Fixed deposits have always been popular due to the safety of capital and confirmed returns. The high interest rates which the FDs are earning in past few years have further increased the popularity of fixed deposit investment.
Here’s a piece of advise: It would be better to lock in your money in long term fixed deposits since RBI has cut repo rate and cash reserve ratio several times.
A few tips to increase returns in fixed deposits may come in handy:
Split your FDs
It is usually better to split your Rs. 5 lakh fixed deposit investment into five FDs worth Rs. 1 lakh each in various banks, since fixed deposits which accumulate up to Rs. 1 lakh are backed by deposit insurance.
Ladder your investment
The biggest risk that even the best fixed deposit scheme in India faces is the risk of your money being locked up for a long tenure at a low rate of return. To counter this, ladder your amount available for investment into smaller amounts. So, the first fixed deposit should be for one year, second for two years and so on.
Invest in a Public Sector Bank
Public sector banks offer a higher return on fixed deposits than private banks. So, one can get higher returns accompanied with more safety and security.
Avoid tax on your final amount
The interest earned through fixed deposits is not tax-free. The interest income from FDs up till Rs. 10,000 is exempt from tax. This tax can be avoided again if you break the total FD amount and invest smaller FDs in different banks.
RBI is likely to continue rate cuts in the coming fiscal year. So, the medium and long term fixed deposit investments will see larger positive return and not the short-term fixed deposits. Also by keeping these points in mind, one can increase the interests for fixed deposit for any term.
Here’s a piece of advise: It would be better to lock in your money in long term fixed deposits since RBI has cut repo rate and cash reserve ratio several times.
A few tips to increase returns in fixed deposits may come in handy:
Split your FDs
It is usually better to split your Rs. 5 lakh fixed deposit investment into five FDs worth Rs. 1 lakh each in various banks, since fixed deposits which accumulate up to Rs. 1 lakh are backed by deposit insurance.
Ladder your investment
The biggest risk that even the best fixed deposit scheme in India faces is the risk of your money being locked up for a long tenure at a low rate of return. To counter this, ladder your amount available for investment into smaller amounts. So, the first fixed deposit should be for one year, second for two years and so on.
Invest in a Public Sector Bank
Public sector banks offer a higher return on fixed deposits than private banks. So, one can get higher returns accompanied with more safety and security.
Avoid tax on your final amount
The interest earned through fixed deposits is not tax-free. The interest income from FDs up till Rs. 10,000 is exempt from tax. This tax can be avoided again if you break the total FD amount and invest smaller FDs in different banks.
RBI is likely to continue rate cuts in the coming fiscal year. So, the medium and long term fixed deposit investments will see larger positive return and not the short-term fixed deposits. Also by keeping these points in mind, one can increase the interests for fixed deposit for any term.
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