Image Source : PIXABAY Choose the locking period of your FD wisely.
Fixed deposits or FDs are generally used to invest a lump sum amount as it keeps the money safe while giving a fixed return every month on it. But there are certain things that investors must keep in mind in order to get the best return.
Here are a few points that investors must do before doing any FD –
1. Compare interest rates first: One must compare the interest rates of different banks before finalising the bank.
2. Locking period for fixed deposits: Choose the locking period wisely as the locking period of FDs may differ. In case you withdraw your money before the locking period, you will have to pay a penalty.
3. Do not ignore tax: You must know that if the annual interest from your FD is more than Rs 40,000 (in private banks) and Rs 50,000 (for senior citizens), TDS (Tax Deducted at Source) will be levied on it at the rate of 10 per cent. The rate is 20 per cent for those who don’t submit their PAN.
4. Divide your FD amount: In case of emergency, investors have to break the entire FD even if the requirement is much less than the total FD amount. Therefore, it’s better to divide the money and do more than one FD.
5. Keep an eye on auto-renewal: When the FD period ends, it gets auto-renewed under the old interest rate. Therefore investors need to be alert and make sure that they invest the amount in new FD after maturity.
6. Check the bank or financial institution: This is the most important aspect. Investors should not get lured by the higher interest rates offered by not-so-reliable financial institutions and must invest the money in RBI-approved banks. Always choose RBI-approved banks or banks under Deposit Insurance and Credit Guarantee Corporation (DICGC) for FD or any other investment. DICGC also provides insurance on deposits up to Rs 5 lakh.
7. Selection of nominee: Before making an FD, make sure to add a nominee.
