Fixed Deposit (FD) is one of safest investment instrument and hence, a popular choice among middle-class Indians. Fixed Deposits have a fixed interest rate and so the returns are guaranteed. Regardless of what happens in the market, your investment is in safe hands and there is nothing that you need to worry about.
As an investor, you probably already know how much return you’ll earn after maturity. Fixed Deposits come with a fixed lock-in period and you can withdraw the money before that. If needed, you can take a loan of up to 90% of your FD value at a very low interest rate. If you happen to withdraw the money before that, then you lose out on the interest.
While there are a few drawbacks, the advantages are aplenty. This is why millions of people have FD accounts.
However, most people don’t know how to make the most out of their Fixed Deposits. Here, we’ll discuss just that. There are many effective tricks that you can make use of to ensure that the returns for your Fixed Deposit are maximum and they are:
Research, Research, and More Research
One important thing that you need to know before investing in Fixed Deposit is the fact that not all banks and NBFCs offer the same interest rate. So, it’s really important that you conduct enough research to find out which financial institution is offering the maximum interest rate.
Tenure is another important thing that you need to consider as based on this your interest will be calculated monthly, quarterly, semi-annually, or annually. Fixed Deposit investment options are many. Make sure to compare the schemes offered by different lenders, before making the final choice.
Opt For Long-Term Fixed Deposits
When you’re investing in Fixed Deposits, it’s best to go for the longer termed ones. The benefits are more, when compared to short-term Fixed Deposits. All banks and NBFCs offer high interest rates on fd. in the case of long-term Fixed Deposit. So, when the lock-in period is 2-5 months, the returns will be better as well.
Distribute to Save Taxes
If your interest income from Fixed Deposits is more than Rs.10,000, tax deducted at source (TDS) is 10% every financial year. So, split your Fixed Deposit investment into two accounts, to avoid paying this tax.
Instead of opening one FD account in one bank or NBFC, split the amount between two accounts into two different banks or NBFCs to avoid TDS.
P.S. Another benefit of splitting FD amount is the fact that if you need money urgently, then you can break one of the FDs and get the pre-determined interest in the other one.
When you are investing in FD, you have two options—you either can withdraw the interest or reinvest that amount. If you opt for the withdrawal option, then your saving account will get credited with the interest.
If not, then the amount will get reinvested and the interest you earn the next time will be more, which again will get reinvested.
If you’re someone who prefers to stay away from risk, then Fixed Deposit is the best investment option for you. You already know how to invest in bank Fixed Deposits (FDs) and how to go about it. Following these tips is easy and these ensure that you earn more from the investments you make.