Savings are an important part of everyone’s lives. It is essential that we all make small and big savings which are helpful at the time of need.
Fixed Deposit or FD is a way of saving, it s a financial policy that is provided by banks in which the investor is given a higher rate of interest as compared with a normal saving accounts. In this, the investor deposits the amount for a certain time period and he cannot break his FD deposit without completing that period or else he loses on the interest.
Save in Small FDs
To make the best use of your money, you must split your FD into different smaller parts which you can invest under different tenures. This way if in case you need some money at some point in time, you can break one FD without harming the others which is a wiser thing to do rather than breaking one big FD and earning nothing.
Risk of Long Term FDs
If you are planning to put your money in FD for long term, you need to be very cautious with the interest rates because in such a scenario, you get penalized for breaking the FD in between and you don’t get richly paid as the interest rates are low. In India, banks offer a higher rate of interest on FDs. Therefore, you must check with the charges that are levied on premature withdrawal because they are quite a heavy penalization.
Taxation Relations
If you are earning interest of Rs.10,000 or more every year then your FD is fully taxable. In such a condition, the banks are suppose to deduct 10.3% as TDS from your interest earnings as a payment to government. You are also suppose to show your income from fixed deposits when you are filing an Income Tax Return. So it is always good to manage your earnings by keeping your interest lower than Rs.10,000 for every year.
Duration of FD
It is advisable that you go for FDs for longer terms because then you can get greater returns as long maturity promise better benefits.
Equation of Compound Interest
You must look into the calculation of compound interest. If you are going with higher rate of interest then it is going to yield lesser returns as compared with a lower rate of interest because that is going to compound more frequently.
Nominee Appointment
When you are opening a fixed deposit account, you must select your nominee. This is essential for easy and convenient process of transfer of accounts with minimum paper work and hassle.
These are some of the points which must be kept in mind while investing in Fixed Deposits in India. These guidelines will make the complete process hassle free for you and you will be able to have more earnings without any complications in taxation or premature withdrawal.