For risk-averse investors who want to protect their money from market instability, fixed deposits (FDs) are the best choice. Although fixed deposits offer a lower income than other investment options with greater exposure to equities, one of the key factors influencing individuals to pick FDs is that they are risk-free. Yet, there are several methods you can use to increase the profits on your fixed deposit account. Here are some tips for your reference:
1. Go for online fixed deposit accounts.
Nowadays, if you open a fixed deposit online, certain banks will give you a bonus interest rate. It is now feasible to open any bank account remotely without going to the bank branch as consumers become more accustomed to internet banking. You can examine the interest rates on fixed deposits given by several banks online and select the one with the greatest rate.
2. Look for company deposits.
Bonds with triple-A (AAA) ratings and corporate deposits pay greater interest rates than bank deposits. Investment-grade debt bonds with a high level of creditworthiness and the best ability to repay investors are given AAA ratings by credit rating agencies. Thus, they are just as secure as bank fixed deposits.
3. Submit forms 15G and 15H.
To confirm that TDS is safe and not taken from your return, you can file forms 15G and 15H if you do not have taxable income. But note that this form is for individuals who fall under the tax-exempt category and have a net annual income of no more than 2.5 lahks. The tax agency is informed not to deduct TDS because your income is below the taxable threshold using forms 15G and 15H. So make sure only to submit the form if you belong to the group with taxable income.
4. Apply for cumulative deposits.
Compound interest is advantageous when you invest in cumulative deposits. Banks typically compound interest every three months, but corporate fixed deposits do not. You can eventually earn bigger yields due to the power of compounding. But, you must disregard additional factors like safety, liquidity, etc.
5. Refrain from withdrawing your FDs early.
You should only take money out of your fixed deposits after maturity because most banks charge heavy penalties. On the other hand, large lump sum deposits should always be avoided because you might need the money for an emergency. For instance, if you wish to deposit ten lakh rupees, divide it into ten deposits of one lakh each so you can withdraw just one deposit. In this manner, you can use the money without incurring any early withdrawal fees for emergencies.
6. Place a deposit in the name of the parents.
Most banks increase senior persons' fixed deposit interest rates by 0.50 percent. You can open fixed deposits in your parents' names if they do not have taxable income. However, avoid doing so if they fall into a higher income tax rate.
Conclusion
It's time to start investing now that you know the advantages of fixed deposits and how to increase your earnings. The CRED Fixed Deposit Calculator can help you determine your potential earnings. To estimate the total interest yield and the return earned, you only need to enter the amount you want to deposit, the interest rate the bank offers, and the fixed deposit's tenure.