How to Increase Your Return on Fixed Deposits in 2021
If you are planning to invest in a Fixed Deposit (FD) but are unsure about how it works, we are here to give you valuable information about it.
Fixed deposits – An overview
An FD is an investment instrument offering guaranteed returns. If you have idle money, it will be beneficial for you if you put it in an FD account for a long period. The best aspect is that FD offers fixed interest rates, which means your returns will not change if the financial market goes through a rough patch. Thus, investors treat FD as a no-risk vehicle that assures a return on investment.
FD has many other plus points, like:
- Flexible tenure that you can choose according to requirements
- Secured FD returns over the entire duration
- Income tax deduction up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961 in case of investments in tax-saving FDs
- 25% higher interest rate for people over the age of 60
Tips to increase returns on fixed deposits
If you meet the fixed Deposit eligibility criteria, you can invest in an FD to allow your money to grow. You can follow these ideas to increase the chances of a higher return:
- Invest in FDs from non-banking institutions
When investing in an FD, check if the financial institution has an AAA rating. Institutions with such ratings offer higher returns.
- Stay invested
FD is a long-term investment instrument. If you want to get the maximum possible return, it is vital to remain and let your money grow. If you withdraw funds before maturity, you will have to pay a penalty.
- Choose cumulative FD
Another way to increase the fixed deposit interest rates is to opt for a cumulative FD. Here, the interest compounds quarterly or annually until the maturity date. This guarantees higher returns compared to a non-cumulative FD, which pays you the interest periodically.
- Submit Form 15G/15H
When you submit Form 15G/15H, it ensures that the FD return remains tax-free if it falls under the non-taxable income bracket.
Now that you know how to ensure high FD rates, it is time to invest with a reputed financial institution. For example, Mahindra Finance offers FDs with multiple tenure choices, the opportunity to deposit up to INR 1 crore, high-interest rates, and other customer-friendly features. To know more, visit the company’s website now!.