High volatility in the stock market coupled with falling inflation has brought back fixed deposits as an attractive investment avenue for the investors who are looking for fixed returns.
Bank FD schemes offer guaranteed returns to the investors at the time of the maturity.
A bank FD scheme is considered one of the safest investment avenues compared to other avenues of investments.
You can avail loans of up to 75-90 per cent of the FD amount.
Here are three ways in which you can get the most out of you fixed deposit plans…
Do enough research
Before deciding on a particular FD scheme, you should look at the interest rate it is offering. You should also decide on the tenure of the scheme. FD interest rates may vary across different banks and different tenures. Interest amount on FDs are calculated quarterly, half-yearly, yearly or at the maturity. Therefore, you should calculate and compare to discover which bank is paying you the highest interest rate. Consider two banks X and Y. Bank X offers 10 per cent per year on a five-year FD and computes the interest on a quarterly basis. On the other hand, Bank Y offers the same interest rate for the same tenure but calculates the interest on a yearly basis. Here Bank X is fetching you more interest than Bank Y because it is calculating interest more frequently.
Thus, the interest that you will get at maturity depends on how frequently the interest is calculated.
Split your FD
TDS (tax deductible as source) at 10 per cent is charged on fixed deposits if the interest income exceeds Rs 10,000 in a financial year. The tax liability of TDS is determined at the branch level. If you want to avoid TDS, you can split your fixed deposits, that is, instead of opening one FD account you can open FD accounts in different branches of the bank and divide the amount among these. Opening fixed deposits in different banks can also avoid TDS. Splitting your fixed deposit has another advantage. In case you need money urgently, you do not have to break all your FDs. You can withdraw the amount by breaking only one or two of them and rest of the accounts still earn you the predetermined interest.
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