5 Simple Tips to Manage Multiple Fixed Deposits
A stable support system is necessary to ensure a secure financial future in today's uncertain economic landscape. One of the most preferred ways of doing so is by investing in a Fixed Deposit. You can opt for multiple FDs to maximise your returns and diversify your investment portfolio. However, managing various Fixed Deposits can be a daunting task. In this post, we will discuss five simple tips to handle your FDs and maximise your investments efficiently.
Practical Tips to Efficiently Manage Multiple FDs
Managing multiple Fixed Deposit accounts can be made easier with the right strategies. Here are the five strategies to help you achieve this:
Tip 1: Managing Interest Income
Managing multiple Fixed Deposit accounts requires keeping track of the interest income each deposit generates. You should reinvest the interest earned on the FDs having the highest rates to earn more year after year. You can choose leading banks like ICICI Bank, which offers an interest rate of 7.25%.
For the rest of the FDs, you can opt for interest accrual and utilise the interest received to pay your expenditures or invest in other places. You should also select deposits with shorter compounding periods to earn the maximum amount. You can best utilise your returns through the FD investments by keeping track of your interest income well.
Tip 2: Breaking Deposits
Breaking a Fixed Deposit can be costly, especially when withdrawing a large amount. To minimise the interest lost, use a sweep-in account with a low predetermined amount to be withdrawn. Usually, sweep-in accounts allow withdrawals in multiples of Rs. 5,000. Opt for banks with flexible minimum withdrawal amounts to reduce the impact on your returns.
You can also link multiple Fixed Deposit accounts to your Savings Account so that it becomes easy to manage your FDs. Some banks also offer the ability to break the FD with the lowest penalty and reverse sweep into your Savings Account.
Tip 3: Enjoy Overdraft Benefit
Some banks offer the Overdraft facility, where you can borrow money against your Fixed Deposit and save on interest. This saves you in an emergency scenario as you borrow money at a lower interest rate than any other type of loan. Interest is only charged on the utilised amount for the borrowed time.
This will enable you to hold your Fixed Deposit and serve all your urgent needs without breaking your FD. It can as a lifesaver in times of financial emergencies.
Tip 4: Use Net Banking to Keep a Track
Handling more than one FD is simplified through Net Banking. Leading banks, like ICICI Bank, provide a safe and user-friendly online portal to access all your Fixed Deposit account information. You can view account balances, check interest earnings, and book new FDs online.
Net Banking saves you time and effort and provides accurate information about your FDs. To prevent unauthorised access, ensure that your account password is strong and that account details remain confidential.
Tip 5: Laddering Your Deposits
If fixed deposit interest rates are falling, having several FDs of varying tenures helps you to earn higher returns. You can ladder your deposits where you break the FD, earning the lowest interest rate and invest in one that offers the higher rate. Tenures should be determined based on your fund requirements, and premature withdrawals should be avoided to maximise returns.
Laddering your deposits will enable you to get a higher return on the same principal amount, thus minimising the effect of the fluctuating interest rate. It allows you to spread your investment over different tenures, creating a diversified portfolio to meet your financial goals.
Understanding Tax Implications of Multiple FDs
Interest earned on all your Fixed Deposit will be taxable under "Income from Other Sources" and shall be taxed according to the income tax slab you belong to. If the aggregate interest income from multiple FDs exceeds Rs. 40,000 in any financial year, banks will deduct 10% TDS if you have filed PAN details. However, in the case of non-registration of PAN, the TDS is 20%.
For senior citizens, an interest of up to Rs. 50,000 annually is exempt under Section 80 TTB. Therefore, choosing FD options that maximise the post-tax returns benefits senior citizens. To manage tax liabilities effectively, there are tax-saving FDs with a 5-year lock-in period, for which deductions are available under Section 80C with a maximum of Rs. 1.5 Lakh per year. Additionally, submitting Form 15H (for senior citizens) or Form 15G (for non-senior citizens) can help avoid Tax Deductions at Source (TDS) if the total annual income falls below the taxable threshold.
Conclusion
Managing multiple Fixed Deposits requires careful planning and attention to detail. Following these five simple tips, you can make the most of your FD investments and secure your financial future. Remember to manage your interest income effectively, use a sweep-in account to minimise interest lost, reap the benefits of overdraft, use online net banking to keep track of your FDs, and ladder your deposits to maximise your returns. With these tips, you can create a stable support system for your financial future and achieve your long-term goals.
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