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Navigating Interest Rates: How to maximise returns on Fixed Deposits

The fixed deposit interest rate determines how much money you will earn on your investment. Hence, it's a crucial factor to look for before you book an FD. Scroll down to check factors that influence FD interest rates.

Edited By: India TV News Desk New Delhi Updated on: June 18, 2024 16:16 IST
Fixed Deposits are considered a stable investment option.
Image Source : SPECIAL ARRANGEMENT Fixed Deposits are considered a stable investment option.

Are you frustrated with Fixed Deposit (FD) rates that barely keep pace with inflation? Fixed Deposits (FDs) are a stable investment option, preferred by millions of Indians for their safety and predictable returns. In fact, as of 2023, ₹103 trillion was saved across 24.23 million deposits in India. However, while FDs offer stability and incur zero risk, parking your money in any deposit won't necessarily get you the most out of your investment. 

Adopting a strategic approach to make your Fixed Deposit earn inflation-beating returns and achieve higher growth is crucial. On that note, here is a complete guide to help you navigate FD interest rates and maximise your returns from these investments.

An overview of FD interest rates and what factors affect them

The fixed deposit interest rate determines how much money you will earn on your investment. Hence, it's a crucial factor to look for before you book an FD. Below are the factors that influence FD interest rates.

Reserve Bank of India (RBI) policies: The RBI's monetary policy, including repo rates, reverse repo rates, and cash reserve ratios, impacts FD rates. For example, a lower repo rate often leads to lower FD rates and vice versa.

Economic conditions: Inflation, economic growth, and overall market liquidity are some of the reasons that influence interest rates. During high inflation, interest rates tend to rise to curb spending, while in a sluggish economy, rates come down to encourage borrowing and spending.

Bank-specific factors: Different banks adopt different strategies based on their liquidity requirements. They also need a consistent flow of funds for their operational and lending needs, which can result in varying FD rates among them.

Tenure: Generally, longer tenures fetch higher rates compared to shorter ones. Hence, using an online fixed deposit calculator to calculate the potential maturity amount and interest earnings for various FDs is advisable. Doing so can help you select the tenure that yields the best returns.

Tips to maximise your fixed deposit returns

Here are some practical tips and strategies to help you make the most of your FD investments:

Choose a bank that offers the best FD returns

High interest rates mean higher growth for your hard-earned money. That is why it makes sense to consider the IndusInd Bank Fixed Deposit. Along with competitive FD rates, you enjoy benefits like: 

Instant booking You can book your FD instantly through a 100% digital and paperless process.
Flexible interest payout options You can choose your preferred way of receiving interest earned on the FD -  monthly, quarterly, half-yearly, or annually.
Loan facility You can obtain a loan against your FD at lower rates. Get high liquidity for different financial needs without breaking your deposit.
Auto-renewal You can opt for the auto-renewal facility to earn interest without any break.
Tax-saver FD You can invest in a five-year FD to enjoy tax benefits.

Book your IndusInd Bank Fixed Deposit today and boost your returns with minimal effort! 

Choose cumulative FDs

In a cumulative FD, the interest earned is added to the principal amount at periodic intervals and paid at maturity. This option is best for those who do not require regular interest payouts and are looking to grow their savings through the power of compounding. 

Over time, compounding works magic in boosting the money you receive at maturity. Hence, the amount you receive is much higher than that of non-cumulative deposits, where interest is paid to the investor periodically.

Ladder your FDs

Almost all investment experts suggest not to put all your eggs in one basket. Laddering FDs by dividing your total investment into multiple deposits with different maturity dates is a practical application of this strategy. 

For example, instead of investing ₹5,00,000 in a single FD, split it into five ₹1,00,000 FDs with 1, 2, 3, 4, and 5-year tenures. This way, after one year, one fixed deposit account opened by you will mature every year, providing you with regular liquidity and opportunities to reinvest at potentially higher rates.

Fill out form 15G/15H to get TDS relief

Interest income from FDs is subject to Tax Deducted at Source (TDS) if it exceeds ₹40,000 per annum (₹50,000 for senior citizens). If your total income doesn't reach the taxable threshold, you can submit Form 15G (or Form 15H for senior citizens) to your bank to avoid TDS on your interest income.

By claiming deductions, more interest will stay in your fixed deposit account. It will allow the principal amount to grow, and the total amount you receive at maturity will be higher.

Leverage the higher rates offered on FDs for senior citizens 

If you have parents or grandparents (aged 60 years and above), consider investing in FDs in their names. Senior citizen fixed deposits typically offer higher interest rates, often 0.5% more than the standard rates. The additional rate can boost your total fixed deposit returns. Moreover, the higher exemption limit for TDS for senior citizens (₹50,000) is an added benefit.

Explore tax-saving FDs

Tax-saving FDs come with a lock-in period of five years and offer tax deductions under Section 80C of the Income Tax Act, 1961. The maximum amount you can claim for deduction is ₹1,50,000 per annum.  Tax-saving FDs offer competitive rates, allowing you to earn higher returns while reducing your tax liability.  

Early withdrawal? Think twice

Before committing to an FD, you must consider your liquidity needs carefully. If you break an FD before its maturity, you might incur penalty charges and loss of interest, which reduces your returns by a significant percentage. It also disrupts the compounding effect, where interest earned on interest fuels growth.  

Therefore, try to avoid premature withdrawals unless necessary. A better strategy is to build an emergency fund in a high-interest savings account. This cash reserve gives you the liquidity to cover unforeseen expenses and lets your FDs mature fully to earn higher returns. 

Don't settle for less – Unlock the full potential of your FD

Plan your investments carefully and wisely to maximise your fixed deposit returns and achieve higher earnings. Hence, choose the right bank, ladder your FD, opt for a cumulative option, avoid partial withdrawal, submit Form 15G and 15H, and leverage senior citizen and tax-saving FDs for additional benefits. 

Hope this blog has helped you understand how to boost your FD returns now. Don't wait any longer! Book your fixed deposit today and give your hard-earned money the growth it deserves.

(Disclaimer: This is sponsored content. The liability for the article solely rests with the provider. The content has not been verified by India TV channel and


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