In today’s world, investing your money in a low-risk scheme is the most feasible option for generating secure and steady returns. FDs are the most straightforward and secure option for investment as it is not linked with the equity market and the returns are guaranteed.
FD schemes are offered by most of the banks and post offices in India, and hence investing in FDs is a hassle-free and safe process. In this article, we will walk you through the steps to invest in FDs and how to maximize your returns with the current FD interest rates.With the current fixed deposit interest rates hovering around 5-6%, the fixed deposit (FD) scheme is an attractive investment option for many individuals.
Step 1: Research the Interest Rates
The interest rates for FD investments are declared by the Reserve Bank of India (RBI). The FD rates offered by different banks and post offices vary as per the RBI’s guidelines. Hence, it is crucial to conduct thorough research on the current FD interest rates. You can visit the websites of different banks and post offices, check out financial blogs, or speak to a financial advisor to get updates on the prevailing FD interest rates.
Step 2: Evaluate the Tenure
The tenure of an FD scheme ranges from 7 days to 10 years. FDs with a longer duration tend to offer higher interest rates. Evaluate the tenure and select a term that suits your investment goals. You can opt for a shorter duration if you are looking for liquidity in the future. On the other hand, if you are looking for long-term returns, then you can consider a tenure of 5-10 years.
Step 3: Calculate the Interest and Returns
After considering the tenure of the FD, calculate the interest and returns that your investment will generate. For example, if you invest INR 10,00,000 at an interest rate of 6%, the interest earned will be INR 60,000 per annum. The total amount that you will get at maturity will be INR 10,60,000. The interest rate calculation differs for different banks, and hence, it is crucial to keep the bank’s interest calculation formula in mind while calculating the returns.
Step 4: Check for Special FD Schemes
Many banks and institutions offer special FD schemes to attract investors. These schemes can have a higher FD interest rates than the regular FD. For instance, the senior citizens FD schemes offer higher interest rates as compared to the regular schemes. Similarly, some banks offer FD schemes with a higher interest rate to their employees or to long-term account holders. Keep an eye on these special schemes, and evaluate if they align with your investment goals.
Step 5: Evaluate the Penalty Clause
FDs are known for their low-risk profile. However, there can be situations when the investor may require premature withdrawal of their funds. In such a case, the bank may impose a penalty on the interest earned. Hence, it is crucial to evaluate the penalty clause before investing in FD. Look out for banks that waive off the penalty in case of a medical emergency or other unforeseen situations.
Step 6: Invest in a Tax-Saving FD
FDs are also a popular investment option for tax savings. Many banks offer tax-saving FDs that qualify for tax deduction under section 80C of the Income Tax Act. The tenure of these FDs is generally between 5-10 years, and the interest earned is tax-free as well. However, the maximum amount that can be invested in a tax-saving FD is INR 1,50,000 per year.
Step 7: Diversify your investment Portfolio
While FDs provide low-risk returns, it is essential to diversify your investment portfolio. Investing in different fixed income instruments such as corporate bonds, government bonds, debt mutual funds can help minimize the risk and ensure steady returns. Experts suggest allocating a portion of your investment towards equity as well, to maximize the returns in the long run.
In conclusion, investing in FD is one of the safest and simplest options to grow your money with the current FD interest rates in India. Conducting thorough research, evaluating the tenure, calculating the interest and returns, checking for special schemes, evaluating the penalty clause and investing in tax-saving FDs can help maximize your returns. And finally, diversifying your investment portfolio can help minimize the risk and provide steady returns over time. However, before choosing to invest in FD or any other fixed income instrument, it is advisable to gauge all the pros and cons as per your investment goals and risk appetite.
Fixed deposit (FD) is a low-risk investment option with guaranteed returns. Currently, FD interest rates are around 5-6%, and investing in FDs is a hassle-free and safe process. In this step-by-step guide, we have discussed how to grow your money with current FD interest rates.
Researching the interest rates, evaluating the tenure, calculating the interest and returns, checking for special schemes, evaluating the penalty clause, investing in tax-saving FDs and diversifying your investment portfolio can help you maximize your returns. However, it is crucial to gauge all the pros and cons as per your investment goals and risk appetite before investing in any financial instrument.