The aim of investment
We invest our hard-earned money intending to get sky-high returns in the shortest possible time without the risk of losing our principal amount. But in the real world, risk and profits go hand in hand; in other words, higher the risk, higher is the returns and vice versa.
Best investment plans
The choice of the best investment plan is subjective. It changes from investor to investor depending upon his purpose of investment, the tenure, highest FD interest rate offered, mode and frequency of payment return, degree of safety desired, and the currently available options in the market.
Bank Fixed Deposits are one of the safest investment options in India, as suggested by experts. Banks offer a much higher rate of interest on FD as compared to regular investments like savings bank account or current account. Some fixed deposit pans like 5-year tax-saving FDs get the tax benefit of Rs 1,50,000 per year under Section 80C of the Income Tax Act, 1961. Apart from banks, other financial institutes also offer FDs.
Three Ways to get a better return on FD
If you’re looking for ways and means to maximize your returns on Fixed Deposits, consider some essential tips.
- Do market research and plan your investment strategy:
Before you decide to opt for a particular fixed deposit (FD) scheme, compare its interest rate with the rate of interest offered by other systems. You must also decide on the tenure for which you wish to invest your money and the best combination of interest rate and tenure provided by the bank. FD interest rates vary from bank to bank and are different for different tenures. You should decide the interest payout mode and should make your choice accordingly.
- Two is better than one
The interest you earn on your fixed deposit is taxable if it exceeds a limit of Rs. 10,000. This tax deduction at source (TDS) is at a rate of 10%. To avoid TDS, you should split your fixed deposits. Instead of having one FD account in one bank, you can have your FD accounts in different branches of the same bank as the tax deduction is at the branch level, or can have your fixed deposit account in different banks.
Splitting your fixed deposit in multiple numbers has an advantage that if you need some money urgently in the future, you can break just one or two policy without disturbing the other. It will ensure continuity of interest-earning on the rest of the FDs.
- Go for Cumulative plans
You have a choice in fixed deposit: you can either withdraw the interest amount or reinvest it. Withdrawal option will add your interest amount periodically to your savings account where the rate of interest is lower than the FD rate of interest. But if you reinvest the interest amount in the FD account, it will add to your principal amount for the next years and will give you higher returns as the rate of interest in FD is higher.