- You should try to keep your surplus funds
in Fixed Deposit for a longer duration if you feel you will not need the
funds during the tenure of the deposit, as longer maturity deposits
usually give higher returns. However, in
recent times, banks have sometimes started giving higher interest for
shorter durations also as such banks view
that in short span of time, interest rates will be lower.
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- If you feel that interest rates of longer
duration deposits are going
to fall in future, you should opt for longer duration of fixed
deposits so that you can continue to earn higher interest.
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- If you feel that interest rates are likely
to go up in near future, you should opt for the fixed deposits for
short maturities, so that as and when the interest rates go up, you
should be able to re-invest the funds at a higher rate.
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- If you plan to invest large sum say,
Rs.1,00,000/- or above, you may opt for more than one fixed deposits
in different banks or branches of the same bank ,
as in case of emergency, pre-mature cancellation can be got done only
for one FD.
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- Explore the possibilities of investing in
new variant of Fixed Deposit schemes, called by different
names. In such cases, the FD is kept in denominations of
Rs.1000/- each and in case of need you can ask for the pre-mature
cancellation of the amount you actually require and thus save the
penal interest for pre-mature cancellation on the whole amount of the
deposit.
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- If you are not a good record keeper of the
maturity of your deposits, you should opt for auto renewal of the
deposits as offered by most of the banks these days
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- If you keep large sums of money in savings
account or current accounts, but wants full liquidity, you may opt for
schemes like 2-in1 deposits or smart deposits or auto sweep, where bank keeps a
minimum sum in your saving account all the time and all the amounts
above that will be automatically shifted to a fixed
deposit. Such banks even allow automatic pre-mature
cancellation as and when some cheques are presented for payment.
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- In case the earning of interest on your
deposits is likely to exceed Rs.10,000/-, but you do not want the TDS to
be deducted, split your fixed deposits in different branches / banks.
(However, if your total income, including interest earned exceeds the
exempted income for income tax, you will have to pay tax at the time of
filing the income tax return).
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