Fixed Deposits (FDs) offer a secure way to grow your savings. However, simply investing is not enough to maximise returns from FD. Choosing the right bank, tenure, and investment strategy can significantly impact your earnings. Small yet smart decisions help you make the most of your Fixed Deposits.
Want to earn higher returns while keeping your money safe? Follow these simple strategies to maximise your benefits on Fixed Deposits.
Tips to maximise Fixed Deposit returns
Having Fixed Deposits (FDs) is a great way to grow your savings with minimal risk. However, choosing the right approach can increase your returns. You can earn higher interest while keeping your money safe by making some smart decisions.
Let us explore some simple as well as effective tips to maximise your FD returns.
Compare FD interest rates before investing
Different banks offer different FD interest rates. Check multiple options to find the best rate before investing your money. Higher FD interest rates mean more earnings on your deposit. Always compare rates before investing to ensure better returns.
Choose the Right FD Tenure
Longer tenures generally offer higher FD interest rates. However, locking funds for too long may reduce flexibility. You must choose the right tenure depending on your financial goals and liquidity requirements.
Opt for Cumulative FDs
Cumulative FDs reinvest the interest. It gives you higher earnings over time. In contrast, non-cumulative FDs pay interest at regular intervals. If you do not need regular payouts, a cumulative FD is a better option for higher returns.
Use the FD Laddering Strategy
FD laddering means investing in multiple FDs with different maturity dates. This strategy ensures liquidity and helps you reinvest at higher FD interest rates when they rise.
Invest in Tax-Saving FDs
Tax-saving FDs help reduce taxable income under Section 80C of the Income Tax Act. These FDs come with a five-year lock-in period. You cannot withdraw them early. However, they provide both tax benefits and stable returns.
Diversify Investments Across Banks
Not all banks offer the same FD interest rates. Investing in multiple banks helps you take advantage of the best available rates. Diversification also reduces financial risk by spreading your investments.
Avoid Premature Withdrawals
Withdrawing an FD before maturity leads to penalties and lower returns. Plan your finances well to avoid breaking your FD early. Keeping funds in place until maturity ensures that you receive full benefits.
Monitor FD Interest Rate Trends
FD interest rates fluctuate based on market conditions. Investing when rates are high helps you lock in better returns. Keep track of interest rate movements to ensure you invest at the right time.
Submit Form 15G or 15H
Banks deduct TDS on FD interest when earnings exceed a specific limit. If your income is below the taxable limit, you can submit Form 15G or 15H to avoid this deduction. You can maximise returns by avoiding unnecessary tax cuts.
Reinvest Maturing FDs at Better Rates
When an FD matures, you can reinvest it at current FD interest rates. If rates have increased, reinvesting helps you earn more. Always compare ongoing rates before renewing or reinvesting your funds.
Conclusion
Maximising FD returns requires small but smart decisions. Comparing FD interest rates, choosing the right tenure, and avoiding premature withdrawals help you earn more. Use these strategies to grow your savings and secure better financial returns.