Understand the difference between interest rates and yield

It is extremely important for one to understand the difference between interest rate and yield. For example, if a bank says it is giving an interest rate of 7 per cent every year, which is compounded quarterly and a company deposit is offering 7.10 per cent per annum compounded every year, go for the bank deposit, if you are investing over 1-year. This is because the yields are much higher, when interest rates are compounded every quarter.

Do not forget to invest in the name of your spouse

If an individual is already having a salaried income, it makes sense for the individual to invest in the name of his or her spouse. This is because interest income is taxable and will be added to the total income of an individual. This is only when the spouse is not working or does not have interest or any other income.

Do not forget to handover form 15g and 15h

Always remember to handover your form 15g and 15h, if you do not have taxable income. For example, if your income is below Rs 2.5 lakhs and there is a TDS that is being deducted, it is better to give form 15g and 15h. This is because there would be no TDS and you do not have to worry of claiming the TDS when filing your tax returns.

Look for company fixed deposits

It is also a good idea, if you are only in the habit of investing in bank deposits, to look at company deposits as well, since these tend to give higher returns. for example, DHFL, which is a AAA rated deposit, gives you an interest rate of as much as 8.6 per cent, as compared to 7.2 per cent in a bank deposit.

Do not forget to sweep into deposits, if you have large balances

If you have large balances in your savings account, it is best to sweep into a fixed deposit account. This will help you get higher returns. The auto sweep accounts are designed for this purpose. It is good to maintain an auto sweep account.

Where will interest rates move?

If possible, try and predict interest rates to get higher returns from fixed deposits. It is extremely important to seek professional advise in this regard. If you anticipate interest rates would fall, go for long term investment options. This would ensure that you lock money at higher interest rates. On the other hand, if interest rates are falling, it is better to look for smaller durations of upto 1 year.