Investing in equity is a risky affair due to high volatility in the stock markets. Even though it allows you to enjoy higher returns in the long run, a fixed deposit is a more attractive investment option that provides you the security of the principal amount and improved returns.
Here is how you can effectively invest in fixed deposits to earn a regular income:
Do Sufficient Research:
Studying the fixed deposit options offered by different lenders is important. You should gather information about the FD interest rates and tenures other NBFCs and lenders offer since they differ from place to place.
Find out About your Returns:
The interest on fixed deposits is calculated monthly, quarterly, half-yearly, or annually or at the time of maturity. So, it is important to calculate the maturity amount and check which lender is paying you the highest interest. Use the Fixed Deposit interest calculator to analyze your returns.
Do not Invest the Whole Amount in a Single Fixed Deposit:
Tax is deductible at source (TDS) if the total interest on FD exceeds Rs.10,000 in one financial year in a single lender branch. So, to avoid TDS, you should not invest the whole amount in a single unit. Splitting your FD investment into different accounts also helps when you do not have to break all your FDs in a financial emergency.
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Reinvestment of Interest Amount:
While opening an FD account, lenders allow you to withdraw your interest income into your account or reinvest it. If you reinvest your interest from the previous year in the same FD, you can earn higher interest since the interest compounding comes into effect. So, if you do not need a regular income, reinvesting the claim will be more beneficial in the long run. Such fixed deposits usually have a lock-in period of 2 to 5 years, and total income from the good and the principal amount is paid on maturity.
FD held Jointly with a Senior Citizen Earns Higher Interest:
There is an additional interest rate of 0.5% to 1% for the FDs held by senior citizens. This is because senior citizens need extra income in retirement, so lenders often offer them a higher fixed deposit interest rate. If you jointly open a fixed deposit with a senior citizen, you also become eligible for a higher interest rate.
Save tax with Tax Saving Fixed Deposits:
Any investment made in the tax-saving fixed deposit is eligible for deduction under section 80C up to Rs.1,50,000 per annum. Thus, investing in this FD helps saving taxes and earn a regular income.
Investment in Fixed Deposits with interest rates starts at 8.05%, along with various benefits like an easy online application process, online fixed deposit calculator, flexible tenures, different interest payment options on non-cumulative FDs, and convenient online FD management tools.
