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Fixed Deposits For Millennials: Building Financial Stability Early


by Mahindra Finance


February 23, 2024


6 mins read

As a millennial, you're navigating a vast array of long-term investment plans to secure your financial future. While seeking higher returns is important, it's equally crucial to balance your portfolio with safer, more secure investments. Fixed Deposits (FDs) offer an excellent avenue for millennials to achieve financial stability and steady growth. In this comprehensive guide, we'll explore everything you need to know about FDs, how to make wise investments, how to use FD calculators and the benefits of long-term investments.

Understanding fixed deposits

Fixed deposits, commonly known as FDs, are a type of financial instrument offered by banks and financial institutions. They provide a safe long-term investments with predictable returns and low risk. Here's what you need to know about FDs:

1. Safety and stability:

FDs are known for their safety and stability. When you invest in an FD, you lend your money to the bank or institution, which guarantees a fixed interest rate on your principal amount.

2. Interest rates:

FDs offer fixed interest rates that are higher than regular savings accounts. The rate is determined by factors such as the bank's policies, tenure of the deposit, and market conditions.

3. Tenure:

FDs have predefined tenures ranging from a few months to several years. You can choose the tenure that aligns with your financial goals and investment horizon.

4. Liquidity:

While FDs are not as liquid as savings accounts, they offer more flexibility than long-term investments like real estate or mutual funds. Most FDs allow premature withdrawals, although this may come with a penalty.

5. Fixed returns:

One of the primary attractions of FDs is the certainty of returns. You know exactly how much interest you will earn over the tenure of the FD, providing financial predictability.

Making wise FD investments

Now that you understand the basics of FDs, let's explore how to make wise FD investments as a millennial, and how to use FD calculators:

1. Define your financial goals:

Start by setting clear financial goals. Identify what you're saving for, whether it's an emergency fund, a down payment on a home, or retirement. Knowing your objectives will help you determine the right FD tenure and amount.

2. Use an FD calculator:

FD calculators are valuable tools that help you estimate your potential earnings based on different interest rates and tenures. Use an online FD calculator to compare rates and choose the one that offers the best returns.

3. Diversify your portfolio:

While FDs provide safety, it's important not to put all your savings into them. Diversify your long-term investments portfolio by allocating funds to different asset classes like equities, mutual funds, and real estate. This reduces risk and enhances potential returns.

4. Ladder your FDs:

Laddering involves splitting your investment across multiple FDs with different tenures. This strategy provides liquidity while allowing you to take advantage of higher interest rates when renewing or reinvesting your FDs as they mature.

5. Consider tax-saving FDs:

Tax-saving FDs, available under Section 80C of the Income Tax Act, offer both safety and tax benefits. Investing in them can help you reduce your taxable income while earning interest.

6. Stay informed:

Keep an eye on changing interest rates and market conditions. Be prepared to reinvest or move funds to higher-yield investments when rates are favourable.

Loan against fixed deposit

One of the lesser-known benefits of FD is the ability to take a loan against your deposit. 

Here's how it works:

1. Collateral for loans:

Banks and financial institutions allow you to use your FD as collateral to secure a loan. The loan amount can range from 70% to 90% of the FD's principal value.

2. Lower interest rates:

Loans against FDs often come with lower interest rates compared to personal loans or credit cards. Since the FD serves as collateral, banks consider it less risky.

3. Quick and easy approval:

The loan approval process for loans against FDs is usually quick and straightforward. Banks don't require extensive documentation or credit checks since the FD serves as security.

4. Flexible Repayment:

You have the flexibility to choose the repayment tenure that suits your financial situation. Repaying the loan is convenient, and you can use the FD's interest earnings to cover the loan interest.

Taxation and FDs

Understanding the tax implications of FDs is crucial to maximising your returns. Here's what you should know:

1. Tax deducted at source (TDS):

Banks deduct TDS on FD interest if it exceeds ₹40,000 (₹50,000 for senior citizens) in a financial year. To avoid excessive TDS, consider submitting Form 15G or 15H if your income is below the taxable limit.

2. Interest income:

The interest earned on FDs is added to your taxable income and taxed at your applicable income tax slab rate. Plan your FD investments to align with your tax-saving goals, such as investing in tax-saver FDs under Section 80C.

3. Premature withdrawals:

If you need to make a premature withdrawal from your FD, you may incur a penalty, and the interest earned might not be eligible for tax benefits.

4. TDS exemption:

You can avoid TDS on FD interest by submitting Form 15G or 15H if you meet the specified criteria. Ensure you meet the age and income requirements for these forms.


Fixed deposits are a secure and stable investment option for millennials looking to build financial stability early. By understanding the nuances of FDs, using an FD calculator, diversifying your portfolio, considering tax saving FD, and leveraging loans against FDs, you can make informed investment decisions. Stay updated on changing market conditions and taxation rules to maximise your returns. 

As you consider your investment options, Mahindra Finance offers a range of financial solutions designed to cater to the specific needs of millennials. Whether you're looking for fixed deposit accounts or other investment avenues, Mahindra Finance provides reliable and customer-centric services to help you achieve your financial goals.


Q: How can I use an FD calculator?

A: An FD calculator is a tool that helps you estimate your potential earnings based on different interest rates and tenures. Simply enter the principal amount, tenure, and interest rate to calculate the maturity amount.

Q: Can I invest in multiple FDs with different tenures?

A: Yes, laddering your FD investments by splitting them into multiple deposits with different tenures is a smart strategy. This provides liquidity and allows you to take advantage of higher interest rates when renewing or reinvesting your FDs.

Q: Are there any tax benefits associated with FDs?

A: Yes, investing in tax-saving FDs under Section 80C of the Income Tax Act offers both safety and tax benefits. You can reduce your taxable income while earning interest on these investments. For more information, refer to websites on tax benefits of FD.

Q: Can I take a loan against my fixed deposit?

A: Yes, banks allow you to use your fixed deposit as collateral to secure a loan. The loan amount can range from 70% to 90% of the principal value of your FD.

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