How to Get the Best Fixed Deposit Interest Rates

July 23, 2025

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Everyone wants to grow their savings, right? One reliable method is through Fixed Deposits (FDs). With FDs, you can enjoy fixed returns elevated by the power of compounding (earning interest on interest). Also, FD rates are not affected by market volatility like Mutual Funds. So, rest assured, your money is more secure compared to market-linked products.

In this article, we have given practical tips on how to get the best FD rates and maximise your returns. Whether you're a first-time investor or looking to optimize your existing FDs, these tips will help you make informed decisions and secure the highest possible interest rates.

Tip #1: Research Before You Invest:

Before investing in an FD, it's crucial to do thorough research. Start by checking your bank's website for their current interest rates on different tenure options. Compare the rates to invest accordingly.

Tip #2: Choose the Right Tenure:

The interest rate on FDs varies across different tenures. Generally, longer tenures offer higher interest rates. Extending your tenure by even a day can earn you a higher interest rate. Therefore, it's essential to choose a tenure that offers you the best fixed deposit interest rate.

Tip #3: Consider Senior Citizen FDs:

Senior citizens enjoy additional interest rates on normal deposit rates. The additional rate is usually up to 0.50% over the regular rates. You can gift a Senior Citizen FD to your parents so that they can enjoy higher returns on their savings.

Tip #4: Opt for Cumulative FDs:

When opening an FD, you have the option to choose between monthly or quarterly interest pay-outs and reinvesting the interest. To maximise your returns, opt for the reinvestment option. The interest amount is reinvested in the FD, and you earn interest on both your principal and accumulated interest. This helps in generating higher interest income at the time of maturity.

Tip #5: Tax Implications:

Interest earned from FDs is taxable under Income Tax regulations. Banks deduct TDS on the interest earned if it exceeds ₹40,000 for regular citizens and ₹50,000 for senior citizens. Please note that this TDS exemption on FD interest is applicable for FY 2024-25 (till March 2025). For FY 2025-26, the current TDS exemption limit has been hiked to ₹50,000 for regular citizens and ₹1 lakh for senior citizens.

To optimise your returns, you can choose to invest in Tax-Saving Fixed Deposits and avail deductions under Section 80C of the Income Tax Act. The tax deduction benefit is available only if you fall under old tax regime.

Tip #6: Consider Small Finance Banks:

In recent years, Small Finance Banks (SFBs) have offered competitive interest rates on FDs. These banks serve customers in rural and semi-urban areas and provide higher interest rates.

Tip #7: Hold on to the End:

To maximise your returns, it's best to hold onto your FD until the end of its tenure. By allowing compounding to work, you not only earn interest on your principal but also on the accumulated interest. Premature withdrawal of an FD may attract penalties, reducing your overall returns.

Final Thoughts

Investing in Fixed Deposits is a reliable way to grow your savings and earn a steady income. Additionally, holding onto your FD until the end and seeking professional advice can further maximize your returns.

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FAQs

1. What is the minimum investment amount for an FD?

The minimum investment amount is usually ₹3 crore. Any deposit beyond this threshold is considered as bulk deposit.

2. Which bank offers best Fixed Deposit interest rate?

Generally, Small Finance Banks like Ujjivan SFB offers higher interest rates on fixed deposits compared to traditional banks. Check the rate card of the bank for better clarity.

3. How can I check my FD maturity amount?

You can use an online Fixed Deposit Calculator to calculate your FD returns. Online calculators are easy to use. Enter the amount, interest rate, and tenure to compare and calculate your returns.