When it comes to investment, Fixed Deposits are one of the best and safest avenues of investment to park your idle funds. Since the investment does not involve any risk, returns are risk-free and higher. A fixed deposit is usually a long-term investment, so investors keep investing in it for a few years. The FD interest rates are high compared to savings or current account. It is one of the best alternatives to enjoy higher returns if you are not willing to take the risk as investors need to take in case of mutual funds. The rate of interest on fixed deposits remains the same throughout the deposit tenure. In the case of FDs, it is advisable not to withdraw your funds before they mature if you are seeking better returns. You are allowed to withdraw after its maturity, i.e., after the deposit completes its tenure. Let’s look at how you can maximize profits from your fixed deposits.
Tips to Increase the Returns from Fixed Deposits
Compare rates across different lenders
The interest rate on fixed deposits might vary from one financial institution to another. So, it is advisable for an investor to look around in to find the financial institution or an NBFC which is paying a higher interest rate for the amount and tenure you want to invest.
Opt for Cumulative FDs over Non-Cumulative FDs
If you are looking to maximize your returns on your investment, you should opt for cumulative FDs over Non-cumulative FDs. Cumulative FDs would enable you to grow your corpus over the tenure as you get benefits of compounding. On the other hand, if you would invest in non-cumulative FDs helps you gain regular payouts on monthly, quarterly, half-yearly, or annually as per the choice of the investor.
Open deposit in the name of your parents
To earn a better profit, place a fixed in the name of your parents if they do not have any taxable income. This is because senior citizens get a 0.50% higher rate of interest than the normal ones. So, one can enjoy the benefits of higher returns by opening a fixed deposit under your parent’s name.
Submit Form 15g and 15h to avoid tax deduction
If your income is not taxable, you can submit the form 15g and 15h forms to avoid tax deduction on your deposit. Form 15g is for the senior citizens who are above 60 years of age. On the other hand, form 15h is for every citizen. If your yearly income is less than Rs. 4.5 lakhs, you can submit the form 15h and request your lender not to deduct TDS on the interest component of your FD.
Tax Saving FD
It is yet another option to be safe from paying taxes on your earnings from a fixed deposit. A tax saver fixed deposit is a deposit in which you get a lock-in period of 5 years which does not allow you to break your deposit before that tenure. If you break your deposit before its maturity, then the amount invested will not qualify for any tax deductions. So, before planning to park your surplus funds in a tax saver FD, you should be familiar with the fact that you would not be able to withdraw your funds before maturity.