Fixed deposit interest rates have gradually inched higher, over the last 6-months and some highly rated deposits like those from Mahindra Finance offer you interest rates as high as 9 per cent. Here are a few smart ideas when implemented, which would allow you to maximize your returns from Fds.
Look at other alternatives to Bank Fds
State Bank of India presently offers you an interest rate of just 7 per cent, which is the maximum you get. On the other hand a quality AAA rated company, like Mahindra Finance can offer you an interest rate of as much as 9 per cent. Most of the quality AAA rated company Fixed deposits offer you interest rates ranging from 8 to 9 per cent.
In fact, even NCDs now offer you an interest rate of 9 to 9.5 per cent.
Not a bad idea to consider various other options, other than bank deposits only.
Look for quarterly compounding of interest
There are many institutions, who do not compound interest rate every quarter. What this means is that your yield drops. Make sure your deposits are compounded every quarter and not after every year.
All of the banks compound interest every quarter, while NBFCs may compound interest rate every year.
Submit form 16g and form 15h
Make sure that you submit form 15g and 15h, if you are not liable for TDS or your income tax is below the threshold limit. This will improve returns, while reducing your tax liability.
However, if TDS is cut, then the only way you can get the amount back if by filing your tax returns.
Open fixed deposit in spouse's name
If you are already paying tax from salary or business income, then you should ensure that you do not open your FD in your own name. This is because the interest income is taxable. So, for example, if your spouse is a housewife, make sure the FD is in her name, if she is not paying tax.
Go for a cumulative deposit
Make sure that you opt for a cumulative deposit. This is because the returns are higher, as compounding is done every quarter or half yearly. This is of course unless you are retired and need monthly or quarterly income.
Compare rates online and apply online
If you are specifically looking for bank deposit interest rates, compare them online. For example, we found that at the moment some small finance banks can offer you an interest rate of of upto of 8 per cent. Though the bank may not have a branch in your area, you can open an FD online.
In fact, Mahindra Finance offers you an interest rate of 9 per cent, if you open an FD online and lower, if you opt physically.
Get the right duration
Take a look at the duration correctly. A one year deposit may fetch you 7 per cent, while in a 2 year deposit, you might get as much as 7.50 per cent. So, please check and go for the deposit with a slightly higher tenure.