Due to high inflation rates, fixed deposits in India may not provide inflation-beating returns. However, investing in a fixed deposit offering high FD interest rates for a short period can beat inflation and yield higher returns. The more you save, the more you earn. However, since inflation is constantly increasing, the value of the money saved over some time could be much lower than when you earned your money because of inflation.
A rise in investment costs has been unavoidable for a long time. A Bank offering a fixed deposit with an interest rate of 8 percent might pique your interest, and it seems like a high return investment. The only concern is whether the 8 percent return rate is enough to keep up with inflation.
Overview of Inflation
The increase in the price of goods and services over a period is known as inflation. In general, economics predicts that the value of the rupee will decline over time. Therefore, if you are calculating high return investments returns over time, you need to keep inflation in mind and know if there is a difference between returns on paper and actual returns, i.e., money’s purchasing power, and when calculating returns over time.
Invest in Fixed Deposit to maximize returns to beat inflation
Avoid withdrawing funds before the maturity
There is no reason to withdraw funds from a high return investments plan, i.e., a fixed deposit scheme, before the end of the deposit term. There will be a decrease in your interest income if you make early withdrawals. When a bank makes an early withdrawal from an FD account, it usually imposes a penalty of 1% of its interest rate. Therefore, you should not put your entire sum in an FD if you need money for an emergency.
Submit Form 15g and 15h
If you do not fall under a taxable slab, you can submit Forms 15g and 15h. Form 15g can be used for senior citizens over 60, and a 犀利士
Form 15h for people in the general category. Using Form 15h, you can request a bank that does not deduct any TDS on the interest income from the FD if your income is less than Rs. 2.5 lakhs in the financial year.
Choose a cumulative FD
There are two types of fixed deposits based on their returns – cumulative fixed and non-cumulative fixed deposits. Non-cumulative FDs have their interest paid at the end of the term, while cumulative FDs’ compound interest is paid quarterly or yearly. It can either be a monthly payment, a half-yearly payment, a quarterly payment or a yearly payment. It would help if you considered opting for cumulative high return investments. You will be earning interest on the interest income earned throughout the FD period.
Compare and calculate interest rates
A wide range of interest rates on FDs differs between banks. The return from a fixed deposit will be greater at higher interest rates. Therefore, comparing the various high return investments in a FD scheme is crucial to choosing the best-fixed interest rate. In addition, many banks provide online fixed deposit interest calculators that allow you to calculate interest rates and maturity amounts.
Account renewal for FDs
Investing in a short-term high return investments FD scheme is a wise move to beat inflation. However, if you want to keep your fixed deposit, you must renew it every time it expires. You can earn maximum profit from the regular renewal of a FD account offering high fixed deposit interest rates. By doing so, you will not be exposed to market fluctuations while taking advantage of the revised interest rates.
Conclusion
Regarding the interest rates on FDs, the banks rarely offer rates higher than inflation. Furthermore, fixed deposit returns may be below inflation when tax is deducted from interest income. It is possible, however, to encounter such a scenario with long-term FDs. Therefore, investing in a fixed deposit for a short period would be wise to take advantage of interest rates.