After three consecutive hikes in the repo rate by the Reserve Bank of India (RBI), banks have started increasing the interest rate on FDs. Due to this, once again the interest of investors towards FD has increased. Shriram Transport Finance has announced an interest of up to 8.75 percent on FD. Other private banks including Yes Bank have increased the interest rates on FDs. In such a situation, if you are preparing to get FD, then we are giving you five important information. By following this, not only will you be able to get more interest, but you will also be able to take many other benefits.
1. Make FD in different banksInvesting in different banks reduces the risk. There is uncertainty in FDs as interest rates fluctuate. To avoid this, do such fixed deposits which have different tenures. For example, if you have Rs 4 lakh to invest, then divide this amount into four deposits of Rs 1 lakh each. Then fix them for 1, 2, 3 and 4 years. When a 1-year FD matures, reinvest it in a 4-year FD.
By doing this the case of interest rate going high or low after a certain period of time will be balanced. This will have two advantages. You will continue to get cash as your FD will continue to mature after a year or so. At the same time, the rate of interest on FD is not the same in different banks. You will get more interest on FD in any bank. In this way you will be able to get higher returns.
2. Time Management Important in FD Before investing in FD, make sure that you have chosen the right investment tenure. If you invest for a long period in the beginning and you have to break the FD in the middle, then you will get very low returns. Suppose, your bank is offering 5 per cent return on 1 year FD and 7 per cent return on 5 year FD.
In such a situation, if you think that you may need money before five years, then avoid investing in long-term FDs. If you break it after one year after getting a five-year FD, then you will get the same interest rate as the one-year FD. You can also be fined as well.
3. Have to pay tax, understand this wayAny interest you get on FD is fully taxable. If the interest amount increases by more than Rs 10,000 in a year, then you will get this amount only after deducting this tax. If you are in the higher income group (annual income is more than 5 lakhs), then you will have to pay more tax on this income. Even if TDS is not deducted, you should show your income from bonds and FDs in your tax return. You have to pay tax on every year basis. On the other hand, if your income is less than the income which is not taxable, then you can claim the refund of the amount which has been deducted as TDS by submitting the return.
4. Do not think of FD as completely safe There are two types of FD, Bank FD and Corporate FD. Corporate deposits are unsecured loans with no guarantee. In case of banks, the Deposit Insurance and Credit Guarantee Corporation (DICGC) guarantees a maximum of Rs 5 lakh per customer and this rule is applicable for every branch of the bank. In such a situation, if you have 20 lakh rupees to invest, then it is better to invest this amount in three to four places in different banks.
