Strategies for Maximising Returns on Short-Term Fixed Deposits

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Many people like to invest their money in “Fixed Deposits (FDs)” because it is a safe way to make more money. If you want to make even more money in a short time, you can use some smart ideas that can help.

Top Strategies for maximising returns on short-term FDs

Diversification and Laddering Strategy

Diversification is an essential strategy, it helps increase profits. By investing in multiple FDs, you can take advantage of varying interest rates offered by different institutions. For instance, if one institution offers a lower interest rate, you can invest in another institution offering a higher interest rate. This way, you can earn a higher return on your investment as compared to placing all your money in a single FD.

Whereas laddering optimises your FD investments. This strategy involves investing money in several FD accounts with varying maturity dates. By doing so, you can earn high returns and take advantage of increasing interest rates in the market. This strategy also provides regular liquidity, which is essential for emergencies or unforeseen expenses.

For instance, if you have a lump sum amount to invest in FD, you can divide the amount into several FD accounts with different maturity dates. Additionally, you can access regular liquidity by reinvesting the principal amount in a new FD account after the current FD matures.

Choosing the Right FD Plan

There are two types of investment options where you deposit a lump sum amount with a bank or financial institution for a fixed period of time in exchange for a fixed rate of interest.

The first is a cumulative fixed deposit plan, where the interest is compounded and reinvested. This means that the interest earned on the FD gets added to the principal amount, and the new amount earns interest in the next period. This process continues until the end of the FD term, resulting in a higher overall return on the investment. This option is suitable for those who are looking for long-term investment options and don’t need immediate returns.

The second one is corporate FDs, which are FDs offered by Non-Banking Financial Companies (NBFCs) or corporate entities. These FDs may offer higher interest rates than traditional bank FDs, but they also carry a higher risk as they are not backed by the government. It is important to carefully research and choose a corporate FD with a high credit rating to ensure financial stability and avoid any potential losses.

Choosing between the two options depends on the individual’s investment goals and risk appetite. If you are looking for a safe and secure option for a long-term investment, a cumulative FD plan might be a better choice. On the other hand, if you are willing to take on some risk for potentially higher returns and have done your research on the company offering the FD, a corporate FD might be a suitable option.

Investment Tenure and Interest Rates

Tenure consideration and interest rate patterns are both critical aspects to keep in mind when investing. While it may be tempting to opt for longer tenures that offer higher interest rates, it’s crucial to be mindful of when rates go up so that you can reinvest and maximise your returns. In addition, observing interest rate forecasts and patterns can help you make informed decisions when it comes to reinvesting at higher rates. So, it’s vital to stay on top of these factors to make the most out of your investments!

Tax-Saving Options

Forms 15H and 15G are available for individuals who earn interest income from FDs. If your total income is below the taxable limit, you can submit these forms to the bank to claim exemption from TDS (Tax Deducted at Source). 

Form 15H can be submitted by senior citizens (age 60 years and above), while Form 15G can be submitted by individuals below the age of 60 years. These forms declare that an individual’s total income for the financial year will not exceed the taxable limit and hence, there is no need for TDS to be deducted from the interest earned on fixed deposits.

It is important to note that if you submit these forms to the bank and your income exceeds the taxable limit, you will be liable to pay the taxes and the penalties. Therefore, it is advisable to submit these forms only if you are sure your total income for the financial year will be below the taxable limit.


Investing in FDs can be a great way to earn a safe and secure return on your investment. However, by implementing smart investment strategies such as diversification and laddering, choosing the right FD plan, considering tenure and interest rates, and exploring tax-saving options, you can maximise your returns and make the most out of your investment. It’s important to research and make informed decisions based on your individual investment goals and risk appetite. By following these tips, you can make your investments work harder for you and achieve your financial goals.

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