Fixed Deposits Investment: Know these four things before investing in fixed deposits

Bank fixed deposits (FD) are a better option for security and income certainty, but its interest rates have fallen drastically in recent times. Fixed deposits are also a great investment option for those who do not like to take unnecessary risks, especially for senior citizens. The minimum and maximum tenure for FD varies from one bank to another. Generally FDs can be invested for a minimum period of 7 days to a maximum of 10 years. However, you have to take care of some important things before investing in FD.

Choose a bank that pays high interest

Some private sector and small finance banks pay 7 to 7.5 percent interest on FD, which is about 150-200bps higher than most public sector banks and private sector banks. Before investing in FD, go to the website of all banks and find out which bank pays the highest interest on FD. Then invest in FD in that bank.

Also Read: Fixed Deposit Bigest Benefits: Getting FD is the safest here, returns are also getting more

Do not open FD for long period

You may have to close your FD with a very low interest rate by opening FD for a long time. Therefore FD periods of 1 to 2 years are fine, even if they have financial targets for long-term frequencies.

Distribute your FD in small numbers over the same period

Some banks have started partial premature FD withdrawal facility, while most banks are not offering this facility yet. To reduce the risk, depositors should prefer to open small ticket FDs rather than one large FD.

For example, if you are planning to invest Rs 10 lakh in a bank FD with a bank, it would be best to open 9 FDs of Rs 1 lakh and 2 FDs of Rs 50,000.

Consider tax slab

The tax liability of FD depositors does not end with the TDS deduction. FD interest income is fully taxable as per the depositor’s tax slab, excluding tax deduction under section 80 TTB on interest income up to Rs 50,000 to senior citizens. Therefore, the depositors should consider their tax slab while assessing the net return from their FD.

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