How To Earn More On A Fixed Deposit Investment?

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Fixed deposit investments hold a majority of people because of their higher returns and stability. The interest rate, tenure and the returns of a fixed deposit are pre-determined, and you can be sure that you will get the same once your deposit tenure ends. When you are a first-time investor or a person who doesn’t want to put your money on risky investments, then a fixed deposit is the perfect choice for you. 

Due to the changes in the economy, the interest rates of fixed deposits are going down. So you should understand it well and make sure to utilise all the methods you can to maximise your returns on your fixed deposit. 

Here are the steps that will help you in maximising the returns that you get with your fixed deposit investment:

Open Online Fixed Deposit:

Nowadays, the world is revolving online, and so is the investment market. When you want to get an additional interest rate on your investment, then you should apply for it online. Many financial providers offer fixed deposits both online and offline modes; the interest rates of online mode varies from that of offline mode. 

People have mostly opted for traditional fixed deposits until now. But the changing economy and the internet impacting the world have made people move towards it as well. Now all the transactions and investment methods have an online touch to it to help people save more time and energy.

Choose A Company Fixed Deposit:

Both NBFCs and banks in the country offer their customers with fixed deposit investment options. When compared to banks, NBFCs provide higher interest rates and flexible tenure options on their fixed deposit investment product. So always make a wise decision on choosing a company fixed deposit over a bank account.

Ensure the company you choose is credible and trustworthy before making your investment. When you are choosing a company fixed deposit, then look at whether the company is AAA+ certified as that ensures high security on your investment. There are many online calculators available to understand your returns and choose the one that gives you higher returns.

Submit Form 15G and 15H:

When you need to pay tax on your fixed deposit, you have to submit Form 15G and 15H. When you place your income tax returns (ITR) with these forms, you can ensure that you are not paying unwanted taxes on your fixed deposit investment returns. 

With ITR filings under section 80C, you can ensure that you can get a tax free income up to Rs.1.5 lakhs on your fixed deposit investment. The income tax they will make you pay for your fixed deposit investment will depend upon your tax slab. The interest accumulation for your fixed deposit should be less Rs.40,000 per financial year to avoid tax.

Choose A Cumulative Fixed Deposit Investment:

Fixed deposit investment is of two types: Cumulative and Non-Cumulative fixed deposit investment. With a Non-Cumulative FD, you will get your interest for your fixed deposit periodically on your bank account. The period of the interest payout will depend upon your choice during the investment.

Whereas with a cumulative fixed deposit, the interest will compound along with your investment, and you will get the whole sum at the tenure end. With the law of compounding, you save more on your fixed deposit investment that is cumulative. When you don’t take out the money, and it keeps accumulating in a deposit, you can ensure higher returns and increase your savings.

Do Not Withdraw Your FD Before Tenure End:

Always make sure you don’t close and withdraw your fixed deposit investment before the tenure ends. When you withdraw it before the tenure, you will have to pay a certain percentage of your deposit amount as a penalty towards premature withdrawal. It is an unnecessary loss that you have to face because of your action, so wait until your tenure ends to withdraw your fixed deposit amount. 

Usually, the financial institutions charge around 1% to 2% as a penalty for premature withdrawal. Depending upon the financial provider, you choose the penalty percentage varies, so always check with your financial provider regarding this before applying for a deposit. 

Split And Invest Your Fixed Deposit Investment:

When you want to avoid the previous instance, then you have to follow the current step. When you are worried about what you will do when there is a financial emergency, then this step will help you with it. When you split and invest your fixed deposit investment, you can make sure that you cancel only fixed deposits during emergencies.

With this technique, you can ensure that you don’t lose all your savings because of unavoidable instances. Also, it will help you in getting out of paying unwanted tax. When you split your money and invest in fixed deposits with different tenures, it will benefit you positively. You can make sure to avoid getting Rs.40,000 as interest on a financial year and subsequently avoid tax. 

Here are the essential benefits of splitting and investing your fixed deposit:

  • Building a safety net on your investment
  • Gaining higher returns
  • Reducing tax obligations
  • Gaining higher and varying interest rates
  • Having money at all times of your life and be without any worry about reduced cash flow

Fixed Deposit On Your Parent’s Name:

When your parents are senior citizens, it’s another factor that will help you in ensuring an increase in returns. You can make sure to invest the money in your parent’s name and get an additional 0.25 to 0.75% of interest rate towards your deposit. Also, senior citizen deposit incomes don’t come under taxable income, and that will help you ensure higher returns on your fixed deposit.

Choose A Financial Provider With Higher Interest Rate:

Apart from safety, people choose fixed deposits as an investment option to gain more returns. So always make sure to do detailed research on all the financial providers and their fixed deposit investment options. Once you get a clear idea on all the investment options and the interest rates they offer, choose the one that provides a fixed deposit option with a higher interest rate.

Reinvest Your Interest Income:

When you want to earn more, you should avoid unnecessary money usage. When you are certain that you don’t want the money for any crucial finances, always make sure to reinvest your fixed deposit. When you do this, you can ensure that your returns grow and help you in elevating your savings for your future benefits.

When you follow the steps of the above investment, you can ensure that you gain more returns on your fixed deposit investment and gain more on your returns.