How to get maximum benefit out of fixed deposits?

Fixed deposits are the most assured investment option that makes it one of the popular investments in India. Here are the ways how you can get maximum benefits from your Fixed deposits.

Fixed deposits are financial instruments offered by banks and non-banking financial companies (NBFCs) to offer a saving vehicle at higher interest rates than any other saving account. You have to deposit a lump-sum amount of money in this instrument for a pre-decide period. The interest earned on the deposited money depends on reliability of the financier and duration for which it is deposited. Before depositing money in FD, you must keep in mind that this money cannot be withdrawn before the maturity period. And if you do so you will have to pay a penalty fee.

There are different types of fixed deposit accounts to suit the requirements of different investors. Here are the types of fixed deposit and their details.

1. Regular FD – This allows you to deposit money for a fixed period that usually varies between 1 week to 10 years. Here the rate of interest is pre-determined and is higher than the savings accounts.
2. Tax Saving FD – This offers a tax exemption of?1.5 lakh on the principal amount in a year. The invested money stays locked for a period of five years and cannot be withdrawn before the maturity date.
3. Senior Citizen FD – As per the name suggests, this scheme is for people above 60 years of age. They get an extra interest rate of 0.25%.

How to maximize returns on Fixed Deposit?

With steady returns on income, fixed deposits can be profitable. If you are looking out to add to the returns you are currently receiving on fixed deposit, then here are a few tips.

1. Get a strategy – Merely investing in fixed deposit is not enough to get higher returns as you need to manage your fixed deposit smartly. When your FD reaches the maturity period, make sure to re-invest the money in other FD schemes based on the interest rates offered by other banks or financial institutes.
2. Use smart methods for liquidity and tax benefits – To make your funds more lucrative consider investing your corpus in different FDs for different period of time. This will help you to get a steady financial backup to rely on and you can take care of your financial requirements with the income you get from it. This is also very important from tab benefits point of view as you get multiple maturity dates.
3. Choose wisely between Cumulative and Non- Cumulative FDs – Cumulative FDs benefits you to grow your corpus over the fixed tenure with extended benefits of compounding. Non-cumulative FDs will give you fixed payouts. If you are planning for retirement, then consider cumulative FDs over Non- Cumulative ones.
4. File your tax returns on time – Once you invest in a fixed deposit, remember to be aware of all the modifications and alterations in tax laws related to FD returns. Make a point to file your returns on time. Individuals from lower income group can receive tax exemptions. On filing return with Form 15H or 15G, you can avail tax exemption.

These easy ways can help you gain benefits from your FDs and reduce deductions.