fixed deposits (FDs) are the safe-haven for risk-averse investors who are looking to keep their money safe from any type of volatility in the financial markets. fixed deposits provide a low-interest yield as compared to other investment options that have more exposure in equity but being risk-free is one of the main reasons why people choose FD. having said that, there are some strategies that can help you get higher returns on your fixed deposit investment. here are some tips for your reference:
go for online fixed deposit accounts
nowadays, some banks offer extra interest rates if you open a fixed deposit online. as people are becoming more familiar with the use of online banking, it has now become possible to open any kind of bank account remotely without having to visit the bank branch. you can compare the fixed deposit interest rate offered by various banks online and choose the one that's giving the highest interest rate.
look for company deposits
Triple-A (AAA) rated bonds and company deposits offer higher interest rates compared to bank deposits. AAA ratings are issued by the credit rating agencies to investment-grade debt bonds that have a high level of creditworthiness with the strongest capacity to repay investors. hence, these are as safe as bank fixed deposits.
submit form 15G and 15H
if you do not have taxable income, you can submit forms 15G and 15H to make sure TDS is not cut and your return is safe. however, note that this form is only for those who have a net annual income limit of 2.5 lakh and come under the tax-exempt category. the forms 15G and 15H are used to inform the tax department not to deduct TDS since your income is below the taxable bracket. make sure you do not submit the form if you fall under the taxable income group.
apply for cumulative deposits
when you invest in cumulative deposits you get the benefit of compounding interest. generally, banks compound interest every quarter, whereas company fixed deposits do not. the power of compounding helps you earn higher yields in the future. however, you have to overlook other aspects such as safety, liquidity, etc.
do not withdraw your FDs early
you should never withdraw your fixed deposits early as most of the banks levy a heavy penalty on early withdrawal of money before maturity. it is always best to avoid large lump sum deposits as you may need the money for an emergency. for example, if you want to deposit a sum of ₹10 lakh, then instead of putting a lump sum in one single deposit, divide it into 10 deposits of ₹1 lakh so that you can withdraw just one deposit. this way, you can use the money for emergencies without having to pay any penalty for early withdrawal.
place deposit in the name of parents
most of the banks offer senior citizens an extra 0.50 percent interest on fixed deposits. so if your parents do not have the taxable income you may open fixed deposits in the name of your parents. however, if they come under the higher income tax bracket, avoid doing so.
now that you know the benefits of fixed deposits and how to earn more from your fixed deposit, it's time to start investing. you can use the CRED fixed deposit calculator to get an estimate of how much you can earn. you just have to enter the amount you want to deposit, the rate of interest offered by the bank, and the tenure of the fixed deposit to get an estimate of total interest yield and the overall return earned.
use CRED fixed deposit calculator