High Returns Fixed Deposits May Vanish Into Thin Air

With the turbulent market conditions, interest rates have begun to go down to their all-time low. Banks that initially used to offer special deposit schemes that were designed to offer higher interest rates than those offered in the market are now destined to jump off the investment bandwagon. Many banks are thinking of removing such fixed deposit schemes off the shelf as it simply means an additional burden on their head. Some banks have been thinking of introducing such schemes only for a specific period of time, mainly to attract customers during the festive season. These schemes are and have always been a huge hit amongst the audience as they provide higher interest rates than those that are usually offered by regular fixed deposits in the market. If the current market scenario is to be considered, very soon investors may see the interest rates of general fixed deposits fall down from their current interest rates. Although investors may protest or seem dejected against such a move, it is important to remember that banks can offer interest rates only when they earn profits. If they are in an unprofitable stage, no matter how high the interest rate promised to you, it cannot be fulfilled as the bank has simply not generated the required profit. Fixed deposits cushion investors from the unpredictability and volatility of the market scenario, and investing in them, whether the interest rate is low or high, will give you assured and risk-free returns at the end of the maturity period. Do not just liquid cash sit in your hand for the purpose of keeping your hands burn-free. With the market being tossed from one stage of unprofitability to the other, retaining cash in its liquid form, without any investment, in not going to make things any better. If you are too scared to try long-term equity investments, then fixed deposits are definitely the way ahead.

Compare the interest rates offered by different banks during different tenures. Sometimes banks may offer different interest rates depending on the tenure you opt for. After comparing the interest rates of different banks, choose the bank which best suits your interest needs. . In order to avail the maximum benefits with fixed deposits, it is best to split your investments. This is usually done to avoid the tax deductable as source or TDS. If your interest exceeds Rs. 10,000 annually, then TDS of 10% is applicable on your fixed deposit. In order to avoid and skip such a tax liability, it is best to split your investments in fixed deposits. You need to open fixed deposits in the different branches of the same bank, thereby limiting your interest earned, which should ideally be shown as less than Rs. 10,000 in one single branch. You could do the same exercise by opening fixed deposits in different banks as well. Your TDS is skipped as it is a tax liability that is charged in one branch of a bank and so on. Also, in case of a contingency or financial emergency, where you need to withdraw funds from your fixed deposit, by splitting your fixed deposits, you do not hamper the entire purpose.

The interest that is gained from your fixed deposit can either be withdrawn or you can choose to reinvest it in the same scheme. If you would like to withdraw your scheme, then your interest will be credited directly to your savings account that has been mentioned by you on its receipt. However, if you choose to maintain a higher level of interest on such an interest, then you will have the added advantage of earning interest which will always be higher than the previous year’s rate of interest. On withdrawal of interest, you will be subject to the same rate of interest as last year.