How To Maximize The Potential Of Your Fixed Deposits For Future Business

For ages, Indian investors, prefer to have an FD account. They do so by investing a fixed sum of money for a fixed tenure to earn a fixed return. FDs offer guaranteed returns, much higher than saving bank accounts. The fall in interest rates in the broader market does not affect the FD rates. 

As an FD holder, you need not limit your earnings to interest only. They are numerous methods to get more out of bank fixed deposits. 

Tips To Make The Best Out Of Bank Fixed Deposits

Although an FD is not new in the existing class of assets, it is an investment tool to consider for it is the least volatile. Many benefits are on offer to FD account holders to maximize their earnings.

1. Choose Higher FD Rates

Banks offer fixed FD rates on your investment. You can choose a tenure for your investment from 7 days to 10 years. There are times when banks accept such deposits for a specific duration; 444, 650, or 700 days. They carry a higher return on investment (ROI).

The rates also vary on your selection to receive interest quarterly, monthly, per annum, or cumulative. Choose the one that will give you the highest earning.

Further, the FD rates also differ from one bank to another and one financial institution to another.  

Strategizing your investment plan also helps in earning higher interest. If you plan to re-invest your funds on its maturity, you must opt for the auto-renewal option. They fetch a higher interest rate.

2. Special Incentives to Senior Citizens on FDs

The Senior citizen special fixed deposit scheme is now available for higher FD rates. Under this scheme, senior citizens receive 50 basis points. If the tenure of the FD exceeds five years, the interest is at its highest.

You can invest in these even if you are not a senior citizen by opening the FD account in your parent’s name. That will help them meet their expenses.

3. Sweep-in FD Option

HUFs, individuals, firms (private and public) residing in India can use this facility. You can link your saving or current account with the FD to exercise the option. 

When the funds in those accounts exceed a certain sum, the bank converts that amount to FDs in units of INR 1. In need, you can draw from the FD without breaking it to honor cheques.  

The advantage of the sweep-in FDs option is, you earn higher interest than you will earn if on funds in a saving bank account.

4. Tax Benefits on FDs

Although FD interest is non-taxable, you can claim an exemption under Section 80C of the Income Tax Act. To avail of the tax benefit, you must invest in a five-year tax saving FD. The lock-in period for these deposits is five years, and the investment amount is— a maximum amount of INR 1.5 lakhs in one financial year.

5. Take the Laddering Approach

Spread out your investments into multiple FDs for different tenures. Such a maturity feature increases your chances for tax benefits. These FDs all work as a financial backup. This way, you can use the funds after the due date and will not have to break any FDs. 


An FD account not only gives you a return on investment at a higher rate than you are earning now. FDs can back you financially and even work as collateral to secure a loan. After a long time you can get a large amount of fixed deposit for a future business.

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