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Tips For Maximizing Returns On Fixed Deposits

mahindra-finance-author

by Mahindra Finance

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May 23, 2024

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4 mins read

Are you looking for a secure and predictable way to grow your savings? Fixed deposits (FDs) are a popular choice among Indians when it comes to investing their hard-earned money. With an FD, you can enjoy a guaranteed return on your investment over a fixed period. But what if there were ways to enhance the returns on your fixed deposits? 

This article explores practical tips and tricks to help you get maximum FD returns.

Choosing the right tenure and interest rates

The tenure of your fixed deposit plays a crucial role in determining the interest you earn. Generally, longer tenures offer higher FD rates, which means more earnings. 

Long-term FDs are best suited for goals such as retirement or your child's education. However, for maximum FD returns, you should not compromise your short-term financial stability. Always do the maths before deciding on tenure.

Avoid premature withdrawals

Withdrawing money from your FD before its maturity can reduce your interest earnings. To maximise your returns, it's crucial to plan your finances in a way that avoids the need to break your FD early. If you anticipate a need for liquidity, consider creating a separate emergency fund. Some banks also offer a smart sweep feature that automatically replenishes your savings account balance using funds from your linked fixed deposit when it falls below a certain threshold. This way, you can ensure that you have access to funds without breaking your FD prematurely.

Laddering your fixed deposits

Fixed deposit laddering is a strategy that involves dividing your total investment into multiple FDs with different maturity periods. FD laddering offers both flexibility and stable growth for your savings. This strategy prevents your funds from being tied up for long periods while still allowing you to earn good returns.

It helps you strike a balance between high returns and liquidity. By having staggered maturity dates, you have the flexibility to reinvest or use the money based on your needs.

Investing in tax-saving fixed deposits

Tax-saving fixed deposits offer dual benefits - saving on taxes and earning interest on your investment. Under section 80C of the Income Tax Act, investments in these FDs are deductible up to ₹1.5 lakh per annum under the old tax regime. However, tax-saving FDs come with a lock-in period of five years.

By investing in tax-saving fixed deposits, you can not only save on taxes but also commit to a long-term savings plan. It's important to note that the interest earned on these FDs is taxable as per your tax bracket.

Conclusion

To make the most out of your fixed deposits and maximise your returns, it's important to adopt smart strategies and make practical decisions. Consider the tenure and FD rates, avoid premature withdrawals, ladder your fixed deposits, and explore tax-saving options. For a wide selection of FD choices, FD rates, and an easy FD online application process, check out Mahindra Finance. Specialising in empowering people in rural and semi-urban areas, Mahindra Finance offers FD schemes to fit your needs.

FAQs

Q1: How do I choose the maximum FD return bank?

To choose the maximum FD return bank, consider factors such as interest rates, credibility, customer service, and convenience. Look for banks that offer competitive FD rates and have a good track record of fulfilling their financial obligations.

Q2: What are the benefits of investing in fixed deposits?

Fixed deposits offer several benefits including guaranteed returns, capital preservation, flexibility in interest payment frequencies (monthly/quarterly/yearly), and ease of investment. They are considered safe investments as they are not subject to market fluctuations.

Q3: Can I withdraw my fixed deposit before maturity?

Yes, you can withdraw your fixed deposit before maturity; however, it may result in reduced interest earnings or penalties depending on the bank's policy.

Q4. How does FD laddering work?

FD laddering involves dividing your total investment into multiple FDs with different maturity periods. This strategy provides both flexibility and stable growth for your savings by balancing the need for high returns and liquidity.

Q5. How do I get more money from my fixed deposit?

Invest for a longer tenure for higher interest rates, compare FD interest rates from different banks, consider a cumulative FD for compounded interest and explore tax-saving FD options for additional benefits.

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