When you have sufficient disposable income, you may consider investing strategically. But the same idea applies to income sources as well. Setting a part of your hard-earned money helps in many ways. It saves you from financial distress and empowers you to achieve your goals.
The best way to embrace this practice is by opening Fixed Deposit in India. They secure your capital for a fixed term and earn returns at fixed interest rates. However, you can enjoy higher interest rates by implementing a few tips:
Compare rates
Every bank issues a different FD interest rate. The structure entirely depends on factors like:
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Your banking partner’s policy
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The investment amount
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Tenure
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Account type
Hence, it is best to consider these factors and decide based on your research. Begin by shortlisting banks that offer the best Fixed Deposit interest rate. Then, check the mentioned aspects to select one that matches your needs.
Select the right tenure
As your funds stay locked for the duration, you must choose one wisely. Consider your liquidity needs to avoid premature withdrawals. Withdrawing before maturity not only leads to penalties but also reduces interest income. Hence, plan your investments according to your financial goals and withdrawal requirements. Use online portals to get an idea.
Utilise tax benefits
Bank Deposits offer investors specific tax provisions. This, however, depends on your interest income and the type of FD. As with Term Deposits, you can get up to Rs. 1.5 lakh under Section 80C. This is possible only under a Tax-Saving FD with a five-year lock-in period. You can also claim the deductions when your income does not fall under the tax slab.
For this, you need to submit a declaration form 15G or H and comply with the process specified by your bank.
Spread your investments
When you start investing, you are asked not to place all your eggs in one basket. The same philosophy applies to a Fixed Deposit in India. To maximise your interest rates, you must create multiple sources to expand your interest earnings. Open multiple RDs and FDs with different banks. This practice is called as laddering, where you invest for different amounts, tenures, and interest rates to mitigate risks.
See compounding magic
The best way to maximise your interest rates is to stay patient. Let the power of compounding accumulate your interest earnings. Avoid making premature withdrawals, which can affect the interest income growth. When you open an FD, make sure to select between monthly or quarterly interest payouts and reinvestment of interest. It is best to go with the latter option to get the best interest returns.
