Best Fixed Deposit Tax Saving and Interest Rate Hacks

Investing is always a good idea, as it allows you to build wealth over the long-term. You may choose from different types of products, such as mutual funds and equities, among others. However, every product comes with an inherent risk, which is especially true for market-linked investments. If you are a risk-averse investor, looking for an instrument that generates assured returns at minimal risk, opting for a fixed deposit will be a wise idea.

Benefits  of investing in fixed deposits

Fixed deposits (FDs)are one of the most popular and safe investment options. You invest a lump sum in an FD, which has a fixed duration and a guaranteed rate of return. Some advantages of FDs include:

  • You can earn decent returns due to high FD interest rates
  • You can take a loan against the FD instead of prematurely withdrawing the amount in case of an emergency fund requirement
  • You can avail of fixed deposit tax benefits under Section 80C of the Income Tax Act, 1961 if you have invested in tax-saving FDs

Tips to find the best interest rates

You need to invest in an FD with the highest rate of interest to maximize your returns. Here are a few ways to get suitable interest rates and earn higher returns:

  1. Opt for an FD with cumulative interest

In a cumulative FD, the interest is added to the principal during the tenure, which effectively increases the returns via compounding interest.

  1. Consider investing in an FD for senior citizens

Most institutions, like Mahindra Finance, pay a higher interest rate for senior citizens. You may check the fixed deposit eligibility for senior citizens to get higher returns on the investments.

  1. Avoid Tax Deducted at Source (TDS)

The interest earned on FDs is subject to TDS if it exceeds INR 40,000 during the financial year. However, you can follow a few methods to avoid TDS. These techniques include:

  • Opening of the FD

You may start the Fixed Deposit in such a manner, wherein the total interest income does not exceed the applicable limit. You may also split the amount into two names to avoid TDS.

  • Submitting Form 15H and 15G

Senior deposit holders can ensure that they need not pay TDS by sending Form 15H. If you are not a senior citizen, you can submit Form 15G if the income is not above the exemption limit.

So, if you have an investible surplus, and wish to earn secure yet guaranteed returns without taking high risks, open an FD today.

Leave a Reply

Your email address will not be published. Required fields are marked *