Tips for Maximising Returns on Fixed Deposits

Posted on Wednesday, February 14th, 2024 | By IndusInd Bank

A Fixed Deposit (FD) is a financial instrument that promises a secure and predictable return on your investment over a fixed period.  

This simple offering is available for people of various age groups, locations, life stages, and so on. No more worries about market fluctuations or inflation eroding your money’s value. And that’s not all. You hold the power to choose how you receive your interest – be it monthly, quarterly, twice a year, or yearly. In case you don’t want periodic payouts, you can opt to get the interest when the deposit matures.  

These are just a few benefits that make fixed deposits favoured by many. But who doesn’t appreciate extra profits or gains? So, wouldn’t it be great if there were methods to enhance the returns on your fixed deposits? This is not just a possibility. You can achieve it through strategic planning and calculative decision-making.  

Discussed below are such practical tips and tricks to help you boost your FD returns.  

Avoid Premature Withdrawals 

Withdrawing money from your FD before its maturity can reduce your interest earnings. To maximise returns, plan your finances so that you won’t need to break your FD early. If you anticipate a need for liquidity, consider creating a separate emergency fund. You can also opt for the smart sweep feature offered by IndusInd Bank where you can link your savings account with your FDs. Any time your savings account balance falls below the predetermined threshold, a portion of the linked fixed deposit is automatically used to replenish it.  

Choose a Longer Tenure 

Your fixed deposit tenure impacts the interest you earn. Longer tenures generally offer high and best FD rates, which means more earnings. For instance, a deposit for five years typically offers better returns than the one for a year. This is because banks keep your funds with them longer, hence, they incentivise longer tenures in the form of higher rates.  

While choosing a long tenure, consider your cash flow needs. You should not lock away funds you might need soon. Long-term FDs are best suited for goals far in the future, like retirement or your child’s education. So, choose the best fixed deposit scheme and try to align the tenure with your future financial needs. This will let you grow your funds over time without interrupting your short-term financial stability. 

Open Tax-Saving Fixed Deposits 

A tax saver FD offers the dual benefits of saving and tax exemption. Under section 80C of the Income Tax Act, 1961, investments in these FDs are deductible up to ₹1.5 lakh per annum under the old tax regime. However, they come with a lock-in period of five years. Thus, they are ideal for those looking to save on taxes while committing to a long-term savings plan. Remember, the interest earned on these FDs is taxable as per your tax bracket.  

FD Laddering 

Fixed deposit laddering means dividing your total investment into multiple FDs with different maturity periods. This method helps you balance the need for high returns as well as liquidity.  

For example, you can create FDs that mature in 1, 2, 3, 4, and 5 years. As each FD matures, you have the option to reinvest or use the money based on your needs. This strategy also helps in dealing with interest rate fluctuations. When rates are high, you get the chance to reinvest at these better FD interest rates and terms. 

FD laddering offers both flexibility and stable growth for your savings. This is achieved by preventing your funds from being tied up for long periods, all while continuing to earn good returns. 

Wrapping Up  

You need to adopt a mix of smart strategies and practical decisions to make the most out of your fixed deposits. Remember, each financial decision should align with your overall investment goals and risk appetite.  

Exploring an exclusive range of FD options by IndusInd Bank can be a valuable consideration. From tax-saving FDs to senior citizen fixed deposits schemes, choose the option that suits your needs perfectly. Enjoy the best FD interest rates, flexibility in interest credit frequency, favourable tenure, and a 100% online application process. Watch your savings grow and unlock maximum benefits. 

Take the step today and open an IndusInd Bank Fixed Deposit now! 

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.