1. Check the premature withdrawal penalty before investing.
Try and invest the money in a tenure within which you will not need the money. But definitely check on the charges applicable in case you need to withdraw in an emergency.
2. Check the frequency of compounding of the deposit, when comparing two deposit offerings.
A rate which might seem higher upfront might have a lower return if it is not compounded as frequently. For example; Bank X offers a one year deposit at the rate of 9% compounded half yearly – which results in an yield of 9.2%. While Bank Y offers a one year deposit at the same rate of 9% but compounded quarterly – which results in an yield of 9.3%. You will earn more at Bank Y because your return is compounded annually.
3. Split your Fixed Deposit investments to avoid TDS deduction.
If the interest earned is more than Rs. 10,000 in a single branch in one calendar year then TDS would be deducted. By splitting your deposits across various banks or branches you can avoid this deduction.
4. Always appoint a nominee.
When you open a fixed deposit appoint a nominee. It is essential for a quick and hassle free transfer of accounts. The nomination facility enables the bank to release the deposit amount to the nominee without insistence on a succession certificate or probate of the will from your legal heirs.
5. Take interest payouts based on your requirements
Most banks have many interest payout options, choose the one which suits your requirements best for example if you are retired person you could go in for monthly payments of interest.
