A fixed deposit account can be opened with banks, finance companies, and post office of India. Most banks have reduced their FD rates this year due to the reduction in repo rates and unstable economic conditions. This has lowered the bank FD rates considerably.
The latest bank FD rates range between 2.5 to 5.5% based on the tenor and bank selected by you. Post office deposit plans offer a better interest rate than bank fixed deposits.
For instance, the SCSS rate of interest is lucrative but it offers limited tenor options and is only applicable to senior citizens. Therefore, you will have to find an FD scheme that offers a higher interest rate than bank FDs and better flexibility of tenor and investment options than post office FDs.
Here are some ideas that can help you earn more interest by investing in an FD plan:
Research various FD plans
Before investing in an FD plan, check whether FDs provided by NBFCs and financial institutions offer a higher interest rate. Bank FDs are preferred despite them offering lower interest rates as it keeps your deposited amount safe. Therefore, while finalizing an FD you must also validate the credibility of the financier.
For example, the Bajaj Finance FD offers interest rates up to 6.85% which is one of the highest fixed deposits rates in India. It is also safe as it has received high ratings from credit rating organizations such as CRISIL and ICRA.
The interest of an FD is usually calculated after every quarter. Therefore, it fetches better returns than the deposit schemes that calculate interest on a yearly or half-yearly basis.
Cumulative FDs provide better returns as the interest generated in the previous quarter gets added to the principal during the next interest calculation cycle. However, if you invest in a non-cumulative FD, the interest gets disbursed at regular intervals and this takes away the effect of compounding from it.
Therefore, you must understand your investment requirements carefully before investing. Bajaj Finance FD provides both non-cumulative and cumulative FD options.
You can invest in a non-cumulative FD to receive monthly, quarterly, six-monthly, or yearly interest payouts. Also, a tenor ranging from 12 to 60 months can be selected irrespective of whether you invest in cumulative or non-cumulative FD.
Moreover, a fixed deposit calculator is available on its portal that calculates the interest generated by an FD plan precisely. You can use it to compare the Bajaj Finance FD interest rate of various FD types and plans before making a decision.
Reduce your tax liability to earn higher returns
A TDS of 10% is deducted at source if your interest earnings exceed Rs. 40000 in a year. If your net income does not fall under the taxable bracket then you can submit Form 15H or 15G to avoid TDS deduction.
However, if your income falls under the taxable bracket then you can divide your corpus and invest in multiple FD schemes. A different tenor can be chosen for each deposit and the varying maturity dates will help you to keep the interest earnings below Rs. 40000 per year.
Also, you can withdraw one or more deposits in times of financial crisis. The multi-deposit facility provided by Bajaj Finance lets you deposit in various FD types and plans easily as only one cheque can be used to invest in all FD plans at once. A higher FD rate of 0.25% is offered to senior citizens and on using the online FD form you get a 0.10% additional FD rate. These features make it one of the best investment options for everyone.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.