How to get the best Fixed Deposit interest rates: 6 tips you can follow!

Everyone wants to save money and see it grow. One reliable method you can follow is by opening and investing in Fixed Deposits. With FDs, you enjoy fixed returns elevated by the power of compounding (earning interest on interest). Also, FD rates are unaffected by market volatility. So, rest assured, your money is more secure than market-linked products.

Here are practical tips on getting the best Fixed Deposit interest rates and maximising your returns. Whether you are a first-time investor or planning to optimise your existing FDs, these tips help you secure the highest interest rates and make informed decisions:

1. Research before you invest

Before investing in an FD, it is crucial to do thorough research. Check your bank’s online platform for interest rates on different tenure options. Compare the rates offered by other banks to invest accordingly.

2.     Choose the right tenure

The interest rate on FDs varies across different tenures. Generally, longer tenures offer higher interest rates. Extending your tenure by even a day earns you a higher interest rate. Therefore, choosing a tenure that offers you the best interest rate is essential.

3.     Consider Senior Citizen FDs

Senior citizens enjoy additional interest on normal deposit rates. The additional rate is usually up to 0.50% over the regular rates. You can gift a Senior Citizen FD to your parents so that they can enjoy higher returns on their savings. You may also teach them how to use Online Banking to make investments and withdrawals easier. However, premature withdrawals may attract penalty charges.

4.     Opt for Cumulative FDs

When opening a Fixed Deposit, you can choose between monthly or quarterly interest pay-outs and reinvesting the interest. To maximise your returns, opt for the reinvestment option. The interest amount is reinvested in the FD, and you earn interest on both your principal and accumulated interest. This helps generate higher interest income at the time of maturity.

5.     Tax implications

Income earned from Fixed Deposit interest rates is taxable under the Income Tax regulations. Banks deduct TDS on the interest earned if it exceeds Rs. 40,000 for regular investors and Rs. 50,000 for senior citizens. To optimise your returns, you can invest in Tax-Saving FDs and avail of deductions under Section 80C of the Income Tax Act.

6.     Hold on to the end

To maximise your returns, hold onto your FD until the end of its tenure. By allowing compounding to work, you earn interest on your principal and on the accumulated interest. Premature withdrawal of an FD may attract penalties, reducing your overall returns.

Conclusion

Investing in FD Accounts is a reliable way to multiply your savings and earn a steady income over time. Additionally, holding onto them until the end of the tenure and seeking professional advice can further maximise your returns. Follow these tips for higher returns on your investment.