Fixed deposits are an investment avenue that is popular due to the lower risk and stability it carries. Despite this, a lot of investors miss out on maximum returns because of a lack of strategizing when investing in FDs. Read on to learn more about fixed deposit interest rates and strategies you can use to boost your earnings from this avenue. 

Choosing the right bank



One of the most effective ways to increase interest on fixed deposits is by selecting a bank that offers higher rates. Interest rates offered by banks on fixed deposits can vary between 4% to 7%. Some banks like IndusInd Bank offer interest rates of up to 7.5% per annum on FDs through its INDIE mobile banking app, which is among the highest in the industry. Investors should compare interest rates offered by different banks on their websites or through apps and opt for those providing the maximum return for similar tenures.

Opt for longer tenures



Banks usually offer higher interest rates for deposits with longer maturity periods ranging from 1-10 years. The longer the period of deposit, the higher the interest rate. For example, most banks offer an interest rate of around 7% for FDs with tenures of three years or more. By locking money for longer, investors can substantially boost their returns through the power of compounding.

Using FD for direct payments



With the IndusInd Bank's INDIE fixed deposits, investors can link their FD to the INDIE savings account and make payments directly from the FD when the savings balance runs out. This allows maximum savings to remain invested in interest-earning FDs without fearing a lack of liquidity. 

Investing regularly



For those with regular monthly cash flows, following a disciplined approach and investing in an FD monthly can help maximise returns. By ensuring that a certain amount of your income is used to invest in an FD regularly, you can keep up with your savings goals while meeting your monthly expenses. 

Laddering FDs

Investors can create a fixed deposit portfolio by investing in staggered maturities. This is called laddering FDs. A portion of the total funds is invested in short-, mid-, and long-term FDs that mature at different points. As each FD matures, the proceeds can be reinvested to grab higher rates if interest rates are on the rise. This strategy smoothens market fluctuations and optimizes returns.

Tax-saving FDs

Investments up to Rs 1.5 lakh per year in the 5-year tax-saving fixed deposit qualify for a tax deduction under section 80C of the Income Tax Act, 1961. This allows boosting fixed income returns while also reducing tax outgo. The interest earned is taxed as per the individual's income tax slab. Note that this section 80C benefit is only available to those who follow the old tax regime. 

FDs with monthly/quarterly payout options



Instead of annual interest payouts, you can also opt for monthly or quarterly interest payouts on FDs. While the nominal fixed deposit interest rates offered remain the same, more frequent payouts allow you to get regular income which you can use to meet monthly expenses. This is especially beneficial for those who don't have a regular income or want to add a source of stable passive income. 

Ending note

By choosing the right bank, locking deposits for longer tenures, and using additional services like sweep-in facilities, investors can substantially enhance the returns earned on their fixed deposit portfolio, especially in times of falling interest rates. Proper planning and utilizing the above strategies as per one's requirements and risk profile can help maximize the income generated from fixed deposits.