Fixed deposits (FDs) have long been a favored option for investors seeking stability and assured returns. With a range of tenure options, from as short as seven days to as long as 10 years, FDs offer flexibility, making them an ideal choice for individuals with varying financial goals. However, the interest rates associated with FDs vary depending on the duration of the investment, making it crucial for investors to choose the right tenure to maximize their earnings.
What Is a Fixed Deposit?
A Fixed Deposit (FD) is a financial instrument provided by banks and non-banking financial companies (NBFCs) in India, where you deposit a lump sum amount for a fixed tenure at a predetermined interest rate. FDs are known for their safety and guaranteed returns, making them ideal for risk-averse individuals looking to grow their wealth steadily.
Top 20 Scheduled Banks Offering Best FD Rates
| Bank Name | Highest FD Rate (% p.a.) | 1-Year FD Rate (% p.a.) | 3-Year FD Rate (% p.a.) | 5-Year FD Rate (% p.a.) | Senior Citizens Additional Rate (% p.a.) |
|---|---|---|---|---|---|
| Unity Small Finance Bank | 9.00% | 7.85% | 8.15% | 8.15% | 0.50% |
| North East Small Finance Bank | 9.00% | 7.00% | 9.00% | 6.25% | 0.50% |
| Suryoday Small Finance Bank | 8.65% | 6.85% | 8.60% | 8.25% | 0.24-0.50% |
| Shivalik Small Finance Bank | 8.55% | 6.00% | 7.50% | 6.50% | 0.50% |
| Equitas Small Finance Bank | 8.50% | 8.20% | 8.00% | 7.25% | 0.50% |
| Utkarsh Small Finance Bank | 8.50% | 8.00% | 8.50% | 7.75% | 0.60% |
| Jana Small Finance Bank | 8.25% | 8.25% | 8.25% | 7.25% | 0.50% |
| Ujjivan Small Finance Bank | 8.25% | 8.25% | 7.20% | 7.20% | 0.50% |
| ESAF Small Finance Bank | 8.25% | 6.00% | 6.75% | 6.25% | 0.50% |
| SBM Bank | 8.25% | 7.05% | 7.30% | 7.75% | 0.50% |
| RBL Bank | 8.10% | 7.50% | 7.50% | 7.10% | 0.50% |
| DCB Bank | 8.05% | 7.10% | 7.55% | 7.40% | 0.50% |
| AU Small Finance Bank | 8.00% | 7.25% | 7.50% | 7.25% | 0.50% |
| YES Bank | 8.00% | 7.25% | 7.25% | 7.25% | 0.50-0.75% |
| Bandhan Bank | 8.00% | 7.25% | 7.25% | 5.85% | 0.50-0.75% |
| IDFC First Bank | 7.75% | 6.50% | 7.25% | 7.00% | 0.50% |
| IndusInd Bank | 7.75% | 7.75% | 7.25% | 7.25% | 0.50% |
| Central Bank of India | 7.45% | 7.00% | 6.00% | 5.75% | 0.50% |
| HDFC Bank | 7.40% | 6.60% | 7.00% | 7.00% | 0.50% |
| Union Bank of India | 7.40% | 6.80% | 6.70% | 6.50% | 0.50% |
Please check official bank websites before investing
Best FD Rates for Senior Citizens
- Senior citizens can earn up to 9.50% p.a. with preferential rates that offer an additional 50-80 basis points (bps) over regular rates.
- Super senior citizens (80 years and above) enjoy further preferential rates, such as an additional 75-80 bps from banks like RBL Bank, Union Bank of India, and Indian Overseas Bank.
These rates provide an attractive option for investors, especially those looking for safe and guaranteed returns through FDs.
How to Choose the Right FD
Choosing the right FD depends on factors like your financial goals, the duration for which you can invest your funds, and the interest rates being offered. Here are a few tips to help you choose wisely:
- Identify your financial goal: Whether you need the money for an emergency, a planned expense, or retirement savings, understanding your goal will help determine the tenure.
- Compare interest rates: Interest rates vary between banks and NBFCs. Compare rates to maximize returns. Also, consider special schemes for senior citizens or recurring deposit options if applicable.
- Consider tax implications: Interest income from FDs is fully taxable under the head “Income from Other Sources.” Tax Deducted at Source (TDS) is applicable if the interest income exceeds ₹40,000 (₹50,000 for senior citizens).
- Look for auto-renewal options: Many banks offer auto-renewal services for fixed deposits. This means the bank will renew your FD upon maturity, helping you continue to earn interest without interruption.
FD Tax Implications
While FDs provide a safe and secure investment option, it’s important to remember that the interest earned on FDs is taxable. The interest is added to your income and taxed according to your income slab. Banks also deduct TDS (Tax Deducted at Source) if the interest earned exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
Special Consideration: Premature Withdrawal and Loans Against FD
FDs offer liquidity, but withdrawing the amount before maturity comes with penalties. Banks generally reduce the interest rate by 1% if you withdraw your deposit before the agreed tenure. However, many banks also allow you to take a loan against your FD, which can be a better option in case of emergencies than breaking the FD early.
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