Every single penny you earn is valuable. Make the most of your hard-earned money by investing it. In order to ensure higher returns, choose one of the safest investment options, fixed deposit investment, in your investment portfolio. This is because FDs offer risk-free returns and also gives you a chance to save on tax every financial year.
However, before you lock your funds for a fixed tenor to earn more from your investment, read some key pointers that will guide you.
Choose a high FD interest rate
Before you invest in a fixed deposit, you must compare the FD interest rate from different issuers. At present, owing to RBI guidelines, the REPO rates have undergone an alteration. Due to this most issuers are offering higher interest rates on FDs.
So, make the best of this opportunity and earn interest of up to 8.75% as a regular investor on a cumulative FDs invested for at least 36 months or up to 9.10% on the same FD as a senior citizen by investing in Fixed Deposit from trusted issuers like Bajaj Finance.
Calculate the maturity amount in advance
Checking the maturity amount you will receive at the end of your selected tenor will give you a clear idea about the earnings on your invested sum. For calculating the maturity amount, you can use the Online FD calculator. Enter basic details such as deposit amount, tenor, interest rate, and deposit type to get to know the maturity amount you will be eligible for.
You can vary the figures for all the parameters to arrive at an amount that you need to achieve your goals, be it buying a car, paying for your child’s education or anything else that you are investing for. This will help you plan your investment better.
Choose between cumulative or non-cumulative FDs
If you want to access your interest earnings periodically, invest in a non-cumulative FD choosing quarterly, monthly, semi-annual, or annual interest payouts. In case you must take care of regular expenses, opting for a non-cumulative FD will help yield a frequent income for you.
On the other hand, if you do not need to access your interest earnings regularly, invest in a cumulative FD. Here, you can only access the interest on maturity as a lump sum along with your invested amount. So, if you are planning to fund long-term goals like your child’s education, a wedding in a family, or a world tour, then these FDs are your best bet. Remember, you will earn more via a cumulative FD due to the power of compounding.
Ladder your FD investments
Spreading your investment in a number of FDs with different tenors will help with more liquidity, as it ensures you get earnings not via one FD at maturity, but as and when your multiple FDs mature. Keep an eye on inflation while laddering your FDs and choose a high FD interest rate that keeps pace with the market. For instance, if you want to invest Rs.5 lakh then instead of investing it in one FD you can invest in 3 or 4 FDs of varying amounts.
In this regard, you can choose an Rs.1 lakh FD for 1 year, Rs.1 lakh FD for 2 years, and FD of Rs.3 lakh for 5 years. This way, not only will you get a chance to access varying maturity amounts at regular intervals, but you also will gain from high-interest returns. Moreover, if you don’t need your entire investment and earnings, you can reinvest the amount and enjoy higher interest rates that issuers offer.
Time your FDs for tax claims
You can claim income tax exemptions on the amount you invest in FDs. Here you can claim up to Rs.1,50,000 as the exemption under Section 80 C of the Income Tax Act every financial year, basis your FD investments. However, the interest earned on your company FDs every financial year is taxable over Rs.5000.
So, plan your FD investments in such a way so that you are able to enjoy maximum tax benefits. For example, if you plan to invest Rs.4,00,000 in the present financial year, then you should ideally invest Rs.2,00,000 this year and Rs.2,00,000 the next financial year. This will help you claim tax exemptions in both years.
Armed with these handy tips, proceed to invest in FDs of your choice. Stagger your investment in such a way that you are able to build a healthy investment corpus over time.