2. Do not look only at bank deposits

A good company deposit like that of Kerala Road Transport offers an interest rate of 10.5 percent, while the best interest rate you can get from a govt bank at the moment is 9.3 percent. On NCDs the interest rate is as high as 11 percent. However, company deposits and NCDs come with an element of risk. It's prudent to take calculated risk and diversify into strong company fixed deposits.

3. Remember TDS can reduce your returns

If you are not liable to pay tax, make sure you submit your 15G/H form as the case maybe or else you could end up paying TDS. For bank deposits TDS is deducted if the interest amount exceeds 10,000 in a financial year, while in the case of company fixed deposits it is 5000. By submitting these forms you can improve returns from fixed deposits.

4. Tax-saver FDs for better returns

Tax saver fixed deposits give you dual benefits. Apart from giving you an assured return, they are also eligible for exemption under Section 80(C) of the Income Tax Act 1961. However, TDS is applicable.

These fixed deposits have a lock-in period of five years and premature withdrawal is not allowed. You can't use this deposit as a means to secure loan from the bank and the maximum amount you can invest in this instrument is 1 lakh.

If you fall in the higher tax-slab, investing in tax-saver FDs will fetch you more return than a regular FD as tax-saving FDs are exempted under Section 80(C).