best interest rates.

4. Interest Rate

The interest rate plays a significant role in determining the returns. Before opening a fixed deposit account, you must check the latest interest rates. The interest rate generally depends upon the FD type. Investors willing to get the best FD interest rates to invest in cumulative FDs, in which the amount remains locked until maturity. But, if you want to get regular income (monthly, quarterly, half-yearly, or annually), investing in a non-cumulative FD will be the best decision. 

5. Tax Exemption

When you open a fixed deposit account, you get tax exemption (up to a specific limit) for free. Generally, any interest income up to INR 5,000 a financial year is TDS-exempt. TDS exemption, coupled with the best FD interest rates, can enable higher returns and faster goal fulfilment. 

6. Loan Facility

Lenders like PNB Housing offer the facility of loans against fixed deposits. The interest rate of such loans is much lower than conventional loans or credit cards. Corporate financial institutions usually charge a 2% higher interest rate than the highest FD interest rates. Hence, if the highest interest rate is 6.70% per annum, you may avail the loan against FD at 8.70%.  

7. Auto-Renewal and Maturity

Gones are the days when you had to physically visit the financial institution to transfer or renew your investment amount. Presently, financial institutions offer auto-renewal and auto maturity facilities. If you opt for the auto-renewal option, your FD will be automatically renewed on maturity. However, if you want to withdraw the amount, choose the auto-maturity option. 

Conclusion

Open a fixed deposit account to make yourself ready for the future. Choose the best financial institution after evaluating all terms. The best lender provides not only high FD interest rates but also optimal satisfaction. 

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