It is a common tendency among Indian households to put part of their income into savings to cater to future financial emergencies. But, investing in a savings account is not the only available option to meet contingencies.
You can also put some of your earnings into an FD account to ensure financial security in times of need.
It is a form of investment wherein you, as an investor, are required to put a fixed amount of money into an FD account for a fixed tenure at an agreed rate of interest. At the end of the agreed FD tenure, you can receive the amount you had invested with the compound interest.
The best part about an FD account is that interest rates are fixed, and it is a secure investment channel as returns are guaranteed. You can invest in both short-term and long-term FD accounts. Also, you can take a loan against your FD in the case of a financial emergency.
How to get the best-fixed deposit rates in India?
Before investing in Fixed deposits, it is imperative to do your research about the market and the available fixed deposit rates in India. Here are the top tips to maximum your FD interest rate:
- Plan a strategy to manage your investment
Investing in fixed deposits is not enough to gain returns. You will have a plant to manage your investment. It would be wise to reinvest in your FD account after it reaches its maturity date. Most financial institutions offer higher interest rates on renewing FD investments.
- Know when you file your returns
Another crucial part of increasing your fixed deposit rates in India is knowing when to file your returns. Make sure to be aware of the changes in the tax laws to file your returns on time. The best part is that you can avail yourself of tax deductions if you fall in a low-income bracket.
- opt for cumulative fixed deposits
There are two types of fixed deposits – cumulative and non-cumulative fixed deposits. A cumulative fixed deposit pays interest monthly, quarterly, half-yearly, or yearly. It is best suited for pensioners who require money regularly.
Whereas, a cumulative fixed deposit compound interest. It enables you to get high returns at the time of maturity. So, if you want to maximize your returns, it is better to opt for cumulative fixed deposits.
- Compare interest rates across different financial institutions
Not all financial companies offer the same fixed deposit rates in India. Before investing in a fixed deposit account, it is advisable to shop around and compare different interest rates. Your priority should be choosing a company that offers the highest interest rate in the market.
- Invest in short-term FD
Inflating has a direct impact on the rate of interest. For instance, when inflation rises, the interest rates on fixed deposits fall. If you want a return that beats inflation, it is wise to opt for a short-term FD over a long-term FD.
Investing in fixed deposits is a great way to create wealth in the future. It allows you to meet contingencies without putting any financial burden on your shoulder. To get a high return on your FD account, pay heed to the above-said tips.