How to Maximize Returns from your Fixed Deposit Investments?

Rohan Mathew

Updated on:

Fixed Deposits have become a popular tool of investment over the years. You can earn more interest on your principal amount if you keep the amount invested in a fixed deposit rather than a regular savings account. The reason is fixed deposit rates being greater than the interest rates offered by a savings account. Needless to say that the rate of interest differs from one provider to another. However, the rate of interest remains the same over the fixed period of time and does not get influenced by any market volatility. 

The best way to ensure higher returns from a fixed deposit is to opt for the fixed deposit offering a higher interest rate. HDFC FD can be a good option as HDFC FD interest rates are higher than most FDs available in the market. Besides aiming for the FD with the highest rates, you can take the following measures to maximize your FD returns. 

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Keep the principal amount fixed till maturity

The biggest mistake that can reduce your FD returns is premature withdrawal or pre-closure. When you opt for pre-mature withdrawal, you get the interest accumulated till the date of withdrawal. Hence, you receive a lower amount than what you were to get from the FD. Moreover, pre-mature withdrawal attracts charges and penalties. Keep your deposit fixed till the end of the term to generate maximum returns.

Instead of premature withdrawal opt for a loan

Financial emergencies may occur at times and when they do you may need to withdraw money from your savings. At such times, instead of withdrawing money, you can get a loan against your FD. Loans taken against FD tend to have lower interest rates. For example, HDFC FD interest rates for loans are lower than a regular HDFC loan.   

Opt for a corporate FD rather than a bank FD

Over the past few years, corporate fixed deposit rates have been higher than the FD rates offered by the bank. You can get higher returns up to 3% with a corporate FD. If you want to maximize your FD returns, opting for a corporate FD will prove te be more beneficial than a bank FD. 

Check the credit rating

Credit rating of corporates indicates the risk associated with investing with them. Generally, a higher credit rating means lower risk. While investing in a corporate FD, make sure to go for the corporate with a higher credit rating.

Select cumulative FDs

Cumulative fixed deposits do not offer regular payouts. Instead, incurred interest is re-invested throughout the tenure. Thus, you earn not only on the principal amount but also on the interest gained on the principal amount. This is a great option for those who do not require a regular source of income. 

Submit form 15G or 15H

If the interest earned on your FD crosses the specified limit, TDS will be deducted as per the norms. However, you can avoid TDS by submitting form 15G or form 15H. Suppose, your gained interest is higher than Rs. 40,000 but your annual income is less than Rs. 5 lakhs, submit any of the two forms to prevent TDS.

Use a ladder investment strategy

Ladder investment strategy means investing in one or more investment tools with different maturity dates. You can apply the ladder investment strategy for FD investments. Instead of depositing your total principal in a single FD, divide the amount in two or more FDs with different maturity periods. You can ensure liquidity and keep some FDs for a longer period to generate higher returns.

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Make FDs in your parent’s name

Banks generally offer up to 0.5% higher interest rates for senior citizens. Hence, placing FDs in your parent’s name will generate higher returns. 

Invest online

Some banks offer higher returns for online investment. When you make your investment, ask your respective bank whether they have online services and if they come with additional benefits. 

Easy investment, guaranteed returns and high liquidity make fixed deposit an appealing investment option. Once you have invested in an FD, your job more or less is done. You either opt for a regular payout or receive the money when the term ends. However, if you pay attention to a few things as mentioned, you will notice a positive influence on your returns.