Looking at the current turbulent times, fixed deposits have once again emerged as an attractive investment in the face of the highly volatile stock market and easing inflation rates. It is especially true for those seeking assured returns. If you find interest rates too low, you might want to place your FD strategically. Maximizing your FD returns is as simple as investing in them. We’ll show you how.
Re-invest your returns
Opting for a cumulative fixed deposit plan allows you to re-invest and grow your corpus. In this plan, the interest of your FD isn’t paid out. Instead, the returns gained are re-invested to have a compounding effect. This is an ideal way to invest for those who don’t need a regular income source.
On the other hand, non-cumulative FDs pay out the interest regularly and offer no compounding effect. This makes it best-suited for retired investors.
Invest in tax-saver FDs for higher returns
Investors can get dual benefits through tax saver fixed deposits. Along with assured returns, investors get exemption under Section 80C of the Income Tax Act 1961. However, TDS still becomes applicable. These fixed deposits have a minimum lock-in period of five years, which investors can extend for a longer tenure. Premature withdrawal isn’t allowed for these deposits.
If you come under a higher tax slab, investing in tax-saver FDs is a more innovative option. These FDs will fetch India’s best FD interest rates compared to regular fixed deposits.
Use the ladder investment strategy
The ladder strategy is simply about having fixed deposits with different maturity dates. This way, you can ensure you have enough liquidity in times of need. Take this strategy up a notch by keeping some deposits for the longer term, thus earning higher interest rates.
Spread your investments in multiple FDs
The TDS of 10% is applicable on FDs if the interest rate gained exceed INR 10,000 in a particular year. This tax is determined at the branch of the bank.
To avoid TDS, investors can split their FD investments. You can do so by opening fixed deposit accounts in different bank branches so that the interest on FD does not go beyond INR 10,000 in a single branch. Another way is to open FD accounts in entirely different banks to avoid TDS. However, make sure to check the stability and dependability of the banks to get the best FD plan.
Splitting your fixed deposits with different maturities will also help you manage your liquidity better. You don’t need to withdraw all your fixed deposits during a financial crunch. You can break FDs into one or two accounts, and the rest will stay and continue earning the predetermined interest.
Invest in short-term FD to overcome inflation
Inflation and FD interest rates have always been linked. When inflation rises, interest rates follow suit. Therefore, it’s wiser to invest short-term if your financial goal is to gain interest that beats inflation.
Investors can get assured returns from their FD deposits regardless of how the economy performs. Therefore, it makes sense to do it strategically. Using the above-given strategies, compare interest rates of different banks, so you get the best FD interest rates in India.