Fixed deposits have always been the preferred mode of investment for people who want to avoid risks as the returns here are guaranteed. They come with a fixed interest rate, so you’ll know as an investor just how much you’ll earn when your deposit comes to maturity. You can also avail loans for up to 90% of your FD’s value.
Here are some tips that will help you to maximise Fixed Deposit returns:
Conduct Enough Research
There are different FD (Fixed Deposit) Schemes available in the market; when you make a choice, consider the interest benefits a particular scheme offers. The tenure of the scheme is another thing you’ll need to consider. Interest rates vary from lender to lender. Depending on the tenure, interest rates are calculated monthly, quarterly, half-yearly or annually at maturity by using Bajaj Finance FD Calculator. Make sure the lender you choose offers the highest interest rate on Fixed Deposits in the market to reap maximum profits.
For instance, Bajaj Finserv offers you one of the highest interest rates in the market and maximum security on their Fixed Deposit schemes; they come with MAAA (highest stability rating from ICRA) and FAAA (the highest stability rating from CRISIL).
Split to Save Taxes
If your interest income exceeds Rs.10,000, a TDS of 10% will be charged on your FD. You can avoid this tax deduction by splitting your FD investment. You can open different FD accounts in different banks of NBFCs and divide the total amount among these.
Another great advantage of splitting up your FD is; when you are in need of some urgent funds, you won’t need to break all your individual FDs. Simply break one or two and continue earning predetermined interests on all the other accounts.
Here’s another neat option that combines the first two tips; you can consider investing in Fixed Deposits from Bajaj Finserv; these let you enjoy no Tax Deduction at Source (TDS) on interest payments of up to Rs.5,000 per annum.
Reinvest Interest Income
When you invest in an FD, you can withdraw the interest income monthly, quarterly, semiannually, or annually, or simply reinvest it. You can earn more FD interest rates in the next year by reinvesting your interest income. If you withdraw your interest every year end, you’ll keep getting the same interest during maturity.
You can also invest this interest in mutual fund SIP (Systematic Investment Plan) equity schemes. You’ll not only diversify your portfolio, but also earn better returns. Let’s see how this works:
Suppose you invest a sum of Rs.1 lakh at 10.5% per annum for 2 years. You’ll receive Rs.875 per month. Now, if you reinvest this amount in an SIP for 2 years, the total invested amount will be Rs.21,000. With a 16% return per annum, you’ll earn Rs.6,720 in 2 years.
So, if you like to stay away from risks and thus prefer an FD, these tips for maximising interest earnings of Fixed Deposits can be really useful. Make sure to invest in the right schemes for maximum benefit.