High share market volatility coupled with decreasing inflation has brought back Fixed deposits as an attractive investment avenue for the investors who are looking for fixed returns. Bank FD schemes offer guaranteed returns to the investors at the time of the maturity.

A bank FD scheme is considered one of the safest investment avenues because banks are closely regulated by the Reserve Bank of India hence; there is very little chance of your losing money.

You can avail loans up to 75-90 percent of the FD amount.

How can you get most out of the FD plans?

Do enough research

Before deciding on a particular FD scheme, you should look at the interest rate it is offering. You should also decide on the tenure of the scheme. FD interest rates may vary across different banks and different tenures.

Interests on FDs are calculated quarterly, half-yearly, yearly or at the maturity. Therefore you should calculate and compare to discover which bank is paying you the highest interest rate.

Consider two banks X and Y. bank X offers 10 percent p.a on a five-year FD and computes the interest on a quarterly basis. On the other hand, bank Y offers the same interest rate for the same tenure but calculates the interest on a yearly basis. Here bank X is fetching you more interest than bank Y because it is calculating interest more frequently. Thus the interest that you will get at maturity depends on how frequently the interest is calculated.

Split your FD

TDS (tax deductable as source) at 10% is charged on fixed deposits if the interest income exceeds Rs 10,000 in a financial year. The tax liability of TDS is determined at the branch level. If you want to avoid TDS, you can split your fixed deposits, that is, instead of opening one FD account you can open FD accounts in different branches of the bank and divide the amount among these. TDS can also be avoided by opening fixed deposits in different banks.
Splitting your fixed deposit has another advantage. In case you need money urgently, you do not have to break all your FDs. You can withdraw the amount by breaking only one or two of them and rest of the accounts still earn you the predetermined interest.