login-icon
mahindra-finance-logo
login-icon
  • English
  • Hindi
  • Bengali
  • Marathi
  • Telugu
  • Tamil
  • Gujarati
  • Kannada
  • Odia
  • Malayalam
|

Tips to Invest in High-Interest Fixed Deposits

mahindra-finance-author

by Mahindra Finance

|

June 29, 2023

|

3 mins read

Fixed or time deposits are a common and popular investment option in India. These deposits provide interest higher than a regular savings account and are less risky than other investment options like shares.

You may open a time deposit account without any inconvenience with minimal documentation. However, premature withdrawal before the due date results in the payment of a penalty. If you want to invest in high-interest deposits, here are seven tips to keep in mind:

1. Check various options

Different institutions offer varied interest rates on fixed deposits (FDs). It is recommended you check with various institutions to know the best rate available for your required tenure.

2. Split the capital

Based on the capital you want to invest, it is recommended you split the same among multiple FD schemes. Therefore, in case you require emergency funds, you may withdraw from one deposit while the balance deposits continue to earn returns.

3. Choose multiple tenures

The financial institutions link the interest rates to the repo rate. This means the FD rates may fluctuate during the tenure. This fluctuation may be countered by including multiple FDs with different tenures.

4. Determine the tax liability

The returns earned on your FD investments are liable to the tax based on your income slab. It is important that you determine the tax liability before you invest in high-interest fixed deposit schemes.

5. Tax-saving FDs

Several tax-saving FDs are available, which have a lock-in period of five years. However, you are not allowed to make any withdrawal before its maturity date. Therefore, if you want the flexibility to break your fixed deposit prior to the end of its tenure, it is recommended you do not invest in tax-saving FDs.

6. Premature withdrawal penalty

In most cases, if you withdraw the money from an FD before its due date, you may have to pay a penalty. Financial institutions may allow you partial or premature withdrawal to meet emergency fund requirements before maturity by levying a penalty. The total interest may also be affected in such cases.

7. Interest reinvestment

When you opt for this option, the interest is reinvested to your FD account. This allows you to earn higher returns through reinvestment. It is recommended you opt for this choice if you want to benefit from capital appreciation over the long-term.

FDs have been a popular investment option for decades. The low-risk and convenience of opening an account with the opportunity to earn good returns make these a popular financial choice.

Related articles

Fixed Deposit Myths You Should Stop Believing

In India, fixed or time deposits have been popular for many years. One reason is that these products are a safe investment option. In addition, these deposits offer a higher rate of interest when comp...

KNOW MORE

June 29, 2023

PPF vs FD: Which One Should You Choose | Mahindra Finance

When it comes to safe investment options in India, PPF and FD are among the most preferred. They both offer a plethora of benefits and are attractive choices, regardless of one’s income. These finan...

KNOW MORE

June 30, 2023

What Is A Fixed Deposit And How Does It Work?

When people talk about investments, the first option that comes to mind is fixed deposits. But, what is a fixed deposit? If you are wondering what is an FD account all about, this article will help yo...

KNOW MORE

March 5, 2024